A terrific edition of Barrons this week as they discuss the current state of the markets and an overpriced BRK stock. Speculation in the article that BRK may reach for the downtrodden MMC.
One item that really caught my eye was the list of the biggest capitalization stocks now and in 2000. Not so surprising to see which companies have come and gone.
XOM GE MSFT T PG BRK GOOG CVX JNJ WMT;
MSFT GE CSCO WMT XOM INTC LU IBM C AOL;
My guess is GOOG won't be on the list in 10 years as the can't miss tech co's from yesteryear, CSCO INTC LU IBM and AOL have all been deleted.
Some comments from various strategists mentioned in Kopin Tan's column "A Bullish Call."
Abby Joseph Cohen (GS)- "recession likely will be avoided due to strength in exports and capital spending by corporations and government."
Jonathan Morton- (CS)- "Conditions for a hard economic landing --like slack in the labor market and weak balance sheets --are still largely absent."
Richard Bernstein-(MER)-- U.S. "relatively attractive" compared with many foreign markets.
Tobias Levkovich- (C)- Stocks "screamingly cheap relative to bonds."
Thomas Lee (JPM)- " While the first half may look like death, second half earnings will improve as the rate cuts take effect" and he expects financials to "lead markets higher in 2008 even with the worst of the bad news on SIV's and write-offs still ahead."
Projections for 2008 from the various strategists:-
Larry Adam- (DB) - SPX - 1,640, 10 year Bond 4.75%;
Richard Bernstein (MER) SPX-1,525, 10 year Bond 3.7%
David Bianco- (UBS)- SPX-1,700, 10 year Bond 4.0%
Abhijit Chakrabortti-(MS)- SPX -1,525 10 year Bond 4.5%
Abby Joseph Cohen-(GS)-SPX 1,675-10 year Bond 4%
Jonathan Golub-(BSC)- SPX -1,700 10 year Bond 5.0%
Thomas Lee- (JPM)- SPX 1,590 10 year Bond 5.0%
Tobias Levkovich (C)-SPX 1,675 10 year Bond 4.4%
Tom McManus (BAC) SPX 1,625 10 year Bond 5%
Jonathan Morton (CS)- SPX 1,650 10 year Bond 4.25%
Ian Scott (LEH) -SPX 1,630 10 year Bond-4.2%
Francois Trahan-(ISI Group) SPX 1,750 10 year Bond 4%
Most of the above strategists expect SPX earning to be around $100 for 2008;
Mike Santoli also talks about 2008 in his column and he finds lots of reasons to be bullish including:
1) The Grant Thornton Business Optimism index last week hit the lowest level in its 5 +year history as only 17% believed the U.S. economy will improve (contrary indicator).
2) Short interest up by 1/3 since January;
3) Barrons confidence index, a gauge of credit-risk tolerance at levels last seen in the Spring of 2003 (end of bear market).
4) "Banks have every incentive to try to close their books for the year with all foreseeable write-downs taken."
Michael is especially bullish on media (biased journalism) since the group is down 15% in 2007 and supposedly is as cheap as it has been in decades. DIS OMC GCI CMCSA or the PBS (ETF) are mentioned.
One final note, "seems" like the markets go down about every day, well the truth is pretty clear, we have been in a pretty tight trading range. Check these SMA's on the SPX:
SMA -10 1,490
SMA -20 1,466
SMA -50 1, 497
SMA -90 1,490
SMA -150 1,499
SMA -200 1,487
Recent high - 1,576- October 11, 2007
Recent low - 1,371- August 16, 2007