A long weekend with the Barron's Roundtable, here summarized: they're all bulls. And they have no idea what makes stock markets go up. They think the US government bought shares on Wall Street and will continue to do so, which is an urban myth. Wall Street went up not because of direct intervention by the government, but because it had created liquidity which flowed into stocks. Anyway, they are all bulls:
Felix Zulauf (Swiss asset manager): “Cyclical forces are bullish. The market probably has 10% upside from here. My next recommendation is to short government bonds.”
Abby Joseph Cohen (Goldman Sachs senior investment strategist): “We think global growth won’t be too bad in 2010. We’re forecasting S&P 500 earnings of $75 to $76 this year and $90 next year.”
Fred Hickey (ed., The High-Tech Strategist): “The stock market will likely be up this year, unless the dollar collapses.”
Scott Black (pres. Delhi Mgm.): “I figure S&P 500 earnings will be closer to $66, which puts the market at 17.3 times earnings, about the historic norm.”
Oscar Schafer (partner, O.S.S. Capl. Mgm.): “Liquidity and another stimulus package will keep the market up.”
Meryl Witmer (partner, Eagle Capital): “Fifteen times earnings seems about right for the market, and earnings could grow a little this year. Fair value isn’t so different from where the market is now.”
Archie MacAllastar (chair, McAllaster Pitfield MacKay): “I’m an optimist, I expect the S&P to earn $75 to $80 this year. Public participation will increase.”
Mario Gabelli (chair, Gamco Investors): “You’ll be up 5% to 10% in the first half of the year. Interest rates at some point will top 4%.”
And even The Boom, Gloom, and Doom Report's Marc Faber, who did best of the panelists last year: “We are all doomed. If you let prices fall sufficiently, you get a re-stimulation of demand. That is why we are all doomed. I am inclined to think 50% of tax revenue will go toward interest payments on government debt in 10 years. Then you are bankrupt. There is only one way out -- the Zimbabwe way. You will have to print and print and print.
Bill Gross (co-CIO, PIMCO) then asked: “what form does printing like crazy take?”
Faber: “The government will buy up more bonds – and stocks.” Neither Gross, who said almost nothing in the session or any of the other participants questioned Faber's false conspiracy theory view that Uncle Sam has been buying stocks on the market.
Then Faber spoiled his tirade by adding: “The S&P 500 won’t revisit the March 2009 low of 666 in nominal terms ever again. In real terms it's another story.” Another bull.
Note that Pimco is now launching exchange-traded portfolios invested in stocks as well as its traditional bonds. Does Mr. Gross really believe that Uncle Sam supports the market via common share buying as Marc Faber asserts?
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