This is where HAL9000 comes in and does his... err, its dirty work....let's see what the super computers accomplishes in next 2 hours.
Kool Aid man is getting tired, I keep pulling him out of the shoebox. Remember, our national contract - we give billions upon trillions to the right organizations/people - in return your Etrade account is allowed to go up 18%. We all win here - let's do this Kool Aid man.
EDIT 2:20 PM - speaking of Etrade (ETFC) it is up nearly 25% as every Tom, Dick, and Harry sub $5 stock is now being run the moon. I sold another batch of Regions Financial (RF) as it hits $7.50 - I was hoping for that price within 2 weeks, not 24 hours. That just leaves us with a less than 1% position going into earnings next week. Again, moves that once took months to take out now happen in days. I am selling some Lennar (LEN) exposure as well. Anything jumping like mad I am selling some off in pieces. I replaced the long exposure with ETFs that I can get out very quickly once the euphoria reverses. While I am drinking Kool Aid, I am standing by the door listening for the siren of the cops to close down this party. I did notice some shorts slumped over the toilet in the bathroom ...
EDIT 2:30 PM - Wall Street strategists estimate that S&P 500 companies will earn a total of $47.45 a share this year, according to the average projection of 11 forecasters surveyed by Bloomberg News.
So we're approaching 19x FORWARD earnings on the S&P 500 . That's not trailing; that's future earnings. That's what paper printing a tsunami of dollars will do - all assets of relatively fixed nature (supply) will be driven up. Boo yah - 19x [forward] earnings in a bear market.
14 comments:
"Wall Street strategists estimate that S&P 500 companies will earn a total of $47.45 a share this year, according to the average projection of 11 forecasters surveyed by Bloomberg News."
And they continue to revise down. What do you think they'll actually come in at? $40
David Rosenberg sees them possibly at $35 within the next 2 years.
I've been in the $40-$45 camp but that was before FASB and 0%ish interest rates
Since we can mark to fantasy maybe $45-$50 is plausible. Financials will be the huge swing - retailers and anything correlated to the consumer (or foreign sales with a strong dollar) should be quite weak.
No problem, we can trade our way to prosperity, and use accounting tricks to make us rich; don't ya know?
Roubini seen smiling, the government gave him the happy market drugs as well...
http://www.businessinsider.com/happy-50th-roubini-2009-3
Dow 10000 tomorrow, Cramer to be new president :)
I just love your graphic TM, no matter how many times you post it, every time I see it, it cracks me up! :)
Everything is great, drink some kool aid and buy some stocks!! yayyyyyyyyyy!!!
Mark,
I disagree with any shorting. Its a mistake to understand the mass amount of institutional money that is getting caught underweight during this rally. Sure, the P/E may look horrid right now, but who cares? There is a premium for anything of relative safety right now.
We won't stop moving up until big money investors stop buying on dips. I haven't seen any signs of that yet. Also, we had every reason to crash after Goldman came out with an equity raise directly after earnings, AFTER a huge pop in financials from WFC last week. Yet, we didn't. Too many people have orders open to fill at every support level.
Retail investors "just know" the market is still heading lower so therefore they are waiting for the pullback before buying in. That tells me we got a ways to go before its over. I want to see these idiots buying at the top because they lost patience before I dump.
Where will it stop? I'm sticking with my original guess of 200DMA for SPX. But who knows. I will get cautious around 920, but honestly, I won't be too worried UNTIL I see an outsized downsize move. Right now, the possibility of that happening is practically zero. Everyone knows "the market could crash at any moment!" and therefore no one who is invested right now has weak hands. We all have strong ones.
Things I am looking for:
1. Sentiment shift among the many. Right now, retail investors are extremely bearish. Everyone is "looking at the charts" and seeing a pullback coming. Everyone puked up long positions when we bottomed between 720-666. Of course, that is what allowed for the current bull market to run as long as it has so far.
2. Sentiment shift among instiutions. At some point, institutions will stop getting phone calls from clients saying "GE is $12/share, go buy it! This is a once in a lifetime opportunity." For now though, the price is still active to anyone who looks at a 10-20yr chart and believes the world WILL return to its previous "normalcy."
Mark,
Did you happen to see the Jeremy Siegel article regarding the P/E valuation of the S&P? I'm not sure I agree or disagree strongly, but it is a very interesting take on why the S&P may not be as expensive relative to earnings as you are implying.
http://finance.yahoo.com/expert/article/futureinvest/153794
I would say earnings are already wrong by a country mile because they exclude things we choose to ignore - such as excluding stock option grants. That is a real cost but we choose to "wink wink" them away.
So there are many ways to skin this cat - so many companies take so many '1x charges' (but take those same 1x charges every quarter) that it's all become a game. If you measured earnings like we used to before excluding all the 'giveaways' - and then put Siegel's reasoning back on top of it then you can sell me.
A lot of this is just fantasy. If a company earns $20 million and pays executives $14 million, thats $6 million. In our "pro forma" world we say it is $20 million in profit and exclude the $14 million because "it's not operational" etc.
Mark to fantasy has been around a long time.
The market would be far more expensive than even the $40-$45 EPS I am stating if we begin to count what should really be counted.
Mike, I know its hard to believe but the same comments were made 6 weeks ago in the opposite direction.
Even in a move up, there are days the market goes down. I guess to not have any short exposure one must assume we have, on the back of 6 straight up weeks, another string of 13 out of 15 days straight up in the market.
Possible.
Probable? Doubtful.
But anything is possible.
I see the same conviction in bulls in everything I read that I did in bears 2 months ago. I have conviction in nothing and even in the strongest of bull markets you have a few deep swings to shake out people. I will never have "no shorts". I can't jump in and out, and all back to cash, etc on a continual basis. I am not looking for a major trend change - but I don't think a 2-3% down day here or there is outrageous
I love how the psychology has swung! Yowsers
Mark,
Re: earnings. See this from S&P
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
And an interesting take on it here:
http://www.fxstreet.com/fundamental/analysis-reports/market-comment/2009-04-17.html
Of course the market's not reacting one bit right now to fundamentals, as you well know. Just the hope of guessing at the recovery that's now turned into a technically driven herd chasing the trend. Sanity will return; it must and always does, for a short while at least.
Siegel has gone off the tracks in trying to defend his thesis of "Stocks for the Long Run."
He needs to just admit that the Great Bull was an statistical outlier that has skewed to overall stats and also everybody's perception of market performance.
He's in denial.
I'm waiting for that 2-3%. I'm too nervous to go long in this - too scared to go short. I would like to go short just for the slight correction or retracement.
Any clue as to when this is? I can usually get an idea when I start seeing FAZ and SRS added to your list, you can be a day or two early but it always pays off.
I have a feeling it will be monday, we've formed something of a double-top on the s&p, and today's volume was really low - reminds me of last thursday's insanity. And no matter how hard we try, we can't close the day at or above 870... makes you wonder if this is the top...
Mark to Model has been around a long time. FASB should not have changed that...You just don't change the rule working for more than 50 years...
A suspension of "Mark-to-Market" accounting would definitely give breathing room to banks. However, there are other alternatives, such as suspending financial regulatory requirements, which could have the same effect.
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