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According To Goldman, This Is The One Thing Needed For The S&P To Rise 80% By Year End
Over the weekend we reported on the disturbing, goalseeked excuse of a research report issued by Goldman's David Kostin, in which the schizophrenic strategist on one hand admitted that the growth curve for stocks will flatten, that the multiple expansion phases is coming to an end and that stocks are massively overvalued. He also added that "US equities soared 42% during the past 18 months but the stellar return borrowed heavily from the future." On the other hand, seemingly operating under direct guidance from above to sucker even more muppets in, boosted his year end S&P500 price target (which until recently was at 1900), to 2050! Perfectly logical.
But here is the punchline. In admitting there is no fundamental case to be made for the market upside, Kostin resorted to the weakest possible justification imaginable: "the Fed model", or the place that finds an inverse correlation between declining bond yields and yield gaps and rising equity prices.
Which is ironic: recall that until recently Wall Street was pounding the drum on rising inflation, and an imminent surge in the 10 Year, all serving to "validate" the record high S&P 500. Well, once again growth is not coming, so it's time to flip everything around by 180.
Sure enough, first Goldman and soon everyone else, will declare that they were only kidding, and in reality what needs to happen for more market upside is even lower yields, i.e., even less economic growth!
One really can't make this up. Alas, it is all right there, and according to some this is the reason for today's market upside.
And here is where Goldman officially jumps the shark.
According to Goldman's sensitivity analysis, forget 2050: all that is needed for the S&P to hit a Venezuelan 3,560 by year end is for the 10 Year to plunge to 2.0% from its current levels of 2.5%, while the yield gap, or the earnings yield less then 10 Year UST yield, should compress from its current level of 300 bps to just about 100 bps.
Or, in short, all that the stock market needs to rise 80% is for the US economy to implode in a deflationary singularity.
Observe the red highlighted cell in the bottom left on the table below. No, really.
And extending this "logic" if and when the 10 Year crashes to 0%, the S&P should finally hit +∞.
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Megalomaniacts
It's all about the motherfucking bankers now.
If you're not on the inside, god help.
I think it's been proven many times this year that the banksters aren't immune to actions of the "suicidal"-type nature. They won't all be protected from their treason, corruption and greed at the expense of the rest of the world.
Long Nail Guns and Guillotines, bitchez!
"the S&P should finally hit +?"
Worked for Zimbabwe....
In Soviet America, shark is jumping YOU!!
Jackoff Smirnoff
Hyper-inflation could cause the S&P to go up 10 times that by years end.
Hyperinflation is a psychological phenomenon involving loss of confidence. With the whole world still wanting USD, this is unlikely in the present paradigm. Admittedly, this is shifting - but it would still need Americans to no longer wnat USD as well.
Have confidence in the Federal Reserve's irresponsibility and ineptness. If anyone can crush the faith in the US dollar it's these group of PhD academics. Bernanke kicked it off and knows the plan.
Bernanke didn't pay for his son's $400,000 plus debt because he knows the Federal Reserve plans on massive inflation to lessen the debt.
Correct. Watch what Bernanke did, not what he said.
Absolutely concur about hyperinflation not likely for resaons stated. I believe a probable scenario for the elite to "shit can" the USD is sufficient further incremental debasement debasement in push to monetize national debt....but main thrust is for bigger institutional players like OPEC,BRIC to use other currency and gold in trading thereby providing cover for a introduction of a new monetary paradigm that all actors would sign on too....individual consumers in mass worldwide demeding a different "currency" is unlikely. Another key factor in new currency intro would be the faster drop of actual hard cash float, as electronic credits of any nations currency is easier to "change".
Not counting food, fuel, healthcare, or education of course. In that case, yes, there won't be inflation in the shit people don't need to survive. You think this is a good thing?
While no one is "demanding a new currency paradigm, a significant number of customers in the world are already bypassing the dollar altogether and the number is growing. I don't think you understand the definition of "collapse". No society/currency has ever collapsed/died because their purchasing power was too strong.
Gas prices have gone up around 40% in the last 6 months. That was the fastest increase in the past 10 years. Hyperinflation is very likely within the next year.
Some of you just don't seem to be paying attention to what is going on even though you obviously have access to ZH where it's all being displayed in front of you...
Wrong. All that matters is the total amount of counterfeit FRNs being printed vs total amount that people with faith are able to soak.
If a single more FRN is printed than people still having faith in the system are capable of buying in exchange for their labour for the purpose of holding it, its velocity will approach infinitum.
THEN we see price spikes and shortages, and after a while everyone loses faith.
Loss of faith is what actually marks the end of hyperinflation and transition to a new system. If people's faith is strong, hyperinflation can last for years. If it's not, just a few months or even weeks.
If Kostin is right, then the lemmings need to pile into TLT and SPY before the reversal.
They are always right. ZH rails against them, and rightly so, but they make the rules. I don't have to like it but I can use it to my advantage. (And I do) I let these fools make my gains for me and profits go direct to the bank of Au. No sense in fighting them... At least, by traditional standards. (Just keep an eye on TSY yields)
Into the Black Hole we go.
https://www.youtube.com/watch?v=uLQhKLPwUp4
BOOYAH !!
Will there be pancakes afterwards?
Megalomanics
It makes sense if this marks the start of a global hyperinflationary event. The price of everything, barring precious metals, increases across all areas regardless of economic fundamentals.
Isn`t this the same Goldman that forecast gold would be about $800 about now. Stop posting their bullshit prognostications, makes my head hurt.
Don't say it out loud... I wouldn't be surprised if gold and silver crash below their resistance levels of the last few weeks...
