Oh Oh…….Did Goldman Sachs just complete their stock distribution (to retail investors) while building out a massive short position? Sure sounds that way. You know what happens next.
Goldman Sachs Is Done With Building Out Their Short Position. You Know What Happens Next. Google
Goldman Sachs believes that the recent decline in the stock market (in tech and IBB in particular) is not indicative or the repeat of the 2000 top. Let’s take a look.
The short answer, according to Mr. Kostin: Current valuations and the market’s historical performance indicate it’s unlikely that the S&P 500 and the Nasdaq Composite are poised for similar 50% and 75% declines they suffered in the early 2000s. The bull market since March 2009 is likely to remain intact. “We believe the differences between 2000 and today are more important than the similarities and the recent momentum drawdown is unlikely to precipitate a more extensive fall in share prices,” he said in a note to clients.
While I agree that we will not suffer a 50-75% on the DOW, momentum tech stocks are another matter. Further, why would the bull market of 2009-2014 remain intact? There is no rationale behind such thinking. I have already outlined the 5-Year and the 17-Year cycles (among many others) that basically kill any hope for continuation of this bull market.
Even the stocks hit hardest this year aren’t nearly as overvalued as they were in 2000. The S&P 500 biotech index, for example, traded last week at about 29 times component companies’ earnings, which is above its median of 26 but far below the level of 57 at which it traded in 2000. The Morgan Stanley Technology Index trades at 22 times earnings, near its median of 23 and far from the 65 level of March 2000.
Yes, of course, the valuation argument. As I suggested before, today’s valuations are incredibly expensive. Much more expensive than they were at 2000 top, even though various valuation metrics do not reflect it. Why? Most of the earning over the last 5-Years were the direct result of a massive credit infusion by the FED. If you take such earnings out, the valuations you will see in today’s market will be astronomical. To the tune of P/E ratio of 50 – 80, making today’s market no only highly speculative, but “Are you f&#$ing kidding me” expensive.
Once the bear market of 2014-2017 starts, you will see P/E ratios surge as earnings disappear. In the same fashion they did in 2007-2009, going from 18 to 128 at the height of the recession. In fact, our mathematical and timing work clearly shows that we will go through such a severe bear market between 2014-2017. If you would be interested in learning when this bear market will start (to the day) and its subsequent internal composition, please Click Here.
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Check the calendar. Turns out this isn’t the year 2000. And it isn’t Groundhog Day either.
Goldman SachsGS +1.24% is telling clients that the stock market is unlikely to pull off a repeat of its antics in March 2000, when the tech bubble peaked and a market crash ensued.
The selloff in the so-called momentum names, such as biotech and social-media stocks, “dominated client discussions” last week, with many investors concerned that the selloff among these high fliers could lead to more widespread weakness, said Goldman Sachs’s stocks strategist David Kostin.
Two questions that Mr. Kostin says garnered the most attention from clients: “When will the reversal end?” and “Will the sell-off in momentum stocks drive a market-wide price decline as occurred in 2000?”
The short answer, according to Mr. Kostin: Current valuations and the market’s historical performance indicate it’s unlikely that the S&P 500 and the Nasdaq Composite are poised for similar 50% and 75% declines they suffered in the early 2000s. The bull market since March 2009 is likely to remain intact.
“We believe the differences between 2000 and today are more important than the similarities and the recent momentum drawdown is unlikely to precipitate a more extensive fall in share prices,” he said in a note to clients.
The S&P 500 is 4% off its record high hit earlier this month. The Dow Jones Industrial Average has dropped 3.3% for the year. The tech-heavy Nasdaq Composite, which has suffered the brunt of the selling in recent weeks, is down 8.2% from its 14-year high hit early last month.
Goldman isn’t the only one suggesting comparisons to the previous tech bubble aren’t warranted. As others have noted, stocks in general still aren’t nearly as expensive as they were in 2000. That is one reason selling has focused mainly on the volatile Nasdaq while the Dow Jones Industrial Average, made up of more-established blue-chip stocks, has been less-affected.
Back in 2000, broad stock indexes had been rising at 20% annual rates for five years. The S&P 500 was trading at 29 times its component companies’ earnings for the prior 12 months, according to Birinyi Associates. Inflation was running at 3.8% and the Federal Reserve was raising interest rates in an effort to cool off the economy.
