The Remarkable Goldman Extrapolation Engine Strikes Again

Tyler Durden's picture


When it comes to Muppet-bating, there is still only one; and "The Highlander" of all strategists is none other than Goldman's David Kostin. His somewhat-exuberant year-end target for the S&P 500 at 1,750 pales in comparison to his wonderfully extrapolated - never gonna be another recession ever again - view of earnings and implicitly the S&P 500 out to 2015. At 2,100, his forecast based on 8%, 9%, and 11% rallies seems so possible when all one can see is the last few years of data... we just hope he and his clients are not disappointed when the hockey-stick doesn't turn and peak margins finally weighs on the reality of a rising debt-cost corporate universe unable to fund buybacks or dividends on the cheap anymore.



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Mon, 07/08/2013 - 17:49 | 3732077 Al Huxley
Al Huxley's picture

Muppet-'bating' - intentional?  Funny regardless.

Mon, 07/08/2013 - 18:12 | 3732144 zorba THE GREEK
zorba THE GREEK's picture

The S&P could very well hit 2100 by 2015. But with hyper-inflation,

$2100 may only buy a happy meal.

Mon, 07/08/2013 - 18:17 | 3732152 Al Huxley
Al Huxley's picture

But I think food is excluded from the inflation numbers, so it won't matter.

Mon, 07/08/2013 - 17:50 | 3732082 Abi Normal
Abi Normal's picture

Slightly OT, but when you read it, why is everyone so giddy?? What did they beat? Their meat?

Alcoa (AA), the first out of the gate with second-quarter earnings, delivered a beat on both earnings and revenue.

After the earnings announcement, the company's shares gained in extended-hours trading. (Click here to get latest quote.) (AA)

"We see that the aluminum fundamentals are very strong. We expect a growth for this year of physical demand of 7 percent," Alcoa CEO Klaus Kleinfeld told CNBC. "I can't predict where the metal price is going to go. I tend to believe we're seeing a low at this point."

The company said its net loss in the quarter was $119 million, or 11 cents per share. That compares with a loss of $2 million, or break-even per share, a year earlier.

The company paid down debt of $566 million during the second quarter.

Excluding items, earnings rose to 7 cents a share from 6 cents a share a year ago.

Revenue decreased to $5.85 billion from $5.96 billion a year ago.

 Analysts had expected the aluminum maker to report earnings excluding items of 6 cents a share on $5.83 billion in revenue, according to a consensus estimate from Thomson Reuters.

 Alcoa said it had positive free cash flow of $228 million during the quarter. 

 "It was nice to see their free cash flow was positive in the quarter. That was probably the biggest positive in the quarter. Three of their last five quarters had negative free cash flow," said Jonathan Pavlik, a portfolio manager at Steward Capital. "In light of their recent downgrade, it was also nice to see them cut their debt." 

The company is often viewed as a bellwether for the materials sector, and some look to it for hints on the health of the broader economy.

from page

Mon, 07/08/2013 - 17:56 | 3732101 prains
prains's picture

I'm long having to skin the family dog after the nuclear winter

Mon, 07/08/2013 - 17:52 | 3732087 kliguy38
kliguy38's picture

I'm all in then......I'll put all of my non-physical gold and silver into paper equities now....there its done .. $6.58......that'll do

Mon, 07/08/2013 - 17:56 | 3732090 derek_vineyard
derek_vineyard's picture

goldman is right on target---there will be a lower minimum wage, no health care to worry about, overskilled workers begging to produce profits and the politicians and fed aiding them every step of the way.  to infinity and beyond!

Mon, 07/08/2013 - 17:53 | 3732091 francis_sawyer
francis_sawyer's picture

Here's the formula


QE^n+x = EPS [par *1.5n+x]

Mon, 07/08/2013 - 18:18 | 3732155 resurger
resurger's picture


Mon, 07/08/2013 - 17:53 | 3732092 Rainman
Rainman's picture

With this bullshit for'll be 2100 by Labor Day

Mon, 07/08/2013 - 17:58 | 3732104 Seasmoke
Seasmoke's picture

Still plenty of time for Goldman to come thru for God.

Mon, 07/08/2013 - 18:01 | 3732115 JustObserving
JustObserving's picture

Why should manipulated markets ever go down? Onwards and upwards, forever.

Mon, 07/08/2013 - 18:07 | 3732124 Big Ben
Big Ben's picture

In March, 2012 Kostin predicted the S&P would fall to 1250 at the end of 2012:

Kostin said there were three main reasons for his call:

  1. The U.S. economy is stagnating, growing below trend.
  2. In a weak economic growth environment, markets historically have a flat multiple
  3. 2012 is expected to see earnings growth of only 3 percent.
Mon, 07/08/2013 - 18:06 | 3732129 Downtoolong
Downtoolong's picture

The sad fact is the bulk of investment and money management has become so institutionalized and regimented that the vast majority of human participants in the markets are forced to pay heed to whatever these assholes say.

Even I have to admit I’ve got to stop telling Goldman to kiss my ass. At this point, even if they agreed to do it, I wouldn’t trust them to do it right.   

Mon, 07/08/2013 - 18:27 | 3732168 resurger
resurger's picture

So this means one thing Tyler, No taper as expected

Mon, 07/08/2013 - 18:32 | 3732182 buzzsaw99
buzzsaw99's picture

actually, since everything the squid says is a lie then this means there will be a taper.

Mon, 07/08/2013 - 18:28 | 3732174 buzzsaw99
buzzsaw99's picture

imo the stock market isn't going anywhere with the 10Y > 2.5%.

Mon, 07/08/2013 - 18:35 | 3732193 orangegeek
orangegeek's picture

Drive EPS by buying back shares.


Stuff channels to meet weak revenue targets.


The new growth formula.

Mon, 07/08/2013 - 18:36 | 3732199 Colonel Klink
Colonel Klink's picture

We all know Golum sacks are master baiters.  Experts at dick'n da muppets!!

Mon, 07/08/2013 - 18:38 | 3732204 buzzsaw99
buzzsaw99's picture

abby baby!

abby baby!

we want abby baby!

it's a man bitchez!

Mon, 07/08/2013 - 18:44 | 3732215 Yen Cross
Yen Cross's picture

   The usd/jpy is signaling that JGBs are going to start getting crazy again. (also the drop in T-10 yields)

    The DXY dropped on U.S. equity market gains. [ U.S. equity markets have been directly correlated to the DXY(rise)from June Fed. release]

Mon, 07/08/2013 - 20:05 | 3732503 chump666
chump666's picture

I agree.  Watching the Yen now, the 5MA (daily) looks like a possible trigger for a sell, which could then set off the JGBs.  Earnings has NOT been priced in on the upside, rather the market is far too tight.  Looks primed for sell positions imo.

China data dump may continue with the blunt take down of their own market and maybe Japan's at the same time.

Mon, 07/08/2013 - 18:59 | 3732249 smcapmachine
smcapmachine's picture

On a long enough timeline, the portfolio value of a zero hedge reader drops to zero.

Mon, 07/08/2013 - 19:17 | 3732302 TLT
Mon, 07/08/2013 - 20:13 | 3732537 drinkin koolaid
drinkin koolaid's picture

Totally agree with his bullishness about the US stock market being much higher by 2015, although I never use specific price targets. Totally 100% disagree with the moron's reasons. We're just the least ugly place to park capital for now.

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