Goldman Report on S&P 500

[bmichaud]

http://www.scribd.com/doc/142693311/S-P-500-2015-goldman

 

Using GS's own effing data I get to a fair value of $1,111 on the S&P 500 using a 9% cost of equity.

 

Goldman projects dividend per share growth of 5.9% per annum through 2022. FUNNY how low this rate is given how "robust" corporate America's aggregate buyback program is right now....

 

They choose to use a "fair value" diviend yield of 2.1% based on the average dividend yield since 1991....VERSUS the 50-year average of 3.2%.

 

The graph on page 3 with ever-increasing operating EPS is just nauseating. The height of insanity. If this isn't a sign of an imminent crash a top I don't know what is (had to throw imminent crash in there for Kraven  8) )

SPX_FV_with_Goldman_Data.xls

[Parsad]

I suspect Fed selling is just around the corner.  It will be interesting to see how markets react when quantitative easing turns into quantitative flooding. 

 

I hate predictions, because they make you look stupid when you are wrong, but I bet we will see a major sovereign default in the next 12-24 months after rates begin to rise.  Let's see how stupid I look now in 12-24 months!  ;D  Cheers!

[Guest valueInv]

I suspect Fed selling is just around the corner.  It will be interesting to see how markets react when quantitative easing turns into quantitative flooding. 

 

I hate predictions, because they make you look stupid when you are wrong, but I bet we will see a major sovereign default in the next 12-24 months after rates begin to rise.  Let's see how stupid I look now in 12-24 months!  ;D  Cheers!

 

Then why make one?

[bmichaud]

After all this talk of "tapering" do you think they will actually be outright selling any time soon? Can't they just let the balance sheet unwind naturally through security maturation?

 

It's too bad Moore can't find his way to a keyboard to weigh in.....

[Parsad]

I suspect Fed selling is just around the corner.  It will be interesting to see how markets react when quantitative easing turns into quantitative flooding. 

 

I hate predictions, because they make you look stupid when you are wrong, but I bet we will see a major sovereign default in the next 12-24 months after rates begin to rise.  Let's see how stupid I look now in 12-24 months!  ;D  Cheers!

 

Then why make one?

 

Because I like to get the board into a tizzy!  ;D  Cheers!

[stahleyp]

Why couldn't the fed just go from $85 billion a month...to $84...$83, etc? 

[Parsad]

After all this talk of "tapering" do you think they will actually be outright selling any time soon? Can't they just let the balance sheet unwind naturally through security maturation?

 

It's too bad Moore can't find his way to a keyboard to weigh in.....

 

He's like Santa Claus.  ;D  He knows when you've been good, he knows when you've been bad...he'll post when he thinks he needs to. 

 

They can let the balance sheet unwind through security maturity, but the moment that the HFT, hedge fund guys get wind that they have stopped buying or are unwinding, the nutjobs may start to panic.  Regardless, we have no idea what the outcome will be, because we've never been here before.  It will be interesting to see how markets and rates behave.  Cheers!

[Parsad]

Why couldn't the fed just go from $85 billion a month...to $84...$83, etc?

 

In theory, that is what they will do.  We'll see if it works in practice.  Cheers!

[JEast]

I will take a little friendly action on the predication of a sovereign default.  I wager a pint to be paid in April of 2015 in Toronto that no sovereign will default.

 

My thesis is that most will kick the can down the road as interest rates will continue to stay low (or lower) helping the situation.  Call it the anti-Bass theory.

 

 

Cheers

JEast

[constructive]

I will take a little friendly action on the predication of a sovereign default.  I wager a pint to be paid in April of 2015 in Toronto that no sovereign will default.

 

My thesis is that most will kick the can down the road as interest rates will continue to stay low (or lower) helping the situation.  Call it the anti-Bass theory.

 

 

Cheers

JEast

 

How are you going to decide what constitutes a default? Some people think Greece hasn't defaulted in the last two years, others think there has been one default, others think two.

 

What countries are you talking about? The odds are against you if you include all 196.

 

http://static3.businessinsider.com/image/4d30bc1a4bd7c8a073220000/chart-of-the-day-sovereign-debt-default-jan-2011.jpg

[Parsad]

I will take a little friendly action on the predication of a sovereign default.  I wager a pint to be paid in April of 2015 in Toronto that no sovereign will default.

 

My thesis is that most will kick the can down the road as interest rates will continue to stay low (or lower) helping the situation.  Call it the anti-Bass theory.

 

 

Cheers

JEast

 

How are you going to decide what constitutes a default? Some people think Greece hasn't defaulted in the last two years, others think there has been one default, others think two.

 

What countries are you talking about? The odds are against you if you include all 196.

 

 

True, what constitutes a default.  In my opinion, Greece has defaulted...as without any European intervention, they cannot survive.  But I'm saying a "major" sovereign default in an advanced economy...major European, Asian, North/South American country...where without full intervention, they cannot survive.  In other words, a signifcant global crisis.  Cheers!

[Kraven]

http://www.scribd.com/doc/142693311/S-P-500-2015-goldman

 

Using GS's own effing data I get to a fair value of $1,111 on the S&P 500 using a 9% cost of equity.

 

Goldman projects dividend per share growth of 5.9% per annum through 2022. FUNNY how low this rate is given how "robust" corporate America's aggregate buyback program is right now....

 

They choose to use a "fair value" diviend yield of 2.1% based on the average dividend yield since 1991....VERSUS the 50-year average of 3.2%.

 

The graph on page 3 with ever-increasing operating EPS is just nauseating. The height of insanity. If this isn't a sign of an imminent crash a top I don't know what is (had to throw imminent crash in there for Kraven  8) )

 

Ha, very nice!

