“The S&P 500 booked a nice 13 percent return in 2012.
For 2013, Goldman Sachs‘ equity strategy team expects the index to climb to 1,575 by year-end.
However, they obviously expect some stocks to do better than others.
The firm’s new “US Monthly Chartbook” includes a list of the 40 stocks with the most upside opportunity relative to Goldman analysts’ price targets.
We pulled the top 12 stocks, which offer 30 to 50 percent upside relative to their recent prices.
Comments »“Why are citizens of the developed world looking a gift horse in the mouth? The Dow Jones Industrial Average rallied beyond 14,300 points this week, passing the highs it reached in 2007 just as the world economy was starting to wobble. Sure, there are reasons to be sceptical about the Dow. It is weighted, rather arbitrarily, by share price. But at least it is a quantifiable index of something. We look at 1954 – the year the Dow returned to its 1928 pre-depression high – as marking an epoch. And yet, this week, investors and pundits warned us not to read too much into it.
They have a point. In the half-decade since the western financial system almost collapsed, the relationship between stock markets and the “real” economy has seemed more tenuous. The Dow owes some of its robustness to expectations of a strong Friday employment report.
Then again, European stocks rose to a four-year high following a rise in unemployment to 11.9 per cent. Other solid-looking economic correlations are melting into air. The US property market rebounded in 2012, according to the Case-Shiller index, but the Yale economist who devised it, Robert Shiller, warned in January: “Any short-run increase in inflation-adjusted home prices has been virtually worthless as an indicator of where home prices will be going over the next five or more years.”
Part of the reason people get less giddy about the Dow than they did five years ago is because they have learnt a bit about inequality. They suspect, more than they used to, that significant developments in the economy go on over their heads. What looks like a recovery, a rally or an increase in consumer confidence may just be the effect of elites passing money among themselves.
Most western leaders hold power today because they weren’t in power during the bleakest days of September 2008. (Germany is the important exception.) They claimed a mandate for radical action, but the economy stumped them. So they have been radical on non-economic matters instead: Barack Obama with healthcare reform, David Cameron with gay marriage and Ireland’s Enda Kenny with abortion. If you were to examine their rhetoric of a few years ago, you might suspect these initiatives were hocus-pocus. Their economic policies don’t differ much from those of their predecessors.
The West’s leaders are vulnerable to the accusation that the policies they lay out on behalf of society as a whole are benefiting only a small group. Joseph Stiglitz, the Nobel Prize winning economist, accuses the Obama administration of trying to rebuild the economy from the top down, not the bottom up. The Occupy movement and the Spanish indignados filled squares with young people eager to make a similar point. Last summer the leftwing Syriza movement won a quarter of the seats in the Greek parliament. In effect, party leader Alexis Tsipras asked Greeks not to take seriously the warnings that Greece would be cut off from the European financial system if it rejected austerity, arguing that they were cut off from the fruits of the system anyway. The strong performance of Beppe Grillo in Italy’s elections is a sign other countries’ voters are willing to call the system’s bluff……”
Comments »“…..Prior to the jobs report, we saw really nice numbers on ISM Manufacturing, ISM Services, consumer credit, and initial jobless claims.
Goldman Sachs is starting to get excited and take note. Here’s a segment from a new note, which was posted on Calculated Risk:
In our annual forecast rollout last November, we predicted that the US economy would move “over the hump” of fiscal contraction, with still-sluggish growth in most of 2013 followed by a gradual acceleration to an above-trend pace in late 2013 and 2014. But the recent data raise the tantalizing prospect that the “hump” may already have occurred. … The most visible data point is the strong February employment report showing a nonfarm payroll gain of 236,000 and a drop in the unemployment rate to 7.7%. But arguably the more important one is the apparent resilience of consumer spending despite the $200bn tax increase that took effect in January. … In our view, it is still too early to close the books on the early-2013 consumption slowdown. After all, we only have auto sales and consumer confidence in hand for February so far. And we still think that the weakness in federal spending will restrain growth in coming quarters. But if consumption picture holds up in light of upcoming data, a modest upward adjustment to our growth forecast would probably make sense.
