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UBS Goes For Bail Out (aka Broke), Sees S&P At 1,350, 2011 S&P Operating Earnings At $100
UBS' Investment Research goes for broke (and not in a good bank/bad bank SNB bailed out way either) with its most recent Market Outlook: the bank which at this point is fighting tooth and nail to prevent client departures and deposit withdrawals is instead focusing on predicting the future, and the future rocks. To wit: "Over the past several months, economic activity and earnings results have come in better than expected. As a result, we are increasing our 2010 and 2011 S&P 500 operating EPS estimates to $90 and $100, respectively, from $83 and $92. 2010 EPS improvement should be driven by margin expansion and easy comps. 2011 should be more of a revenue story." Forget that a few months ago 2010 was supposed to be a "revenue story." And when the revenue story does not materialize in 2011, UBS will simple say 2099 may be finally the year in which CAT's revenues will be greater than its earnings. Yawn: the only thing that matters is whether or not Bernanke will keep ploughing on with negative real rates, and whether the PDs will continue the shell covert monetization games, thanks to which Bid To Covers on 1 Minute CMB Bills will soon hit infinity. The excess cash sure isn't going to come from Money Markets: at YTD rates of depletion, there should be no actual cash left in the system within 12 months.
From UBS:
Since the beginning of 2010, the U.S. economy and earnings results have been meaningfully stronger than expected. As a result, the market has rallied sharply, with the S&P 500 up 9% year-to-date, and 15% since its February lows. Moreover, the “junk trade” has re-emerged, with the most economically sensitive companies and lower quality stocks outpacing the broader market.
As a result of the improving environment, we are raising our year-end 2010 S&P 500 price target to 1,350 from 1,250. This represents 11% upside from Friday’s close.
Our upward revision to 1,350 is fueled by an increase in our S&P 500 operating EPS estimates for 2010 and 2011 to $90 and $100, respectively, from $83 and $92. (For additional details, please see our accompanying note out this morning, Raise ’10/’11 S&P 500 EPS $83/$92 to $90/$100.)
With respect to valuation, we expect multiples to hold their ground in the face of rapidly improving earnings through the remainder of the year. As such, our year-end price target is based upon a forward P/E multiple of 13.5x applied to our 2011 EPS estimate of $100.
Only $100? Goldman will see see you $200 and raise you another $300 (although even the Somali Pirate HoldCo is still at a mere 1,250 on the S&P. That said, that number will definitely change very soon.
Those (very few) who care what UBS has to say (but, but, they have the biggest trading floow in the world, one must take them seriously) you can read the full report here.
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The price of oil will be >$100/bbl long before S&P "earnings" hit $100.
Thus, Bubble 3.0 is self-limiting.
Any new word on the other Iceland volcano? I heard earlier they are predicting it to blow its top real soon. Poetic justice if you ask me. Have the GODS been angered? Sure seems so.
Television ratings where to low for the eruptions so they cancelled the show. They will soon air GLOBAL WARMING SEASON 2 "Burning Ice" with Steven Segall and Jean Claude Van Damme!!!
I couldn't give a crap less what the earnings are seeing as how shareholders don't get any of them anyway.
BINGO!! You get a prize Buzz!! This is my exact rationalization for NOT holding equities. I don't see any substantial dividend payment, my profits are paid to management and frittered away on Hertz-Dollar Thrifty like acquisitions.
Show me the cash flow, then I'll show my cash. Until then, pound sand!
http://www.youtube.com/watch?v=mBS0OWGUidc
That's why I call them yearnings. The whole EPS meme is just another facet of the "ownership society" illusion. Have another blue pill, sheeple.
can i have reality back please? changing the rules does not work if you have already lost the game.
"To attain our $100 in EPS we assume a US deficit of 20% of GDP, the fed balance sheet at $5 trillion, a marginal tax rate of 1% at the corporate level and .5% at the individual level, chinese GDP at 25%, indian GDP at 23% and a new round of stimuli packages twice the original amounts budgeted and spent in 2008 / 2009"
"While our official price target is 1350, we actually believe a 70x multiple is appropriate given 0% interest rates until 2030, so we feel comfortable some upside to S&P 7,000 is possible"
When I read things like this. I'm reminded of this timeless classic.
I feel like we're all little Dangerfields and F-TV et al is the idiot professor.
http://www.youtube.com/watch?v=YlVDGmjz7eM
It doesn't seem out of the realm of possibilities. I've been saying this for quite some time. Earnings and economic numbers have recovered much more rapidly than anyone expected. Now, factor in AAPL the number 2 weighted stock in the SPX, and it's trading at forward 18 p/e. It's not even close to being expensive. As it continues the upward surge, it will pull the SPX with it.
Why don't they suggest S&P @ 2000, it's a nice round figure
Harry I hope you dont live in Arizona. They are going for broke out there. Nothing less will do.