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Enough of a Reason to Get Out of US Stocks...NOW!



December 21, 2010 – Comments (16)

USA Today Headline: 

"In 2011, it's all about stocks"
5 top experts agree: New year's looking great for stocks, not so great for bonds

By Adam Shell

17 Dec 10

NEW YORK — Five Wall Street heavyweights say it's time for individual investors to shun the perceived safety of bonds — and get over their fear of the U.S. stock market — so they can take advantage of what they predict will be a third straight year of solid gains for stocks in 2011.


Abby Joseph Cohen, Goldman Sachs: 

"When the economy does better, things like stocks and commodities tend to rise in price. U.S. equities are now trading between 13 and 14 times earnings, and that is significantly below the historical average. That suggests that there's good value there. Our 12-month market forecast for the S&P is 1450, (a 17% jump from Thursday's close of 1243"

MY COMMENT: The only thing more bearish then quoting permabull GS Abby Cohen in the front pages of the MSM would be your capitial city being taken out by nuclear weapon.

My Previous Posts on bull killer GS'  AC 19 Sep 10 and 05 Dec 07:

Goldman Sach's Abby Cohen is Back with More Insane Calls

September 19, 2010 – Comments (0) | RELATED TICKERS: GS

Unlike NAR's David Lereah ( Abby Cohen does not know when to quit.

I posted to get out of stocks in DEC 2007 after after Cohen called for a 14% rise in the S&P in 2008.

Here is my post in DEC 2007:

SEL! SELL! SELL!!!!!!!!! Bear Market Confirmed! Goldman's Abby Cohen calls for S&P 500 Rising 14% by 2008'

December 05, 2007 – Comments (4) | ADD RELATED TICKERS

Goldman's Cohen Sees S&P 500 Rising 14% by 2008's End

Abby Joseph Cohen was one of the most famous perma-bulls of the late 20th century. She was quoted everywhere. The market was going up. She kept predicting that it would go higher . . . even in 2000, after the tech stock collapse.

Now she says the S&P 500 will rise by 14% in 2008.

That is a bear market indicator -- not primary. She is always bullish. But it's a secondary indicator.

She stayed bullish on computer-related stocks for too long as the S&P 500 suffered a bear market from March 2000 to October 2002. Cohen said in October 2000 that technology shares would be a good investment in 2001. The S&P 500 Information Technology Index tumbled 26 percent that year. . . .

In December 2006, Cohen said the S&P 500 would climb to a record 1,550 this year. The index surpassed that level in July and went on to reach an all-time high of 1,565.15 in October. The S&P 500 then dropped 10.1 percent through Nov. 26, the steepest loss in four years.

16 Comments – Post Your Own

#1) On December 21, 2010 at 9:12 PM, rofgile (98.97) wrote:


 Keep telling yourself that.  

 1) We still haven't had significant jobs growth (and we will at some point) - and this will definitely boost optimism and stock levels.   

 2) Would you buy bonds over stocks now?  Didn't think so.



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#2) On December 21, 2010 at 9:32 PM, bg11235 (28.94) wrote:

Yields are still ridiculously low but they're climbing. Each notch up they become at least a smidge more attractive.

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#3) On December 21, 2010 at 10:06 PM, ChrisGraley (28.48) wrote:

@ rofgile "(and we will at some point)"

Please enlighten me on this, because all I see on the horizon is a further loss of jobs.

"2) Would you buy bonds over stocks now?  Didn't think so."

Would you buy a poke in the eye over a kick in the genitals?



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#4) On December 21, 2010 at 11:28 PM, MoneyWorksforMe (< 20) wrote:


Stocks will likely go up for a while next year but a severe collapse is imminent...Severe drop in the dollar and increasing interest rates and inflation with continued high unemmployment will be the catalyst probably between 6 months to a year out...

The government is propping everything up, including the stock market, as it has been successful in convincing myopic speculators and naive thinkers that we are indeed enjoying realeconomic growth.

If you wish to continue to invest in U.S. equities, you must do so while the illusion of the artificial economy remains in tact. It is important that you realize the REAL reason why equities are rallying now, and why it is unsustainable. Once the illusion begins to fade, that will be the time to jump ship, right before shit hits the fan. Those who believe we are experiencing real economic growth and are headed down the right path will be absolutely slaughtered...

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#5) On December 21, 2010 at 11:58 PM, DarthMaul09 (29.16) wrote:

Although the market may be due for a sell off in 2011, it won't happen until at least the second quarter.  Why?  Because Ben said so.  From Zero Hedge:

S&P Vs Fed Treasury Holdings: Spot The Correlation

Submitted by Tyler Durden on 12/02/2010 21:32 -0500

A graft with a compelling story.  This is why it is a safe bet that the S&P 500 will be higher four months from now.

With $600+ Billion Fed bond purchases which were planned prior to tax bill compromise and further purchases likely to follow it seems logical that the S&P 500 will continue to rise.

A good alternative to the S&P 500 would be CEF, but not bonds.


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#6) On December 22, 2010 at 12:30 AM, Valyooo (34.27) wrote:

CEF is not even close to an alternative for the S&P 500.

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#7) On December 22, 2010 at 12:51 AM, checklist34 (98.39) wrote:

well she was right this year, etc.  permabulls are at least right mroe often than they are wrong. 

I have been wondering if we will be experiencing another deflationary panic at some point here.  We had inflation scare (08), following by deflationary shock (late 08), then the expectation of inflation/reflation (09), then a big panic stemming from the fear of a deflationary shock (summer of 10), and now, again, expectation of inflation.  

