Bernanke & Kuroda Capital LLC: Overweight S&P 500, 2013 Target 1950

Tyler Durden's picture

Given that the Fed and the BoJ has our back (and will add a further $1.75tn or so to their balance sheets by 2013 year-end), we should expect US equity prices to rise to infinity and beyond. As one smart chap on the television noted, "stocks won't go down again," but given expectations for earnings in 2013 (which include the remarkable hockey-stick in Q4 - which surely would only occur if things were strong enough to warrant the Fed pulling back in a reflexive vicious circle), the S&P 500 will trade at a rather expensive 19.5x P/E at end-2013 (which we are sure we will be told is still cheap).

 

If it was just up to the Fed, the 1950 is an obvious target - dump your bonds and get some...

 

but the Europeans are seeing LTRO-payback reducing the size of their balance sheet and the Chinese are 'anxious' so factoring in the BoJ riding to the rescue as well, it seems a much more conservative 1900 target for S&P 500 is warranted by year-end...

 

The question is - at what point is an equity market multiple representative of exuberance and what if the correlation breaks - what if the herd realizes that none of it is wealth until you take profits. And with that kind of 'wealth' creation, will inflation pop up its ugly head?

Given correlations, Gold would trade at $2200 by year-end (and WTI Oil over $140)...

Charts: Bloomberg

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Sudden Debt's picture

TO THE MOON ALICE!!!!

Apollo 3....

diogeneslaertius's picture

this is relevant to my interests

Top_Kill's picture

I caught Jim Cramer's Mad Money tonight for the first time in 2 years. The first 10 minutes is going to make an epic highlight film after the market crash. Cramer is a walking/talking contrarian highlight reel.

McMolotov's picture

While the average human body is 60-70% water, Jim Cramer is 60-70% cocaine. The remainder of his body is bullshit.

PC Load Letter's picture

It's only fitting this fund would be called BK LLC

zorba THE GREEK's picture

The markets have become like professional wrestling, everyone knows they are

fixed, but they are still fun to watch.

RockyRacoon's picture

What does that first graph remind me of?   ...Hmmm   Oh, yeah,  BITCOIN!

razorthin's picture

Challenger

Substitute Bernanke for McCauliffe.  The fucker.

TeamDepends's picture

"Stocks won't go down again."  And you can take that to the bank...

Supernova Born's picture

If stocks won't go down, the ground must be coming up.

"Terrain...pull up, pull up, pull up".

The Mountains of Debt are higher than the absolute ceiling of the world economy.

TeamDepends's picture

We're on an express elevator to hell- goin' down!!!!

TeamDepends's picture

Is this gonna be a standup fight, sir, or another bughunt?

kevinearick's picture

like Japanese real estate...right?

thismarketisrigged's picture

guys, im feeling a major pullback tomorrow before the next leg up.

 

i feel the dow may shave off 5 pts, s&p 0.50 pts, and nasdaq 2 pts. major pullback, get in when this happens, because its next dow 100,000 and s&p 5000.

 

dont worry though, once it hits those levels, it will pull back for a day to dow 99.990 before it goes to 1,000,000, etc.

 

of course it will have no value but who cares at this point, as long as the numbers are high, all i well in bernankes and obamas world

ekm's picture

LOL, LOL, LOL. WTI at $140  LOL, LOL, LOL

 

You'll see millions and millions of trucks and cars abandoned and parked on highways.

McMolotov's picture

Bullish for towing companies. Or we can just leave them to serve as mini homeless shelters.

ekm's picture

I'm telling you. I can't stop laughing.

fomcy's picture

"WTI at $140", perhaps, but then WHY GOLD should go down?

Basically Gold Miners should pay more for fuel and pay more for

workforce due to inflation and yet their output product should cost less????

Any f*cking sane Economists here? Guess not...

ekm's picture

You have to look at it 'in comparison with' what?

 

When the Fed stops QE (and they will) the major banks would default on their derivative losses and sell anything they have to pay. First thing they'd sell are the most liquid ones that would be sold at minimum loss: Gold and Treasuries.

fonzannoon's picture

WTI won't hit 140. $95 seems like a good place to peg it. 1.30 on the euro. $1550 on gold. 1.75% on the ten year etc etc etc.

Those numbers will be nailed to the wall and the S&P will be the beneficiary of every loose dollar out there.

No one is buying it by the way. Nobody. Everyone knows what a total bag of shit this is.

ekm's picture

Wall Street and the City of London exist only and only and only due to VOLATILITY.

No volatility, they'd better go and find jobs at macdonald.

 

Whoever believes that bankers rule, should conclude that the market will collapse very soon so few primary dealers die and others survive to play the game.

It's been like this, it is like this and it will always be like this.

