"Panic Is Building" BofA Admits; Asks "How Bad Could This Get?"
Just one month ago, Bank of America's equity strategist Savita Subramanian told Barrons to stay the course and to expect a 2,200 year end target on the S&P based on a year end 125 EPS forecast and an implied 17.6x forward multiple. Incidentally her 2015 year end S&P500 forecast was an identical 2,200.
It appears that much has changed with the market's "fundamentals" in the month that followed, because in a note released earlier today, the same Savita, when commenting on the "Worst start ever" to a new year by equity markets, is far less concerned with market upside as she is with analyzing the worst case scenarios.
Here is her take on "How bad could this get?"
The risk of a full-blown bear market remains low without a recession, which our economists continue to see as unlikely. The S&P identifies 13 bear markets since 1928, of which 10 have coincided with US recessions. The exceptions were 1961, 1966 and 1987, which (precisely because they did not occur alongside recessions) were relatively short-lived, followed by swift recoveries. In fact, the average 12-month returns from these peaks was -12%, suggesting we would only be a few percentage lower by spring. We advise against panic-selling, and still believe that we have yet to see the highs for this cycle. Our signal checklist (page 2) provides a framework for how the S&P 500 looks today relative to prior market peaks.
While Savita forgets to mention that in none of the prior historical occasions was the Fed "half-pregnant" with a $4.5 trillion balance sheet at a time of tightening conditions, she does correctly note that the current environment is hardly a "supportive backdrop for profits." Specifically she notes that the weak stock market performance comes in the context of:
- slowing US and global economic growth (US 4Q GDP tracking 1%)
- collapsing commodity prices (oil prices averaged -42% y/y in 4Q)
- renewed fears about China (Shanghai Composite -38% since last June)
- heightened geopolitical tensions (Middle East, North Korea, etc.)
- the first transition to Fed policy tightening in a decade.
Her conclusion is that "these factors have created a difficult backdrop for corporate profitability, and we forecast 4Q EPS growth of -1% y/y (consensus: -4%)."
Actually, according to Factset, Q4 EPS consensus has now tumbled to -5.3% and dropping by about 1% every 2 or so weeks. More on that in a later post.
So is BofA's conclusion to ignore JPM's "sell any rally" call and BTFD? Not anymore, although while BofA does admit that "panic is building" (suggesting this "sets the stage for a rally"), it also says there is one key ingredient missing: growth.
Near-term caution is warranted, but don’t panic sell
In our framework, there are three key drivers of stock returns: valuation, sentiment and growth. But in the near term, sentiment and growth matter most. Panic is building, most likely setting the stage for a rally, but the missing ingredient here is growth. With analysts cutting estimates at an accelerating rate, increasing China risks and no apparent floor for oil prices, we remain cautious on our near term outlook for stocks.
But not cautious enough to change the year end target of 2,200?
(6 votes)
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BINGO.
"Our Director of Public Relations, Honest Bob tried to warn you about this 6 months ago. We are sorry that your gambling addiction did not work out for you. Please see Nancy in our Bankruptcy Dept. She'll help you get started on the paperwork so we can take your house and land. She'll be very helpful."
Global margin call?
QEI
quantitative easing infinity
and this just in as I checked silverdoctors
http://www.silverdoctors.com/jim-willie-double-barreled-hidden-q-e-to-in...
Fighting a Great Depression is futile. It makes things worse. My grandparents had their hours cut to 3 days a week, but they got through it easily because everything needed to survive became a lot cheaper. They had more free time to go to parks and visit family. They went hunting and fishing (we have about 10 million Canadian Geese that should be on dinner tables). The Great Depression was easy as pie for most Americans. World War II brought on the terrible times of food rationing, worry and death. Pray the Wall Street Shucksters and Super Rich Politicians don’t create WW3 to get us out of this one.
Praying will not stop WS.
They will continue until they are dead. It is what they do.
The question is what will everyone else do?
It's exactly like a drug addict who is moderately fuctional. The real damage is in all the things they DON'T do like take pro-active steps to turn things around.
So the errors of omission just keep piling up.
I've said over and over that the one thing the masters of the universe can't do with all this manipulation is make the economy actually function.
The economy functions in SPITE of the things they do but they are building up a horrific disconnect.
The real problems go unaddressed.
Our ponzi economic system can't handle slowing growth, marginally more costly to extract resources and the technological assault on human earning ability in general.
All these things are eroding the foundations of the economy and on TOP of all this the ponzi is being managed to maintain or increase the grift.
It's a perfect storm of old world grift meeting real world new problems and the problems themselves are not being addressed at all.
This will only resolve through crisis protracted as it has been it's likely to result in WW3 and we will all be lucky if it doesn't result in an extinction event.
I truly believe only something horrendous is going to have the power to change peoples approach to building a society.