Of course, the sequestration has just barely begun…”
Comments »“Jim Rogers decries the growing uncertainty and recklessness of global central planners as the world enters uncharted financial markets:
For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don’t know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history.
I own the dollar, not because I have any confidence in the dollar and not because it’s sound – it’s a terribly flawed currency – but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven. It is not a safe haven, but it is perceived that way by some people. That’s why the dollar is going up. That’s why I own it. Will I own it in five years, ten years? I don’t know.
It makes it extremely difficult for the investor looking for acceptable risk/reward, or the saver looking to protect their purchasing power; as in Rogers’ view, all options have their problems:
I own gold and silver and precious metals. I own all commodities, which is a better way to play as they debase currencies. I own more agriculture than just about anything else in real assets because of the reasons we discussed before. We were talking before about the risk-free or worry-free investment. Even gold: the Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something — whether it’s foolish or not is irrelevant — if they do something, gold could go down a lot. So I own it. I’m not selling it. But everything has problems.
To Rogers, the bigger danger that concerns him is the hollowing out of the ‘saving class’ resulting from this situation. Central planners’ policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social — and often human — costs:
Throughout our history – any country’s history – the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on…..”
Comments »Before you make a leap into bank stocks you need to watch this video and judge for yourself what the stress tests mean for the banking system. Given this video i would say the stress tests are for your confidence more than anything relating to reality.
“NEW YORK (Reuters) – The newest stress tests for U.S. banks produced scores that are at odds with other measures of lenders’ safety, in another sign that some institutions may be too big for regulators to understand and executives to manage.
For example, Citigroup Inc, which has been bailed out multiple times by the U.S. government, showed up on the score sheets posted by the Federal Reserve on Thursday as being clearly safer than JPMorgan Chase & Co.
That conclusion is at odds with the views of investors, bond analysts and credit-rating agencies, as well as when measured by a yardstick regulators themselves want to use in the future.
“At the end of the day, there is a legitimate question about the ability of regulators to fully evaluate $2 trillion institutions because of the complexity and exposures they have,” said Fred Cannon, director of U.S. research at Keefe, Bruyette & Woods.
On Thursday, the Federal Reserve reported the latest results of the tests that began after the 2007-2009 financial crisis to determine if banks have enough capital to withstand a severe economic crisis. The Fed concluded that the banks are in “a much stronger position” than before the financial crisis in 2008.
While experts are not arguing with the fact that the banks are better capitalized now and that the system is safer than it was in the run-up to the financial crisis, some of the numbers the regulators published left analysts and bank executives groping for explanations. The test raises questions about the ability of regulators to head off the next big threat to the financial system because of the complexity of the institutions…..”
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“NEW YORK (Reuters) – The Dow’s run to record highs in the stock market’s rally this year may not mean it’s time for investors to go on a buying spree.
Instead, many financial advisers are telling clients to go easy, whether they’re just getting back into stocks or seeking to add to equity positions.
Questions over how much higher the market can go have kept caution in play, with some technical indicators suggesting the market is overbought.
But the case for investing in stocks is strong, they said, particularly given signs of more strength in the economy, especially Friday’s jobs report, which showed a much higher-than-expected 236,000 workers added to the payrolls in February.
“We’re telling clients to take a more defensive approach to the market right now,” said Frank Fantozzi, chief executive of Planned Financial Services, an independent wealth manager in Cleveland.
Yet stocks remain a better choice than other asset classes, he said.
“If I had to pick a category, I’d still be looking at equities,” Fantozzi said. “We still think the market is going to post positive gains for the year.”
On Tuesday, the Dow Jones industrial average <.dji> broke through levels not seen since 2007 and continued to mark new record highs the rest of the week. The Dow is now up 9.9 percent since December 31.
The broader Standard & Poor’s 500 <.spx> on Friday ended less than 1 percent away from its record close of 1,565.15, which it reached on October 9, 2007. The S&P 500 is up 8.8 percent since the end of 2012.
Valuations remain relatively attractive. The S&P 500’s forward 12-month price-to-earnings ratio, a commonly used measure to value stocks, is at 13.8 percent, still below its historic average P/E of 14.8 percent, based on data going back to 1968, Thomson Reuters data showed….”
