Hey Professor Roubini! The Street Says The Dow Is Going to 15,000! Are They Nuts?
Stock-Markets / Stocks Bull Market Jul 24, 2009 - 08:33 AM GMTBy: Andrew_Butter
We didn't hear much talk about that "dead-cat-bounce-sucker-rally" recently, and all those guys with those pretty brightly-colored P/E ratio charts and pages and pages of verbiage predicting S&P 500 going to 450 seem to have disappeared along with the “Gold piercing $1,000 and on to the stratosphere” theorists. Perhaps they are on holiday?
14th March Professor Roubini, the man who saw it all coming like a walking-talking crystal ball (and unfortunately didn't get anyone to listen to him before it was too late), declared that the sinners would surely repent, and that cat was DEAD-DEAD-DEAD!!
Sackcloth and ashes all round!! Or what? Didn't I hear someone say something along the lines of, "A broken clock is right twice a day?"
But now the word on The Street is its Game Over, “Dow 10,000 by the end of the year and 15,000 in sight” (http://www.thedailybell.com/index.asp?fl=).
Just for the record this is what I said:
1: In January I said that the S&P 500 would bottom at about 660 (http://www.marketoracle.co.uk/Article8293.html)** It did on the 9th of March.
2: On 9th March I said “That was The Bottom”, it’s over! (http://www.marketoracle.co.uk/Article9321.html).
3: On 19th March, after Professor Roubini’s now famous misdiagnosis of the health of that darn cat, I conducted a carefully designed Physics experiment throwing hundreds of dead cats from buildings, from various heights, and I meticulously recorded how high they bounced. I concluded after extensive statistical analysis (multivariate, ANOVAR the lot), that in my humble medical and scientific opinion the cat was most certainly not dead (http://www.marketoracle.co.uk/Article9749.html).
4: On 25th March I wrote that Bernake and Geithner were following the wrong map and that “The good news is that it looks like USA is almost out of the cycle of insanity that started in 1995, what happens next depends of course on the pilots (and I do wish they had the right maps).” http://www.marketoracle.co.uk/Article9658.html
5: 17th April I repeated the dead cat experiment just to be sure and put out a “Bull Run Warning”. http://www.marketoracle.co.uk/Article10101.html
6: On 12th May I said that the market would go bubbling up at least to DJIA = 10,000 with perhaps some hiccups on the way but none of them more than 15% (the maximum peak to trough reversal so far was 7%): (http://www.marketoracle.co.uk/Article10604.html).
So where are we now?
Today the Dow is 9,069 and the S&P 500 is 976.
Silly me, the first time I thought about stock markets in my life (in January), I thought the Dow was 10x the S&P 500, that shows how much I know about stock markets. For the avoidance of doubt, I don’t know anything about stock markets in fact, all I know about is how to do valuations. Second hand bottling plants, marriage contracts, nuclear power stations. It’s all the same to me; just I always work out two values:
a): What someone dumber than you would pay (that’s easy, mark-to-market, just look at the sticker).
b): What someone smarter than you would pay (that’s the hard one to work out).
Well anyway, the "correct" price for the S&P 500 exactly today is 1,250.
Based on the well known principles of market-long-waves plus the Seven Immutable Laws of Bubbles (http://www.marketoracle.co.uk/Article12114.html) I do not expect a reversal of any magnitude until that is reached unless there is a huge new upset in the economy, it will get there sooner or later even if the economy flat-lines for another year, or even two.
What happens next will depend on what the geniuses who created this mess do next. The temptation will be to keep foot-on-gas, in which case there will be another bubble, which will burst, eventually, and will cause even more economic damage (that’s what the guy in the cave is hoping, personally I think he’s got “connections” in you-know-where, that’s the way those guys work – very tricky).
If they start acting like grown ups for a change (why am I worried about that?), then the US stock market will go up broadly in proportion to nominal GDP divided by long term interest rates.
Of course if they forget to take foot-off-gas, then what’s going to happen next, in the immortal words of that Great American Poet Toni Tennilli, will be… "Do that to me one more time....BABY!!"
Hey “Casey Jones - watch your SPEED!!” (Hat tip: Grateful Dead); here’s a tip, when S&P 500 hits 1,100; start easing off.
Hey Ben - watch the ROAD!!
Here’s a tip, when S&P 500 hit’s 1,100; start easing off.
**Just for the record I got the timing on the S&P bottom wrong, but I figured out why that was and corrected it when it got to 660 on http://www.marketoracle.co.uk/Article9321.html). Sorry about that, got confused for a second by the 9/11 mini bubble, I blame it all on the man in the cave.
No Positions
By Andrew Butter
Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( hbutter@eim.ae ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.
© 2009 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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