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Hey Professor Roubini! The Street Says The Dow Is Going to 15,000! Are They Nuts?

We didn't hear much talk about that "dead-cat-bounce-sucker-rally" recently, and all those guys with those pretty-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 from there on to the stratosphere” crowd.  


Perhaps they are on holiday?


14th March Professor Roubini, the man who saw it all coming and got it 100% right (and unfortunately he didn't get anyone to listen to him before it was too late), anyway, he declared that the sinners would surely repent, and that cat was DEAD-DEAD-DEAD!!


Sackcloth and ashes all round!! Mm…didn't I hear someone say something along the lines of, "A broken clock is right twice a day?" Of course now that he not 100% right all the time, everyone is listening to him, such is life!


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” (


Just for the record this is what I said:


1: 22nd January: “The S&P 500 will bottom at about 660” (** It did on the 9th of March.


2: 9th March: “That was The Bottom” (


3:  19th March. After Professor Roubini’s now famous misdiagnosis of the health of that darn cat, I conducted a carefully designed physics experiment that involved throwing hundreds of dead cats from buildings, and I meticulously recorded how high they bounced. After extensive statistical analysis (multivariate, ANOVAR etc.), I concluded that in my humble medical and scientific opinion the cat was most certainly not dead (


4: 25th March: “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).”


5: 17th April: The dead cat experiment was repeated just to be sure, and a “Bull Run Warning” was issued (that was a Public Service Announcement, just in case anyone got trampled). (


6: 12th May: “The market will 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%):


So where are we now?


Today the Dow is 9,069 and the S&P 500 is 976, and the signs are it’s going to keep going.


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, but I do know something about tropical fish! Actually, all I know about is how to do valuations…second hand bottling plants, marriage contracts, camels, 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, even a mentally defective hamster can work that one out, which is why central banks, rating agencies, banking regulators, and accountants were so fond of it).


b): What someone smarter than you would pay (that’s the hard one to work out).


Well anyway, in my considered opinion the "smart" price for the S&P 500 exactly today is 1,250.  


That’s not a prediction, that’s a valuation (Other-Than-Market-Value), done strictly in accordance with International Valuation Standards, dated today, for the “Purpose of promoting World Peace”…or something like that - (under IVS you have to state the purpose of the valuation; change the purpose and the value can change).


Based therefore on the well known principles of market-long-waves plus the Seven Immutable Laws of Bubbles ( I do not expect a reversal of any magnitude (more than 15%), until that is reached; unless there is a huge new unforeseen 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 from there 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.


**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 Sorry about that, got confused for a second by the 9/11 mini bubble, I blame it all on the man in the cave.


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