Speculation is probably driving inflation in commodities much more than demand...  if speculation retreats once again, hugh hendry may be heard once again, and another episode like summer 2010 may be upon us again.  

I got nothing, but I don't think that stocks in 2011 are a given bad bed, and I'm not sure dear abby's endorsement of them is assurance that they crash.  

And, by and large, gold, commodities, and PMs are the only things really experfiencing alot of hysteria or bullishness or euphoria, etc.

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#8) On December 22, 2010 at 2:38 AM, awallejr (38.93) wrote:

Well Arbitare since I joined Caps in 2008 you have been right one year and wrong 2 years.  33% accuracy.  I have been wrong one year and right 2 years.  66% accuracy.  As for 2011 who the heck knows.  Just too many potential intervening events could happen.  But I don't see any reason for dumping stocks in general.  People just have to be more selective now since the easy pickings are over.  PE multiples are still relatively low for many companies. And many companies' dividends still beat bonds and CDs.

Seems kind of desperate now to play the "Abby Cohen Card" as the reason why the current 21 month rally should crash and burn.  The "Oh this is just a bear market rally" argument didn't hold true.  The "Oh wait until October threat" was blank for the last 2 years.  The "Oh we will have a double dip recession" is too old now.  Another recession?  Inevitably, but double dip is off the table since too much time has passed.

I will rec you for creating a discussion tho.

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#9) On December 22, 2010 at 10:09 AM, davejh23 (< 20) wrote:

I agree, but I wouldn't say get out "NOW!".  Caution is certainly warranted, but that doesn't mean stocks won't run up another 10% before they fall. 

The GDP revision certainly wasn't inspiring...inventories a larger factor than expected, PCE worse than expected, and corporate profits?...what every bull has been pointing to as justification for a continued rally?...TERRIBLE...+0.2%, 85% below expectations!   Stocks should be trading at below average multiples in this environment.  Current forward multiples are based on EPS estimates that will be missed by a mile.  I'd say there's a real risk that FY11 S&P EPS estimates are missed by 20%, at current market levels this would make multiples jump to ~25 when 12 would be justified in a weak environment...stocks crash!  Not saying this is what will happen...just that the risk is real, and I'm being cautious.

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#10) On December 22, 2010 at 10:32 AM, rexlove (99.56) wrote:



What makes you think earnings will miss estimates? Earnings have been beating estimates for more than a year now. What would change now  that would cause earnings to miss?

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#11) On December 22, 2010 at 12:49 PM, djemonk (< 20) wrote:

The only thing more bearish then quoting permabull GS Abby Cohen in the front pages of the MSM would be your capitial city being taken out by nuclear weapon.

+1 Rec for this line alone

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#12) On December 22, 2010 at 1:05 PM, leohaas (30.08) wrote:

Some people just love to repeat it over and over again:

"The Sky Is Falling! The Sky Is Fallling!"

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#13) On December 22, 2010 at 1:08 PM, TDRH (96.66) wrote:

Not sure what kind of predictive abilities the analyst has, but why do they still have a job?

For 2011 the three keys I will be watching are interest rates, state governments, and employment.  

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#14) On December 22, 2010 at 2:24 PM, davejh23 (< 20) wrote:

"What makes you think earnings will miss estimates? Earnings have been beating estimates for more than a year now. What would change now  that would cause earnings to miss?"

I find no reason to think otherwise.  Earnings have increased YoY, BUT the days of easy YoY comps are ending.  Earnings have beat estimates, BUT many of those estimates were lowered over and over during the months preceding the earnings announcements.  Many earnings reports missed the prior year's consensus estimates, but were reported as spectacular beats because the estimates had just been lowered.  In addition, most of these companies that beat estimates lowered forward guidance.  As companies started lowering forward guidance, many analysts started lowering FY11 S&P EPS estimates...then, the stock market took off, and everyone has been increasing estimates in the last month...that looks like a recipe for disaster.  Lastly, I think the dismal corporate profit number from today's GDP report proves that the lowered forward guidance was justified and that the recent increased estimates are's just the analysts trying to follow the trend...and they'll all be wrong.  Bear markets typically start when forward EPS estimates start falling, right?  I think we'll see falling estimates after Q1.  Q4 will be decent with holiday sales, but Q1 will see a huge reversal in inventories and PCE will be contracting.  Q1 earnings reports will be full of caution, not the sentiment you see today.

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#15) On December 26, 2010 at 11:13 AM, topsecret10 (< 20) wrote:

  I agree abitare. You cannot keep printing money forever without paying the piper. Everyone Is getting lulled to sleep again. Gettting comfortable. Oil Is approaching $100.00 per barrell,commodities are an a straight up trajectory,as well as gold and silver. I have NEVER In my Investing lifetime seen ANYTHING like this. The FED Is once again using the same failed policies of yesteryear to deflate,then Inflate the economy. It did not work then,and It will not work now. Our current Government Debt Is completely out of control,and It won't be long before the whole thing blows up In our faces,If members of Congress fail to act to reduce our deficits NOW. Bottom line... There are still NO JOBS,The Real estate market Is upside-down. Houses are still overpriced (thats why they are not selling) Mainstreet Is still reeling from this recesssion THAT WE ARE STILL IN, and the media has It wrong AGAIN....  Listen to the spin at your own peril fellow fools,and prepare for a very bumpy ride....  TS  :) 

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