BofA's Chief US Equity Strategist Unable To Hide Optimistic Delirium

The greatest piece of "research" humor today (and that is saying a lot as it is in direct competition with Wells Fargo's upgrade of Bank of America) comes from David Bianco, whose report "Six Reasons for Optimism" borders on the surreal.

Reasons to stay bullish following the 50+% rally

The 50+% equity market rally that we have witnessed off of the March low appears to have left many investors wary of a pullback. While a 5-10% pullback would not surprise us given the frequency of such moves, we see no catalyst for a pullback and we see more reasons to be bullish than bearish. We would view any pullback as a buying opportunity and not a sign of an impending major market correction.

Here are six reasons that support our view:
1. This rally has actually lagged historical recoveries when measured as a proportion of the market’s fall from the peak. [True, the market still has 400 points to go until its hits the all time high, last seen at a time when there was a few trillion in securitization activity each year, unemployment was just 5% lower than today, and GDP wasn't exclusively driven by government funding... oh yeah, and the consumer was actually spending]
2. Investor sentiment has shifted away from outright pessimism, but remains one of skepticism, according to our Sell Side Indicator. [Do "Dubiousness" and "Trust Issues" follow next on the Pessimism -> Skepticism scale?]
3. The macroeconomic environment is supportive of continued equity market gains based on BofA/ML economic forecasts. [We are shocked. SHOCKED. Enter the UMich Consumer Confidence, or "the market is up because the market is up" index]
4. Earnings are poised for sustainable year-on-year growth starting in Q4. [Earnings based on what: BofA/ML research reports? As for revenues, not so much?]
5. Valuation remains attractive on current and forward PEs, while the trailing 4Q PE continues to reflect the outsized losses of 4Q08. [If anyone tells you a 26 Fwd P/E is a anything but a steal, they are conflicted morons]
6. The relative attractiveness of stocks to bonds remains high on both a real and a nominal basis. [Appropriate clip further elucidating this point]

More comparable self-mutiliation follows.

And here is why "BofA/ML" got hosed on the Rosie/Bianco deal. From Rosenberg's Monday report... A somewhat less cheerleadery report on the economy from a firm that is not a direct beneficiary of spreading rose colored glasses.



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