I pray it comes in time.
"The risk of a full-blown bear market remains low without a recession, which our economists continue to see as unlikely."
Bolded for historical reference. If the average economist told me they were lying, I wouldn't believe them.
There's nothing more fun than watching a bunch of 'got it all figured out' and self-perceived 'smartest guys in the room' wearing suits while running around in a panic about uncertainty. Screw them. Let them all take up new careers in the service sector they helped create.
Does anyone realistically even care about a BoA report?, the Fed's agenda?, or the MSM's bullshit propa-ganga?
I prefer truthiness of the obsure writers out there.
http://www.nomiprins.com/
https://www.linkedin.com/pulse/truly-big-shorts-john-m-cunningham?trk=pu...
http://www.hussman.net/index.html
hey, don't knock Bank of America
They were smart enough in 2008 to buy Countrywide and Merrill Lynch to destroy all the incriminating emails that passed between them.
That's pretty hip, if you ask me.
The demise of the Western consumer has affected demand for Chinese products and their Keynesian infrastructure investment has run out of money due to the length of the downturn in the West.
The lack of demand for Chinese products and the end of its Keynesian, debt fuelled stop gap has fed back into global commodity prices.
This is affecting commodity producers in Latin America and Africa.
Spain and Portugal are massively invested in Latin America and the losses are starting to mount.
The vicious circle is now complete and can only spin faster and faster until the global consumer gets some money to spend.
In our wonderful new, supply side, trickle down world we have taken our eye off the global consumer.
How is the global consumer these days?
1) The once wealthy Western consumer has had all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.
2) Japanese consumers have been living in a stagnant economy for decades.
3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.
4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.
5) South American and African consumers are busy struggling with economies that are disintegrating fast.
Oh dear, no wonder there is no demand for Chinese products or any other products for that matter.
When these fucksticks urge eveyone to remain calm, there exist only one piece of advice that I can give you. RUN!!!!
What are you saying, dude?
IN 2009 growth was missing in the US economy and the market TRIPLED
Unless you mean pretend growth.
At this point in time only a stupid moron would not take measures to put all your assets under your control.
Get money out of the banks and do it right NOW! Only keep enough there to pay basic bills.
Look into getting all your retirement funds transferred to your direct control which means for practical purposes to move all your money into treasurydirect.org in very short term notes.
Anything that you do not have under your direct control or in your mattress will be taken.
A Cyprus event is close to happening in the US. One day your credit cards will work and the next they won't and your bank will be closed. Actual, cash will be king.
Martin Armstrong (armstrong economics blog) has written another very elegant and crystal clear piece on his website about the mess we are in.
He mentions the tax burden and future liabilities -
" When the American Revolution said NO TAXATION WITHOUT REPRESENTATION, it also incorporated no borrowing or public debt.
Why?
Because by maintaining a public debt, we are now being taxed for past debt on a 70% interest payment that we had ABSOLUTELY no right to vote on at that time. This is TAXATION WITHOUT REPRESENTATION.
We are taxed for the past — not the present. '
-spread the word-
Democrats are like socialists in Europe and anywhere else who always run up more and more public debt . In Britain the Conservatives cut , then the Labour socialists get back in and spend like there's no tomorrow. Then the people vote the Tories back in to sort the mess out.
Fighting over other people's money is an art there. Amazing.
The reason why Martin Armstrong writes eurdite articles about the nominal aspect of it all is because doesn't understand the whole basis of the game.
This is function of the Wolfowitz Doctrine - the statistical aspects of the econ are whatever they say they are. Period. If the motor caughs - they'll inject digital cash; and as long as they are allowed to - they'll run the motor wide open. If it blows, the've got a plan B (not for you, but for them); and if anyone wants to get sassy about it all - well... that is what the MIC is all about.
In sum, I don't think Ol Martin has an understanding of FORCE.
" In sum, I don't think Ol Martin has an understanding of FORCE. "
I suspect that, at some point during his incarceration in an NY jail for seven years on trumped up contempt of court charges, Ole Martin might have come to understand the factor of FORCE being used against him personally.
I also suspect that, since he is erudite enough to write that the Government is the enemy of the people and not it's servant, he has retained a reasonable grip on such matters.
-but he is an unusual guy troo dat.
It would appear as if the "fan" was turned on.
BAML ... tards
'likely setting the stage for a rally'? Just how far up your ass does your head have to be before you see the light?
"The risk of a full-blown bear market remains low without a recession" ... well, yah ... but what about the fact that we are in a global recession and a national contraction.
??? C'mon BOA! Read it in reverse and you will be able to see it: lower growth= lower sentiment= lower valuations. See? It's pretty simple after all. Now stop squirming around, you know this hurts us more than it hurts you.
Assholes...