As seen on BloombergTV and reported on ZeroHedge:
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, orafter 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
Thinking that equity markets are only down 1% or the US indices only down about 15% from the May top makes me wonder how much more denial can the market take?
As I like to say, denial is the best friend of the bears.