Comments »Did the Dow Jones Industrial Average really hit new highs last week? Practitioners of the dismal science might answer: Not so fast. When the value of an asset rises more slowly than the rate of inflation, then in economic parlance, real gains should be distinguished from nominal. In real terms, a Dow of more than 15,651.80 would have been required for the average to exceed its October 2007 peak.
Inflation was one reason Barron’s called its own forecast “conservative” when it put the odds last February at seven chances in 10 that the Dow would reach 15,000 by year-end 2013 (“Enter the Bull,” Feb. 13, 2012). The story also spoke of Dow 17,000 occurring in the same two-year time frame—a less conservative target, but with a 50-50 shot. Both those targets, with the assigned probabilities, remain relevant for 2013, since they are based on patterns of market history that still apply.
Even with the Dow reaching a nominal record of 14,329 last Thursday, the performance of the market over the past five years is still below par. That bodes well for the bulls. Lower-than-average returns over five years are generally followed by higher-than-average returns over the following two years.
Accordingly, the Dow has four chances in five that it will be flat or higher by year-end 2014, and a 50-50 chance of approaching 18,000 over the same time frame.
TO SPEAK IN THIS WAY about the odds on future trends in stock prices may sound—well, odd. The probabilities are not as statistically sound as, say, the odds of coming up heads four times in a row on a coin toss. Rather, these market odds are derived from long-term market patterns whose source is University of Pennsylvania’s Wharton School finance professor Jeremy Siegel, author of the aptly titled best seller, Stocks for the Long Run…..”
Comments »“Bill Gross, whose Pacific Investment Management Co. coined the phrase “new normal” in 2009 to describe an era of subpar growth and a diminishing role for developed economies, sees the U.S. outlook brightening — at least for 2013.
Gross, co-chief investment officer of Pimco, doubled his forecast for growth in U.S. gross domestic product to 3 percent for this year, up from the firm’s December forecast of 1.25 percent to 1.75 percent in 2013….”
The past four spring/summer sessions have brought a correction to the market place.
Look it up.
Will it happen again?
All speculation at this point.
However, i like many have said expect the S&P to rise to 1560ish. You were warned at 1370 that if you went short you would die a slow death.
At any rate, it is time to sell into strength and take down some hedges for your safety.
The market in pictures:
The DOW
The S&P
The NADAQ
[youtube://http://www.youtube.com/watch?v=qtFBRJFN3p8 450 300] Comments »
The Dow Jones Industrial Average, one of the key benchmarks of the US stock market, has soundly surpassed its all-time high. And most of the investing world is toasting their collective success and celebrating the recovery.
It’s a funny thing, really. Most investors only think in terms of ‘nominal’ numbers, i.e. Dow 14,000+ is 40% higher than Dow 10,000 (back in November 2009). But few think in terms of ‘real’ numbers… inflation-adjusted averages.
Everyone knows that inflation exists. We can all look back on prices from the past and realize instantly how much more expensive things have become. Conversely, though, most people don’t think about the stock market like this.
The reality is, though, that when you adjust for inflation, the Dow is well below its highs from over a decade ago.
I thought I’d put this into a bit of perspective.
Take beef, for example. Based on USDA retail price data, today the Dow will buy you 3,332 pounds of beef in the supermarket. This sounds like a lot. But it’s actually about 20% less than the 4,046 pounds of beef the Dow would buy back in December 1999.
And if beef’s not your thing, let’s look at fruit. Based on the wholesale price of bananas, the Dow currently buys you a whopping 15.35 tons of the tropical fruit.
But this is exactly the same amount of bananas the Dow would buy back in February 2008, when the Dow was just 12,266. And it’s a massive 60% drop from June 1999 when the Dow bought 38.51 tons of bananas.
Gasoline is an even more interesting example. Today, the Dow will buy roughly 3,812 gallons of unleaded, non-premium gasoline in the United States. This is almost exactly the same as last January, just fifteen months ago, when the Dow was only 12,633.
