Photo: AP Images
Holy cow! All of the biggest bulls sharpened their horns and the biggest bears pulled out their claws this week.Back in December, Wall Street’s top strategists were timid and cautious when our stock market survey revealed a 2012 year-end consensus target of just 1,363 on the S&P 500.
This week, we heard from bulls like BlackRock’s Bob Doll, Citi’s Tobias Levkovich, and JP Morgan’s Tom Lee. We also heard from high-profile bears like David Tice, David Rosenberg, SocGen’s Albert Edwards, and Nomura’s Bob Janjuah.
Oh baby, it was epic.
What follows are the highlights from this week’s epic bull-bear battle.
'It's all about Europe, if that left tail risk dissipates. At S&P 1550 stocks would still not be expensive…If Europe continues to heal and the Middle East doesn't blow up, 1550 is do-able.'
'While many bears cite the lack of daily trading volume as a sign that the market lacks real conviction about these positive signs, it can also be argued that this reflects just how many investors have abandoned the equity culture and can still return.'
'As of Friday, the S&P 500 was within 1% of its upper Bollinger band at virtually every horizon, including daily, weekly and monthly bands. The last time the S&P 500 reached a similar extreme was Friday April 29, 2011, when I titled the following Monday's comment Extreme Conditions and Typical Outcomes .
...As it happened, April 29, 2011 turned out to mark the exact high of the S&P 500 for the year, and was followed by a steep intermediate market plunge.'
'They write that this could easily be a 'heads I win, tails you lose, scenario.' If past rounds of easing are any indication, then the coming end of the Federal Reserve's 'Operation Twist' will launch a pullback in equities.'
Doug Kass, who predicted the S&P would hit new all-time highs this year, slashed his valuation on the index
'Importantly, I depart from some of the (newly) converted bulls in that I do not expect that P/E multiples will reach their historical multiplier (of about 15x) experienced over the last five decades, as the new normal of slower and below-trend economic growth and other factors weigh on valuations. (Implicit in my melded fair market value of 1335 for the S&P 500 is a 13x P/E multiple.)'
Art Cashin pointed out that all of the cash generated by the Treasury sell-off wasn't going into the stock market
'The amount of money raised, if fully invested in the stock market, would have sent the averages much higher (in the opinion of many traders). Some bond types claim a large chuck of the money is being parked in cash. That raises a key question why and the parallel - by whom.'
Then Goldman Sachs unleashed the mother of all bullish arguments with a 40-page report arguing that from an equity risk premium perspective, stocks were insanely cheap
'We retain our heavy overweight in 10y+ government bonds. We have been overweight bonds now since the end of 1996 and conversely underweight global equities....while global de-leveraging continues apace, we feel comfortable that we remain in an Ice Age investment environment.'
'The USD price of an ounce of gold and the Dow will, I believe, converge at/around 1, at some point over the next 2 years or so. I have extremely high conviction on this. What I am not sure on is whether we converge at 7000+/-, or at 14000+/-. Because I do believe that even Bernanke and Draghi cannot do as they wish and that there are some limits to the recklessness of policymakers, I still lean towards a deflationary resolution at/about 7000 in the next year or two.'
'But we've had an enormous rally over the last six months, and positioning now in equities has become quite aggressive. So I suspect you need to put this into a time frame that we'd have to look for some form of a correction of 5% to 9% in the equity markets given the risk appetite that's already been placed into share.'
'More information has come our way since the initial forecast, including favourable developments on the policy front, better economic data and a decline in the supply of homes on the market. We have therefore updated our home price model and believe that prices are bottoming now.'
'Shilling does not think the economic recovery is gaining steam. He thinks analysts are much too optimistic about earnings for this year, and he thinks the recent resurgence in hiring is not the result of companies being optimistic about the future but because productivity gains are declining and companies need to hire to grow revenue and earnings.'
Citi's Tobias Levkovich reiterated his argument that the US was entering a long-term raging bull market
'His epic report included six secular trends that were expected to boost the U.S. economy. They included an improving U.S. fiscal situation, a nascent housing recovery, a domestic manufacturing renaissance, increasing energy independence, a favourable ageing demographic, and growth in mobile technology.'
And then right before the closing bell on Friday, the mother of all bull-bear debates: Lee versus Rosenberg
We were hoping that the debate between JP Morgan's Tom Lee and Gluskin Sheff's David Rosenberg would be much more colourful. But the two professionals just reiterated their respective books.
Here's the video courtesy of Bloomberg Television>
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