David Bianco CDS Hits All Time High Following His S&P Price Target Hike From 1,400 To 1,450

Just when one thought Wall Street could not become more full retard, here comes David "Kermit" Bianco who, perfectly oblivious of the world ending one broke European country at a time, has just released the following: "S&P 500 2011 year-end target remains 1400, 12-month target raised to 1450 from 1400 12-month target raised on time value and conviction in 2012 EPS being ~$100 barring recession." Barring recession? Has this "strategist" even looked at a TV in the past three months, let alone exited the island of lunatic asylum that is Manhattan? But wait, the humor continues, although we are 100% confident this joke of a snake oil salesman will be on CNBC any minute. As a reminder, Bianco had an S&P price target of 1650 until October 6, 2008, or after the Lehman bankruptcy. He would end up being off by only well over 100%.

Key views and expectations:

  • No US recession – but balance sheet repair and government policy angst weigh on GDP growth for extended period
  • Global economy stays healthy (4.5%) in 2012, despite weak US (2.3%) and European (1.4%) growth, thanks to Asia
  • In correction territory (under 1230), S&P 500 priced for a mild to avg. US recession. ~1200/~14x implies ~$85 2012 EPS
  • No Fed Funds rate hikes until 2014, 10yr Treasury yield 3% at 2011 end, 4% at 2012 end and below 5% until 2015
  • Oil prices stay high (WTI $85-100/bbl) but do not spike to new records – high commodity prices stimulate capex
  • US business spending on equipment and software to rise at healthy pace, which benefits Industrials and Technology
  • 2012 S&P EPS growth of 7% outpaces US GDP, led by S&P foreign (~40%) and business spending (~25%) exposures
  • The huge disconnect between PE ratios and interest rates will spur acquisitions, share repurchases and dividend hikes
  • We prefer high dividend growth stocks over high dividend yield stocks.  S&P 500 DPS estimates: 2011 $28, 2012 $38
  • Overweight sectors most foreign and B2B exposed, underweight sectors most consumer and govt. spending exposed
  • Discipline & courage earn gains – S&P 500 typically rallied 15%+ Sep-Jan when priced for a recession that didn’t come

For those who enjoy having their front lobe turn to mush, especially as Europe is once again in full meltdown mode, both radioactive and otherwise, the full paperweight is attached below.

Idiot Report


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