But to match its high of 10,718 gallons set in March 1999, the Dow would need to almost triple from where it’s at today….”
Full article and more fun charts
Comments »Stoval is pointing out what history suggests; we have a successful track record suggesting only a correction as opposed to a bear market after making new highs.
Comments »“Look, these guys are after a quick hit. I’d blow him off,” he told CNBC‘s “Closing Bell.” “I’d give Einhorn the back of my hand.”
Apple is in a vicious technology war with rivals big and small, and Welch said he thinks CEO Tim Cook should be given the space to run the company.
“He’s got Samsung and everyone nipping at his heels. And he risks running, rather than a sexy company, a commodities company.”
He said Apple needs to have the cash and the flexibility to move on an acquisition in a turbulent market.
“Apple deserves, after all they’ve done, a chance to deliver on all their promises,” he said…..”
“All but one of the nation’s 18 biggest banks could survive even a severe recession and still have enough capital to keep lending, the Federal Reserve said Thursday.
Ally Financial would fall below the central bank’s guideline for how much capital would be needed in a downturn, the report said.
As a whole, the banks would lose $462 billion over nine quarters from a combination of loan write-downs and the falling value of securities, in a recession where unemployment hit nearly 12%, stocks lost half of their value and home prices dropped 20%.
“The stress tests are a tool to gauge the resiliency of the financial sector,” Federal Reserve Governor Daniel Tarullo said in a statement. “Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty.”
The tests show banks’ woes are unlikely to intensify a future economic downturn, as in 2008 when they made the recession worse because they had too little capital to keep lending, said Paul Edelstein, director of financial economics at IHS Global Insight.
“Banks wouldn’t have to cut back sharply on lending to recapitalize themselves, even though they would take some pretty significant losses,” Edelstein said. “They have a cushion to absorb the losses now.”
Banks bolstered their capital in the last year by retaining their profits and shedding risky or non-performing assets, according to Keefe Bruyette & Woods, an investment bank specializing in bank stocks.
Wall Street has been awaiting the stress tests partly to learn whether the Fed will allow big banks including Citigroup to resume paying dividends…..”
Comments »“There’s a lot of money riding on the accuracy and credibility of U.S. economic data. A lot of that faith is misplaced, but it’s not because the government is actively fudging the numbers or lying to us. Unlike a lot of people in Washington, the statisticians who crunch the numbers are a professional bunch who want to get things right.
The two alternative measures of unemployment have risen and fallen in tandem.
We know that because we can verify much of what they produce from other independent sources. By and large, the government data are consistent with numbers produced by the private sector.
Of course statistics, by their very nature, can never be perfect or pure, no matter how well-meaning their creators.
Frequently we make it even tougher on ourselves by misinterpreting what the data could tell us with a bit of certainty. Too often we pay attention to the wrong numbers and ignore a more useful alternative. Those problems in understanding the data are compounded when we try to use them to make political points.
In recent years, the unemployment rate has become one of the most politicized economic numbers. Which means it’s also become one of the most misunderstood numbers. I have a partial solution for that, as you’ll see.
In theory, the jobless rate should be noncontroversial. It’s simply the percentage of people who want a job who can’t find one. However, it’s more complicated in practice. What does it mean to look for work? How hard do you have to try? How often do you have to try? What does it mean to have a job? Does it have to be a full-time job to count? What if it’s irregular work? …”
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“The world today does not smell of lavender and lilacs these days but more like old grease that has gone rancid. Always a skeptic, I find myself these days looking with more of a jaundiced eye than usual as I stare out on the fiscal landscape. Yesterday a High Court Examining Magistrate opened a second investigation into the ruling party in Spain examining new corruption charges that include Prime Minister Rajoy. These focused on money paid by the construction industry but a second article by Reuters made me wonder. This story centered on Santander selling off $393 million in troubled assets to a hedge fund. What caught my eye here was that they were apparently sold at four cents on the Dollar; a 96% discount. You might think write-off but the bank is having serious difficulties so that doesn’t quite fly. You might think some other reason in the normal course of business but at four cents on the dollar there is scant benefit to be gained. I wonder if Santander wasn’t, given the two ongoing investigations, not removing consumer loans from their books, as reported, but questionable loans that they did not wish to be investigated. If the loans are not there then they cannot be found and if they can’t be found then perhaps it lessens the chance of implication and criminality. I look at it all and wonder.