[Kraven]

I will take a little friendly action on the predication of a sovereign default.  I wager a pint to be paid in April of 2015 in Toronto that no sovereign will default.

 

My thesis is that most will kick the can down the road as interest rates will continue to stay low (or lower) helping the situation.  Call it the anti-Bass theory.

 

 

Cheers

JEast

 

At this rate, Sanjeev is going to be out a lot of money.  He already is going to owe me $1 at the end of the year when BAC doesn't pay out $7 bil or more on the common.  A pint too?  Better pick some good stocks!

[JEast]

Agreed - a default in an major advanced economy.

 

I do not believe that a default by Lesotho or Swaziland will rock the markets much and some countries are actually on the US dollar like Ecuador and Panama.

 

 

Cheers

JEast

[constructive]

The trend is against "major defaults" and in favor of many small semi-default steps (although the end result might be the same, the process is more convoluted). Because CDS triggering is now very important.

[ubuy2wron]

The CDS game is rigged as far a Europe is concerned. My understanding is the the Greece bail out was specificaly structured so as not to trigger the CDS's. It seems to me that if Japan does not default it will only be because they make their currency worthless, I presume Kyle Bass has positioned himself short both the YEN and the JGB.  Central bankers have not been able to repeal the Laws of Physics...yet.

[constructive]

My understanding is the Greece bail out was specificaly structured so as not to trigger the CDS's.

 

Greek CDS were triggered.

 

http://www.reuters.com/article/2012/03/09/us-greece-cds-isda-trigger-idUSBRE82817B20120309

 

Now whether Parsad and JEast would consider this a major default in an advanced economy, I don't know.

[Parsad]

I will take a little friendly action on the predication of a sovereign default.  I wager a pint to be paid in April of 2015 in Toronto that no sovereign will default.

 

My thesis is that most will kick the can down the road as interest rates will continue to stay low (or lower) helping the situation.  Call it the anti-Bass theory.

 

 

Cheers

JEast

 

At this rate, Sanjeev is going to be out a lot of money.  He already is going to owe me $1 at the end of the year when BAC doesn't pay out $7 bil or more on the common.  A pint too?  Better pick some good stocks!

 

I'm going broke!  No wonder it feels like 1935 to me.  ;D  Cheers!

[Parsad]

My understanding is the Greece bail out was specificaly structured so as not to trigger the CDS's.

 

Greek CDS were triggered.

 

http://www.reuters.com/article/2012/03/09/us-greece-cds-isda-trigger-idUSBRE82817B20120309

 

Now whether Parsad and JEast would consider this a major default in an advanced economy, I don't know.

 

I consider it a default, but not a major economy.  I'm talking UK, France, Germany, Italy, Japan, Spain, Russia, China, Brazil, United States, etc.  One of the biggies...and a couple in particular out of such a list are really on the verge.  Cheers!

[One World Trader]

Given their track records, if Mr. Buffet tells of the coming 'shot heard round the world' with the easing of Quantitative Easing, and Mr. Watsa remains hedged ready for an opportunity, I won't be disagreeing with their perspective!

 

"Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria." - John Marks Templeton

 

[Parsad]

Given their track records, if Mr. Buffet tells of the coming 'shot heard round the world' with the easing of Quantitative Easing, and Mr. Watsa remains hedged ready for an opportunity, I won't be disagreeing with their perspective!

 

"Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria." - John Marks Templeton

 

That's one of the best quotes on investing around.  Cheers!

[wescobrk]

At this rate, Sanjeev is going to be out a lot of money.  He already is going to owe me $1 at the end of the year when BAC doesn't pay out $7 bil or more on the common.  A pint too?  Better pick some good stocks!"

 

Why wait till the end of the year? I'm still not clear on returning more capital under ccar. Can they reapply and buy back more common in sept or do they have to wait till march for ccar?

 

If the former isn't correct, why not pay up now?

 

Thanks!

[JBird]

I suspect Fed selling is just around the corner.  It will be interesting to see how markets react when quantitative easing turns into quantitative flooding. 

 

I hate predictions, because they make you look stupid when you are wrong, but I bet we will see a major sovereign default in the next 12-24 months after rates begin to rise.  Let's see how stupid I look now in 12-24 months!  ;D  Cheers!

 

Sanjeev, what do you believe the probability is of a major sovereign default?

[JBird]

The Goldman report seems overly optimistic.

 

Their estimates are of EPS, rather than just earnings. They don't describe to what extent they believe EPS will increase due to earnings growth vs. repurchases. Frankly, that's not surprising.

 

The question I'm asking myself is, does Goldman expect the S&P 500 to be a massive net-repurchaser of stock over the next 3 years? I've been trying to find information on repurchases for the S&P 500. I've found plenty on the dollar amounts going into repurchases, but little else. Does anyone have info regarding the changes in shares outstanding for the S&P 500 over time?

[Parsad]

I suspect Fed selling is just around the corner.  It will be interesting to see how markets react when quantitative easing turns into quantitative flooding. 

 

I hate predictions, because they make you look stupid when you are wrong, but I bet we will see a major sovereign default in the next 12-24 months after rates begin to rise.  Let's see how stupid I look now in 12-24 months!  ;D  Cheers!

 

Sanjeev, what do you believe the probability is of a major sovereign default?

 

30-70...default/no default...60-40...crisis/no crisis.  I think the chance of a default is reasonably high, but probably prevented through intervention.  But I think the chance of a significant crisis that worries markets, because of that possibility, to be almost a given. 

 

We'll see...I may be off on the timing, just like I was with BAC hitting tangible book...but I was right about 5 months later than predicted.  Cheers!