Market watchers have noted in recent days that much has changed this time around. Inflation is running at just over 1%. The S&P 500 trades at 17 times earnings, slightly above average but far from 2000 levels. While the S&P gained 30% in 2013, it was up 13% in 2010 and 2012 and little-changed in 2011. Economic growth has been running below 3% and the Fed has been stressing how reluctant it is to raise its target interest rates any time soon.
Even the stocks hit hardest this year aren’t nearly as overvalued as they were in 2000. The S&P 500 biotech index, for example, traded last week at about 29 times component companies’ earnings, which is above its median of 26 but far below the level of 57 at which it traded in 2000. The Morgan Stanley Technology Index trades at 22 times earnings, near its median of 23 and far from the 65 level of March 2000.
Goldman calculates a basket of momentum stocks has dropped 7% from its recent highs. Since 1980, there have been 46 other instances in which momentum stocks suffered similar declines over comparable time frames. Following those selloffs, the S&P 500 averaged about a 5% gain over the following six months, while those momentum names dropped another 4%, on average.
“The S&P 500, but not momentum, will likely recover during the next few months,” Goldman’s Mr. Kostin says.
Even Goldman Sachs’s President Gary Cohn believes that, for the most part, markets are ignoring geopolitical and overvaluation concerns. A situation where most investors are essentially forced to be in the stock market due to zero interest rate environment elsewhere. While true, this does not mean such an environment cannot be readjusted, leading to a substantial market decline in the very near future. Based on our mathematical and timing work, we are very close to such a point, as the bear market of 2014-2017 is about to begin.
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Even Goldman Sachs Thinks Markets Are Ignoring Risks Google
Bloomberg Writes: Goldman Sachs President Says Markets ‘Ignoring’ Risks
Goldman Sachs Group Inc. President Gary Cohn said prices in global markets don’t reflect the risks from geopolitical conflicts such as Russia’s annexation of Crimea.
“For the last six to 12 months, markets for some reason have been ignoring a lot of the geopolitical risk,” Cohn, 53, said in an interview with Canadian television network CBC. “Russia, Crimea, Ukraine: this is not the first or newest geopolitical risk we’ve had in the last year or so.”
Cohn cited tensions between China and Japan as well as continuing violence in the Middle Eastas risks that haven’t halted a climb in global equities over the last 12 months. Investors with a lot of cash have felt pressure to deploy it, preventing a sustained downturn in prices, he said.
“Anytime we get any sell-off in the market, there’s new investors coming into the market, so we haven’t seen that repricing,” Cohn said. Investors are saying, “I’ve got to put cash to work, and maybe these situations are going to be with us for a long time, and I can’t sit on cash at the bank earning no return forever,” he said.
Still, Cohn said the U.S. stock market seems fairly valued, given low interest rates and bond yields that will probably climb. The Standard & Poor’s 500 Index has risen 18 percent in the last 12 months.
“In a lot of respects, owning equities in the world today seems like the least risky opportunity for cash out there,” Cohn said. “Each of the alternatives has its own negative potential consequences to it, and then you evaluate all the alternatives in relationship to each other, and then you end up in a scenario where I think equities provide the most upside versus the downside.”
I write about China and their economic situation extensively. Please type in “China” into the search bar on the right to see all of the data. With it’s massive credit bubble, real estate bubble, lagging stock market, falling currency and a slew of other problems, Goldman Sachs believes right now is the great time to buy China. Certainty, with all the bad news and Chinese stock market “under performance” it might seem as if right now is a good time to buy China. After all, the god of investment banking, Goldman Sachs thinks so.
Don’t be a fool.
Goldman Sachs will be selling China while you are buying there idiotic forecast. With the US Bear Market and a severe recession of 2014-2017 starting now, it would be very difficult for the Chinese stock market to exhibit any sort of a bull market. Not impossible, but highly unlikely. Remember, Chinese credit collapse, defaults, real estate collapse and Yuan decline are all in early stages of development. So, read between the lines here and sell China.
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Goldman Sachs Needs To Distribute Their Chinese Shares To Fools. Issues A Buy Recommendation Google
Bloomberg Reports: China Stocks Seen Rallying 24% at Goldman on Valuations
Goldman Sachs Group Inc. is sticking with its recommendation to buy Chinese stocks, the biggest losers worldwide this year, after valuations fell to the lowest level in a decade versus global peers.
