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Weekly Chartology
Key points:
S&P Earnings:
Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 38% increase in 2010 to $79, and a 20% increase in 2011 to $95.
Valuation:
Top-down the S&P 500 trades at an NTM P/E of 15.2X (14.2X on pre-provision EPS). Bottom-up, it trades at NTM P/E of 14.8X and LTM P/B of 2.4X.
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The Gods of Goldman! It's beyond me how these numbers are justified. With UE "stable" at near 10%, ongoing housing problems & limited consumer output, how do companies expect to get much further passed cost cutting and quarter to quarter restocking? Not to mention fiscal issues upon us that liley will increase tax burden on virtually anyone who could make an impact on the economy, including middle and upper class incomes. Something's not right.
Barclays and others have recently argued that it is asset prices and wage growth that drive consumer spending recoveries, and NOT so much further progress in terms of debt reduction / credit availability, as is assumed by many bears/critics.
Carrying their logic forward, with household wages increasing for 4 months running (whether or not that reflects real improvement) and with the HFT machines successfully elevating the market (so far, anyway) then it would be only a matter of time before the synthetic wealth effect triggers at least a mini-boost in consumer spending (esp. if headline employment goes even mildly positive in the near term, so as to improve sentiment).
If it works, then there's your consumer spending increase to fund your business inventory movement, which "should" eventually coax some of those piled-up corporate trillions back into actual business investment in people and production.
Recession over, and no double dip on the horizon, then. Recovery underway. Hurry and buy stocks while they're cheap. Warren sez.
Goldman appears to be the spokesman for the policy described, mapping the engineered moves on the common chessboard, dials and levers moving as needed, and all for the bears to read and weep.
Will it work? I have no idea, no crystal ball; just reading what I can, learning as I go.
But it seems like this is how they intend to "git 'er done".
Makes sense except the only fault logic may be, "should" the FED react to improving employment and raise rates. I think the mild improvement in CS is already priced in and a FF rate hike is not (see futures lower). So, whatever, we both don't know, things appear to be at major crossroads.
are these goldman charts reproduced to give the squid some sort of legitimacy?
Perhaps so but it sure is tough to avoid all these supporting docs and what kind of junk is trading up on nothin'. NOT NOT NOT! I want my country and markets back but it'll take another round of caning to do so.
You got that right. A lot of things just don't feel right. Maybe they'll all work fine, but these are uncharted waters and the path being taken is such a highwire act it is difficult to apply the normal rules and faith and perseverance. I hope THEY know what they are doing...cuz it sure looks unwieldy from where we all sit...and it won't end anytime soon..strange days indeed
Here's what Carl Swenlin says about P/E http://www.decisionpoint.com/TAC/SWENLIN.html personally, I like how he includes Hussman's calculation, which I think is more accurate
Click above link for charts, here's the page as of 3.19.10
DECISION POINTOVERVIEW OF MARKET FUNDAMENTALS
Friday 3/19/2010
*************************** S&P 500 FUNDAMENTALS ****************************
The real P/E for the S&P 500 is based on "as reported" or GAAP earnings
(calculated using Generally Accepted Accounting Principles), and it is the
standard for historical earnings comparisons. The normal range for the GAAP
P/E ratio is between 10 (undervalued) to 20 (overvalued).
Market cheerleaders invariably use "pro forma" or "operating earnings,"
which exclude some expenses and are deceptively optimistic. They are
useless and should be ignored.
The following are the most recently reported and projected twelve-month
trailing (TMT) earnings, quarterly earnings, and price/earnings ratios (P/Es)
according to Standard and Poors.
Est Est Est Est
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3
TMT P/E Ratio (GAAP).......: 92.50 22.70 19.50 19.00 18.80
TMT P/E Ratio (Operating)..: 29.30 20.30 18.10 16.70 15.70
TMT Earnings (GAAP)........: 12.54 51.15 59.44 60.93 61.69
TMT Earnings (Operating)...: 39.61 57.07 64.17 69.39 74.10
QTRLY Earnings (GAAP)......: 14.76 15.36 15.81 15.00 15.52
QTRLY Earnings (Operating).: 15.78 17.37 17.21 19.03 20.49
For a more thorough discussion of earnings and other fundamentals
click here.
