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The Other Street
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Thirty years of salt mine experience as an institutional investment advisor, both on the Buy and Sell side. A graduate of Columbia Business School (MBA) and Chimie Paris Tech (MSChe), I started my Wall Street career with Brown Brothers Harriman & co, went West with Montgomery Securities and... More
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Capital Max, Inc.
My book:
Anatomy of the Meltdown - 1998-2008. The Worst Decade in Stock Investing, or Was It? 2nd edition, with a new introduction by the author.
  • The Air Pocket Is Over - SnP 1643 Going Higher 5 comments
    Jun 17, 2013 9:58 AM | about stocks: NILE, SPY

    While everybody seems t be ready the economic and Fed tea leaves, I posit that the defining surprise this week-end is the Election in Iran of "moderate" Rhowani. After the close on Friday, the futures were ticking down, and I can't help but believe that the then likely scenario of a Jalil victory was the Invisible Hand behind the correction, especially given the heightened rhetoric on Syria and Russia. If I am correct and this defuses the Middle East concern for a bit, we can then turn back to economics and the Fed' tea leaves. My opinion on this has not changed. Target 2000, but we first should expect a strong test around 1675 or so.

    From my last article, glad to see that NILE is finally being talked up - and that's a prime candidate for a short squeeze.

    Disclosure: I am long NILE.

    Themes: Market Outlook, Long Ideas Stocks: NILE, SPY
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  • davidshelton
    , contributor
    Comments (320) | Send Message
     
    Hi Franck - I've missed you're interesting articles of late and I'm interested in your reasoning behind your call for 2000. Is it purely technical or QE based or both? Personally I'm very concerned with the action in bonds and stocks in the wider world and the recent weird action in US treasuries. Inflection point marking a major market top and a re-newed bear market cycle? Is a global deleveraging cycle precipitating a run on government paper?
    17 Jun 2013, 03:48 PM Reply Like
  • The Other Street
    , contributor
    Comments (678) | Send Message
     
    Author’s reply » Hi David, here is the link to my latest article http://seekingalpha.co...

     

    I actually started a series called "S&P Target 2000" on April 6, and I am now at # 8, so the answer to your question is a bit long. The short version is this: (a) continued P/E expansion now that we are back in the historical 14 to 26 range; I take 20 as a target, times $100; (b) This is justified by a regression to the mean for the Earnings Yield: a P/E of 20 would mean an Earnings Yield of 5%, with room to go; (3) I don't care about QE, except to say that the end of QE will lag the recovery; we can't have it both ways - say QE is bad when it happens, and what when it goes away; in my opinion, QE was good, as it resulted in Household Net Worth being at an all-time high, beating Q3, 2007 not only on the number itself, but on the Debt-to-Net worth ratio; when banks start to revive the Multiplier, and draw down on their $1.7 trillion in Excess Reserves, you'll know their B/S is back in shape, to include the skeletons they still hold via CDS et al; a that point, the Fed will simply sell its QE funded assets, and I'll bet you they'll made money on these. Classic disintermediation, been there done that, in the early 90's it was called the Resolution Trust Corporation. This one is times four.

     

    You may want to pose your question on the article - it would fuel the conversation :)
    18 Jun 2013, 12:08 PM Reply Like
  • davidshelton
    , contributor
    Comments (320) | Send Message
     
    Thanks! Will look back over your articles and post more questions....
    18 Jun 2013, 01:12 PM Reply Like
  • The Other Street
    , contributor
    Comments (678) | Send Message
     
    Author’s reply » One thing though - the balloon floated by Obama yesterday re Chairman Bernanke. I submitted an article this am, let's see if it gets published. This is potentially a game changer.
    19 Jun 2013, 09:40 AM Reply Like
  • davidshelton
    , contributor
    Comments (320) | Send Message
     
    We live in interesting times....
    I read elsewhere that a taper is likely based on Bernanke leaving and that the deficit is coming down significantly this year so it no longer requires 85 Billion a month but more like 50 Billion.
    I'm also looking at the trouble in Asia and EM bonds as indicative as to where this all goes in the near term....
    19 Jun 2013, 10:54 AM Reply Like
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