 

Equation:

VOLATILITY = BIG BANKS = BIG PAYCHECKS

STABILITY = NO WALL STREET=NO CITY OF LONDON=STRONG MINIMUM WAGE LAWS DUE TO INFLUX FROM THE FINANCIAL INDUSTRY UNEMPLOYED PEOPLE TO FAST FOOD CHAIN

 

Conclusion: Wall street hates, literally hates QE, hence FT article from Blackrock guy yesterday.

fonzannoon's picture

There was no volatility between 1980 and 2000. Yes there was a crash in 1987 but it recouped those losses soon after.

The banks are cutting staff through the bone into the muscle. They may have less profits but they ars passing it through less people so whoever is left is still doing fantastic.

QE allows the banks to privatize gains and socialize losses. I don't see why they would hate that.

Outside of QE they have every judge in their backpocket. LIBOR...money laundering etc. etc etc.

They have bent the law so they have immunity to do whatever they want. That is better than QE.

ekm's picture

Nailing oil at $95 is a disaster, it's 100% overpriced.

 

Regardless of how much big banks may survive, now that the economy is literally dead, nobody survives.

fonzannoon's picture

Agreed. A few PD's croaking and coughing up their inventory does not change anything with the economy or your conclusion.

ekm's picture

I have to thank you because you challenge my thoughts all the time and it makes think deeper.

fonzannoon's picture

The irony of it all is that we may (or may not) take different routes but we keep ending up at the same conclusion. I wish we were debating the conclusion and not the route.

Hohum's picture

ekm,

Cannot junk you.  But is WTI were $47.50, oil production would plummet like a stone.  But I know you disagree.  I'd be glad to read your links on how cheap it is to produce new oil and how new wells are getting cheaper and cheaper to construct.

ekm's picture

1) Prove to me that costs are high

2) Define COST

3) How do you know books are not cooked to show high costs (I think they are)

4) If deflation as a cause of money destruction occurs, that everything will have lower price, that means that even the costs will go way lower due to shortage of money.

MeelionDollerBogus's picture

"banks are cutting staff through the bone into the muscle."

winning - locusts have an exoskeleton, good of you to notice

swissaustrian's picture

All-in costs for miners are already >$1200/oz with a CAGR of 8+%. If prices don't rise, they'll book losses soon.

More here: http://www.pmbug.com/forum/f14/paradigm-shift-pm-mining-industry-growth-...

ekm's picture

It is somehow difficult for people to discern between Inflation of Input Costs and Inflation of Finished Products.

swissaustrian's picture

Especially for gold analysts, take a look at their lousy records:

http://www.pmbug.com/forum/f2/%5Bchart%5D-financial-analyst-gold-price-f...

At the same time they've been predicting ever rising oil prices. Try running a mine with 25% input cost running from energy with a falling price of your product.

ekm's picture

To tell you the truth, it took me some time to understand it, also.

fonzannoon's picture

suspend operations. Remove supply from the market. Watch what happens.

The fact that they have not done so means they have already been nationalized.

ekm's picture

I've been telling everybody here on ZH and on other blogs that QE = Government ownership of goods and services, because the Fed is telling the banks to buy on behalf of the Gov.

 

We used to call that COMMUNISM in eastern europe.

fonzannoon's picture

It's one thing to tell the banks to buy, it's another to force a company to operate under conditions that it would otherwise not operate. Both equal communism. It's already here.

ekm's picture

We are in violent agreement

nmewn's picture

That makes a bunch of us...I enjoyed it you two ;-)

swissaustrian's picture

Some majors have already axed future capex budgets. It's gonna be felt in supply

fonzannoon's picture

I would love to see a supply shock hit the market. Love it.

ekm's picture

It is happening massively but....slowly.

swissaustrian's picture

ABX is also not going to get Pascua Lama online next year, that alone is 24 tons less p.a.

Rumor is that they've already sold part of the anticipated PL production for 2014 forward.

e-recep's picture

"You'll see millions and millions of trucks and cars abandoned and parked on highways."

they were overproduced and oversold anyway. thanks to credit created out of thin air....

Ham-bone's picture

Seems tptb have resolved the "leakage" issues of hot money into PM's, energy, food bubbles...not sure how they are directing all the money but seems they have found some way to ensure only "good" and taxable assets are levetating...while bad 'assets" are "out of favor"...

Thoughts???

nmewn's picture

Well personally, the timing couldn't be better for me...I'm sittin on a pile of cash and I hate having it taxed twice ;-)

rhinoblitzing's picture

You will be paying your fair share soon enough

nmewn's picture

Only in what they know I make ;-)

Dr. Engali's picture

Hey nmewn, If you're sitting on a pile of cash thinking you'll scoop up some PMs if prices collapse, I would caution you against that. If asset prices deflate the paper price and the actual cost if physical may be two different stories. I think there are a lot of people waiting to make the same play. My guess is there won't be any physical to meet the demand. Hell it's hard enough to buy now. I just put an order in for 10 gold eagles and I have to wait until they get them in.