“Given how share prices have corrected and given where the valuations are, from a risk-reward standpoint we still think we can make a positive case on Chinese equities,” Kinger Lau, a strategist at Goldman Sachs, said in an interview inHong Kong on March 4. He predicts theHang Seng China Enterprises Index (HSCEI) will climb to 12,000 in the next 12 months, a 24 percent advance from last week’s close, versus the brokerage’s December forecast for the measure to reach 13,600 by the end of 2014.
The index of Chinese shares in Hong Kong lost 10 percent this year through last week, the most among 93 global benchmark indexes tracked by Bloomberg, as factory gauges pointed to a slowdown in the economy and concern grew that more companies will struggle to repay debt after the nation’s first onshore corporate bond default on March 7. The gauge trades at a 45 percent discount to the MSCI All-Country World Index, the most in a decade.
China’s leaders are trying to balance clampdowns on the shadow-banking industry and local-government debt with measures to support growth in the world’s second-largest economy.Shanghai Chaori Solar Energy Science & Technology Co. (002506) became the first company to default in China after failing to pay full interest due last week on onshore bonds.
The Hang Seng China index is valued at 1.1 times net assets, the biggest discount since September 2003 to MSCI’s global index, which has a multiple of 2. The H-share measure slid 1.7 percent to 9,540.10 as of 1:41 p.m. in Hong Kong.
BlackRock Inc. today named Helen Zhu as head of China equities, luring the New York bank’s chief China equity strategist away from Goldman Sachs. The appointment takes effect on April 7 and Zhu may start managing funds later this year, BlackRock said in a statement. The New York-based firm is the world’s largest money manager, overseeing about $4.3 trillion.
Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. all trade at about the same level as their net assets, while Bank of China Ltd. has a price-to-book ratio of 0.8. The four lenders are the nation’s biggest by market value.
“Any clear and concrete policy measures in terms of dealing with shadow banking loans and local government debt would likely be positive catalysts for banks,” Lau said. “Valuations for Chinese banks have already priced in a very significant crisis scenario.”
Premier Li Keqiang told the National People’s Congress last week that China will develop a regulated regional borrowing mechanism, after local-government liabilities surged to 17.9 trillionyuan ($2.9 trillion) as of June 2013 from 10.7 trillion yuan at the end of 2010. Authorities have also started a cleanup of the $6 trillion shadow-banking industry and identified sectors of the economy in need of consolidation.
While Chinese banks’ non-performing loans rose by 28.5 billion yuan in the last quarter of 2013 to 592.1 billion yuan, the highest since September 2008, bad loans only accounted for 1 percent of total lending, the China Banking Regulatory Commission said Feb. 13.
Bank valuations currently imply a non-performing loan ratio of about 7 percent, Lau said.
An improving global economic outlook may also be a catalyst for a rally in Chinese shares, Lau said, declining to name specific stocks.
The World Bank raised its 2014 growth forecasts for advanced nations in January to 2.2 percent from 2 percent, while cutting its estimates for developing nations to 5.3 percent from 5.6 percent. China is the world’s biggest exporter.
China last week retained a target for 7.5 percent growth in 2014 for the $9 trillion economy. Gross domestic product expanded 7.7 percent in 2013, the same pace as in 2012.
A purchasing managers’ index from HSBC Holdings Plc and Markit Economics dropped to a seven-month low of 48.5, the companies said March 3. A similar gauge from the government with a larger sample size fell to 50.2, the lowest since June, a report showed March 1. Numbers above 50 signal expansion.
Overseas shipments unexpectedly declined 18.1 percent in February from a year earlier, customs data showed March 8, compared with analysts’ median estimate for a 7.5 percent increase. Producer prices fell 2 percent, the most since July, according to a statistics bureau report yesterday, extending the longest decline since 1999.
The Hang Seng China gauge has tumbled 16 percent since Noah Weisberger, a New York-based analyst at Goldman Sachs, predicted on Dec. 2 that the H-share measure would rally 18 percent by the end of 2014.
Goldman Sachs’s forecast formed part of a trade recommendation in which the bank told investors to buy Chinese stocks while selling copper as a bet that commodities would lag the rally in equities. Goldman Sachs called the trade its fourth top recommendation for 2014.