Sound actually pretty possible to me. But that also means they're talking about a dollar implossion at years end with a 70 to 80% devaluation.
trading one share blocks they could get there in a microsecond if they chose to do so
Those numbers (80%) are a bit lofty,but they are pretty much spot on. they lower yields go, the higher stawks go. For a while.
Also the higher yields go, the higher stawks go. For a while.
In the past, the only rational for yields going that low would be a stock market correction taking the yield there first. I can't see it but we are living in crazyville so who knows for sure because these central banks can get any number they want as you well know.
it works till it doesn't?
The alternative is getting off your bum and doing physical work. And that pays even less ...
... If you can tell me I'm right or wrong, please add a comment. I'm listening. But make it a good one.
The forecast is if the 10 year is at 2% and the earnings yield is at 3%, which reflects a 33.3 pe ratio. They also allow at the same 2% 10 year rate, an earnings yield of 7.5% which reflects a 12.5 pe ratio and a target of 1780.
The earnings yield is the only number that really matters when projecting S&P levels. The rest is noise.
Massive inflation is the Federal Reserve's card to lessen the debt and enrich the few.
If there was going to be hyper inflation, it would have already happened. It has not and will not happen. The Fed has and can continue to print but absent the government buying everyone in the US a new house and car (I am not ruling this out completely) there is simply not enough end demand from consumers. The populous is tapped out, period.
The 10 yr will decline due to economic weakness and flight to safety as investors pour out of equities, unwind margin, pour out of equities, end share buy back programs and pour out of equities. Repeat.
Do you think the people in Germany could afford 10,000 mark apples? No. They sold everything to survive. Your personal paycheck has nothing to do with price levels or money supply. Hyper inflation is the only mathematical outcome. it always has been.
People selling their shit, paying off loans, pulling back on spending, baby boomers retiring, banks not lending, all are deflationary.
Those Apples were the same cost as they were prior to HI. Wages, etc., were adjusted accordingly. The biggest losers in a HI environment are the Creditors. Over run by debt to other countries, Germany decided to print their way out and fuck over the countries, governments and bankers that enslaved them.
If the Fed wanted to, they could have already followed the same strategy, they didn't.
They will....they won't want to, but the Fed will be forced to support the banking system and will kill the dollar in doing so.
All these things you list as being deflationary may indeed be true, but what you aren't taking into account is the Feds reaction to these things being deflationary. Deflation hurt debtors, and it would wipe out all these trillions in interest rate derivatives, all it takes is a few percentage points and every major bank in the world is rendered instantly insolvent. By trying to protect the biggest debtors ( every single major govt in the world) and preventing these banks from going broke, could be the tipping point. Dollars are no longer wanted, and come flooding back to the US, resulting in massive price increases across the board. At that point, other countries would no longer be willing to send us real commodities(such as oil) in exchange for dollars we create, billions a day, out of thin air. There is your hyperinflation.
I understand what you are saying, I just believe the deflationary pressures are too large to overcome. The fed has been printing and base is going through the roof but you look at velocity and the currency is just not making it out in to the economy. The stock market, yes, money is going there, but not so much elsewhere. We are down to student loans, which is nothing more than trip C rated junk debt, and sub-prime auto loans.
I hear the argument that "dollars will come flooding back", but it will need to be in exchange for something. This is already happening with real estate. Foreigners have dollars and spend on real estate which is jacking up prices in very limited areas. There, however, does not appear to be much demand for anything else. If there was we wouldn't have the gigantic trade deficit.
We will see...
Yep. It is all about page views and clicks...or something like that. Always some new metric to justify a bubble. I'd have more respect if they just said it was a bubble, but it might get bigger.
To me it appears that the places we are seeing major inflation are those affected by the 1% who have been the beneficiaries of the Feds largess. In other words, the stock market, exotic cars, yachts, and high end real estate in certain market area
"To me it appears that the places we are seeing major inflation are those affected by the 1%"
What the heck are you talking about? Do you use food, healthcare or energy?
Bob Brinker was on the radio on way home from work yesterday and he was saying he expected P/E's to get into the 30's before bubble pops. He says P/E's are at 17-18x now.
I'm voting for a white man during the next presidential election.
If they let one get on the ticket? Knowing that White males are becoming increasingly unelectable, what party would front one? Red team probably fronts a Latino male/White female and Blue team picks either a White female or another African male.
Keep it simple.
Stay home.
If you vote you are complicit in government crimes
SPX to 2066 by year end, then SELL.
http://www.safehaven.com/article/34503/spx-follow-up-of-the-triple-zig-z...
I've been thinking alot lately about psychology of rigged markets by CB intervention with no skin in the game. Is it possible that there can still be market psychology if Central bankers and governments own over 50% of all markets and own a % of everything else through taxes?? is SnP 2k a psychological number?
The Santelli rant to end all Santelli rants just happened w/ the "Fast" Money halftime cretins ("fast" meaning you don't eat much if you follow their investment calls), and can't imagine the Tylers won't feature a post w/ the video. If you missed it, greater entertainment (and unintentional humor) won't be had for months to come, guaranteed ...
http://video.cnbc.com/gallery/?video=3000069878#eyJ2aWQiOiIzMDAwMjkyNDI1...
Santelli's head........ BOOM!
Goldman = jagoffs.
Seriously, ZeroHedge is advertising for a VH1 show called Dating Naked?! This whole debauched culture needs to collapse to get real.
Dow perfectly priced to actual value of US dollar _ German index went to xxxMillion in 1923
We now have another hashtag: #DIV/0!
The real question is how much it will cost the Fed to keep the S&P high. Maybe they can do it on the cheap but they'd be doing something no nation has been able to do in history.
Eventually those dollars spent on derivatives cause price increases not just in the equity markets but also in the market place.