“Every man serves a useful purpose. A Prime Minister who has been caught stealing, for example, may make a perfect scapegoat for the next man that assumes his office.”
-The Wizard
Meanwhile in Italy the spaghetti sauce continues to boil….”
Comments »“Where stress tests are concerned, callCitigroup “most improved.”
The bank posted an 8.3 percent tier 1 common capital ratio – the highest of its peers – under the Federal Reserve’s annual stress tests, which show how financial institutions would fare amid severe economic crisis.
While the tests have been carried out for three years, this is the first that it’s been tackled in two, separate parts: The first, the performance of the banks on the Fed’s models. The second, the Fed’s sign-off on each bank’s plan to return capital to shareholders.
The splitting of the tests came after Citigroup in 2012 cleared the capital hurdle, but saw the Fed strike down its proposal to disburse some of its remaining capital. The bank, as a result, categorically failed the test…..”
Comments »“The euro zone is undergoing serious socio-political fragmentation which could lead to further de-stabilization in the bloc, Nouriel Roubini warned Friday.
Speaking at the Ambrosetti Workshop in Italy, Roubini, renowned for his pessimistic economic forecasts said the political situation in Italy was a “tsunami” risk and was a reflection of the broader problems facing the currency bloc.
“In Italy there’s the beginning of a political storm. The result of the Italian elections signal that the majority of people are against austerity and not just in Italy also in Lisbon half a million people were in the streets and 25 percent unemployment in Greece and Spain, 50 percent amongst young people and there is restlessness,” Roubini said.
Italy’s election last month failed to give any party an outright majority and so far the leading center-left bloc has been unable to muster up a coalition government….”
Comments »“Firefighters and mechanics tried repeatedly to put out a battery fire aboard a Boeing787 Dreamliner through smoke so thick they couldn’t see the battery, according to documents released Thursday that portray the incident as more serious than previously described.
The Jan. 7 fire at Boston’s Logan International Airport is under investigation by the National Transportation Safety board, which released laboratory analyses, interviews and other data it has gathered so far. It still hasn’t been able to pinpoint the cause.
Federal Aviation Administration officials are expected to make a decision in the next few days on whether to approve a plan by Boeing to revamp the 787’s lithium ion batteries to prevent or contain future fires. Once the plan is approved, Boeing hopes to swiftly test the reconfigured batteries and get the planes back in the air.
Dreamliners worldwide have been grounded since a second battery incident led to an emergency landing in Japan nine days after the Boston fire. The incidents have raised questions about the safety of using lithium ion batteries, which are more susceptible to igniting if they short-circuit or overheat than other types of batteries. The episodes also have called into question the FAA’s process for certifying the safety of new aircraft designs….”
Comments »“Hong Kong (Reuters) – Bank of America Corp will seek more lending and cash management business with companies in Asia and elsewhere outside its U.S. home turf, Chief Executive Brian Moynihansaid, an area ripe for expansion where it lags its big rivals.
That could mean vying for market share with more entrenched global banks such as Citigroup Incand HSBC Holdings Plc in fast-growing regions like Asia, where Fortune 500 companies and big local corporations demand a full spectrum of banking services from hedging to foreign exchange to cash management.
“Inside the U.S. we’re number one in cash management revenues, but outside it, against some of our competitors, we’re less than we want to be,” Moynihan said in an interview with Reuters on Friday.
“We might get 70 percent of our revenues from a company inside the U.S., when only 50 percent of their revenues are made there, so we’re missing opportunities,” he said.
The U.S.-based lender won’t be jostling with competitors, however, for securities business in China, where most big names in global banking have been eagerly setting up joint ventures.
“It’s not sensible to have a minority stake with no path to control,” said Matthew Koder, Bank of America’s Asia Pacific president. Foreign banks in China are only allowed to offer investment bankingservices through an onshore partner.
“Right now, everyone’s losing money in China,” Koder said….”
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