Based upon projected GAAP earnings the following would be the approximate
S&P 500 values at the cardinal points of the normal historical value range.
They are calculated simply by multiplying the GAAP EPS by 10, 15, and 20:
Est Est Est Est
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3
Undervalued (SPX if P/E = 10): 125 512 594 609 617
Fair Value (SPX if P/E = 15): 188 767 892 914 925
Overvalued (SPX if P/E = 20): 251 1023 1189 1219 1234
******************* COMPARISON OF MAJOR INDEXES ***************************
SPX OEX NDX DJIA DJTA DJUA
Price/Earnings Ratio........: 93 21 31 17 14 D
Dividend Yield..............: 1.9% 1.7% 0.4% 2.6% 4.5% ----
*********************** DIVIDEND VALUE RANGE ANALYSIS ***********************
The yield for the DJIA, DJTA and the S&P 500 has historically moved
between a range of 3% (overvalued) and 6% (undervalued). The normal yield
range for the DJUA is between 3% and 12%. Decision Point expresses this
range as an RVR (Relative to Value Range) value of between 0 (undervalued)
and 100 (overvalued). Values can fall outside that range, and, when they
do, indicate even greater extremes of market valuation.
S&P 500 DJIA DJTA *DJUA
----------------------------------- ------- ----- ----- -----
Current Closing Price.............: 1160 10742 382 47
Current Yield.....................: 1.9% 2.6% 1.7% 4.5%
Current P/E.......................: 93 17 61 14
Current Payout Ratio..............: 1.8 38.6 1.0 0.6
Current RVR.......................: 136 114 143 83
Price at 1.5% Yield..............: 1469 18619 433 141
Price at 3.0% Yield (RVR 100)....: 735 9310 216 71
Price at 4.0% Yield..............: 551 6982 162 53
Price at 5.0% Yield..............: 441 5586 130 42
Price at 6.0% Yield (RVR 0).....: 367 4655 108 35
Price at 8.0% Yield..............: 276 3491 81 26
Price at 12.0% Yield (RVR 0 - DJUA).........................: 18
*********************** MISCELLANEOUS MARKET MEASURES ***********************
DJIA Yield.............: 2.59% Bearish (Norm Rng: 3% - 6%)
DJIA P/E...............: 16.83 Neutral (Norm Rng: 10 - 20)
T-Bill Yield/DJIA Yield: 0.06 Bullish (Norm Rng: 1.6 - 2.0)
Price to Dividend Ratio: 38.61 Bearish (Should be less than 30)
*****************************************************************************
Looks like the EPS better come through or else, no? I think if there's any further delay in producing these numbers such as continued UE, or distractions with Sovereign issues could break the back of meeting those expectations. Risks very high. Nice stuff, thanks.
P/E's are useless since GAAP has been destroyed by Mark to Fantasy.
Oh you pretty things . . .
When your running the country and get to spew whatever data makes your analysts right you can predict anything and look smarter than god. Thats how you do gods work!
Goldman will continue to periodically upgrade stocks with the highest short interest, at the worst possible time for the short sellers.
Here are some samples:
Saks has a short interest of 43%, with 15 days to cover:
Bank of the Ozarks has a 29% short interest requiring 44 days to cover.
Mylan Labs has a 25% short interest with 8 days to cover.
Toro has a 12% short interest with 11 days to cover.
So the stock market bouncing goes on and on.....
that's right, robo, the traders at squid know no mercy. a good short squeeze and the entire trading desk can blow some loot on this:
http://www.youtube.com/watch?v=b5eW98fGny0
L3 is going blow any second now....
Makes sense except the only fault logic may be, "should" the FED react to improving employment and raise rates. I think the mild improvement in CS is already priced in and a FF rate hike is not (see futures lower). So, whatever, we both don't know, things appear to be at major crossroads.
XOM, COP, and HES make the Argonaut formation Friday. Higher oil prices floating on the oceans will make waves of currentsea.
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