After calling this year’s rally since March, Barton Biggs is still onboard. He sees 1,200 for the S&P as perfectly reasonable.
Why? One point he makes is that financial conditions, measured by Bloomberg’s financial conditions index, have returned to pre-Lehman levels; and the S&P at 1,200 pre-Lehman.
Obviously there’s more as well:
The following are our highlights from a recent Bloomberg Radio interview.
- We could get a V-shaped recovery. “The world economy and the US economy are clearly emerging from this recession and the pace of acceleration is not totally clear yet, but I suspect it will be better than the consensus expects. It’s gonna be more of a V.”
- S&P was 1200 pre-Lehman. We can go back there. “I think the equity markets are behind reality and they are behind the financial conditions index which is back to pre-Lehman levels. And the equity market at that time was around 1200 on the S&P. So my feeling is that’s where it should be going now. Where it goes from there is another qustion.”
- S&P can trade at 16-17x earnings. “There are some encouraging signs out there. Including the fact that American companies, and companies around the world, have done a remarkable job of cutting costs and reducing overhead as we went into this collapse. As a result, it is beginning to look like the sustainable ROE for the S&P is 14.5% to 15%. And if thats the case, the S&P should sell at 16-17 times earnings.”
- No super bull market ahead, but the market is too cheap right now. “But that doesn’t mean I think we’re going into a new super-secular bull market. I think it will be a long time before the S&P exceeds 1580, that it hit in 2007, but should we be at 1020? No I dont think we should.”
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