Cohen, Bianco See Year-End Rally; Dow Theory Says No....

Discussion in 'Trading' started by S2007S, Nov 21, 2007.

  1. S2007S


    These have to be the worst predictions of 2007. Do they think that Credit Bubble is going to disappear....hahah

    Cohen, Bianco See Year-End Rally, TO 1600 THAT IS, there is no way the S&P rallies to 1600 by end of 2007...Fools

    Do they really get paid 7 Figures + to say foolish statements like this.

    ``The market's priced for a U.S. recession,'' New York-based Bianco said during a conference call last week.

    Cohen, Bianco See Year-End Rally; Dow Theory Says No (Update4)

    By Nick Baker and Eric Martin
    Enlarge Image/Details

    Nov. 19 (Bloomberg) -- What do Abby Joseph Cohen, Jason Trennert and David Bianco know that the Dow Theory doesn't?

    The strategists at Goldman Sachs Group Inc., Strategas Research Partners LLC and UBS AG say the Standard & Poor's 500 Index will climb 9.7 percent from its Nov. 16 close to 1,600 in the final six weeks of 2007, the steepest gain since 1971.

    This month's drop in transportation stocks suggests equities may decline instead. With FedEx Corp. and Ryder Systems Inc. leading the Dow Jones Transportation Average to its lowest level this year, the rest of the U.S. market may slump too, according to the 123-year-old theory that says truckers, railroads and airlines lose business before the economy slows.

    ``The transports have broken down,'' said Jack Ablin, who oversees about $52 billion as chief investment officer at Harris Private Bank in Chicago. ``We're going to need a boost on the economic front to really help push the market higher. I wouldn't bet on it.''

    The transportation average of 20 stocks, created by Wall Street Journal co-founder Charles Dow in 1884 to foretell economic trends, fell today to the lowest since October 2006. A drop in the 30-member Dow Jones Industrial Average, which Charles Dow compiled 12 years later, below its level on Aug. 16 would signal a bear market is about to begin, the theory holds.

    ``We've moved one step closer to a bear market,'' said Chuck Carlson, an editor at the Dow Theory Forecasts newsletter who manages $130 million at Horizon Investment Services in Hammond, Indiana.

    Buffett's Support

    The transportation average fell 2.3 percent to 4,457.97 today. The Dow industrials retreated 1.7 percent to 12,958.44, putting it 0.9 percent above its Aug. 16 close. The S&P 500, the benchmark for U.S. stocks, lost 1.8 percent to 1,433.27, the lowest since Aug. 28.

    Transportation shares rallied early in the year, gaining 19 percent by mid-July. The advance was assisted by Warren Buffett, the billionaire chairman of Omaha, Nebraska-based Berkshire Hathaway Inc.

    Berkshire disclosed in May that it owned shares of Union Pacific Corp., the biggest U.S. railroad, and Norfolk Southern Corp. of Norfolk, Virginia, the fourth-largest. The notice came three weeks after the industrial and transportation averages reached simultaneous highs -- bullish under Dow Theory. The S&P 500 advanced to a record in October.

    Way Down

    Buffett helped on the way down, too. Berkshire said last week that it had sold shares of both railroads. Omaha-based Union Pacific rose to $129.96 in New York Stock Exchange trading Oct. 23 and declined 4.1 percent since then. Norfolk Southern hit its high of $58.64 on June 1 and then fell 16 percent.

    While the government reported that the U.S. economy grew 3.9 percent in third quarter, stocks have been weighed down by the worst housing market since 1991, about $45 billion of subprime- related credit losses at banks and securities firms and the first quarterly decline in corporate profits since 2002.

    Losses triggered by bad home loans may cause banks, brokerages and hedge funds to cut lending and threaten to trigger a ``substantial recession,'' Goldman Sachs Chief U.S. Economist Jan Hatzius wrote in a Nov. 15 report. Macy's Inc. and J.C. Penney Co., two of the nation's largest department-store chains, slashed their estimates last week before the holiday shopping season.

    FedEx, Ryder

    FedEx, based in Memphis, lost 13 percent this year to $94.05, the lowest since November 2005. The largest air-cargo company cut its profit forecast last week for the second time in three months, citing lower freight demand and rising fuel costs.

    Ryder, the largest U.S. truck-leasing firm, fell 19 percent to $41.12 in 2007. The Miami-based company said Oct. 8 that third-quarter earnings trailed its forecast because the economy weakened.

    None of that swayed Cohen, Trennert and Bianco. They say low equity valuations, overseas growth and the prospect that the Federal Reserve will cut its interest rate target for overnight loans between banks can lift the S&P 500 to a record 1,600 this year.

    ``It's a tall order to get to our year-end target, but I don't want to concede defeat,'' said New York-based Trennert, 39, the chief investment strategist at Strategas, who correctly predicted takeovers would send stocks surging earlier this year. ``Whether we get to 1,600 or not, the Lord only knows, but I do feel very strongly that there's enough value in the market that it's not a bad way to bet.''

    P/E Ratio

    Companies in the S&P 500 are valued at 15.5 times their projected earnings, the cheapest in almost 17 years when compared with reported profits, according to data compiled by Bloomberg.

    Bianco, 32, wrote in a Nov. 9 research note that stocks are inexpensive and said the Fed will reduce its benchmark lending rate to 3.5 percent next year from 4.5 percent now. The central bank cut borrowing costs from 5.25 percent in the past two months to keep the housing slowdown and losses in bond markets spurred by mortgages to people with patchy credit from dragging the economy into recession.

    ``The market's priced for a U.S. recession,'' New York-based Bianco said during a conference call last week. ``We don't think that's the case, and we believe the earnings are going to prove to be far more resilient than most people realize.''

    UBS declined to make Bianco, chief equity strategist at the brokerage arm of the world's largest wealth manager, available for an interview.

    Recession Unlikely

    Cohen, known for her bullish predictions during the 1990s, said in an investment outlook this month that losses for companies hurt in the housing market will be offset by increased earnings at corporations that sell technology and industrial equipment outside the U.S. The 55-year-old strategist says a recession is unlikely. Cohen, based in New York, was unavailable for comment.

    Trennert, Bianco and Cohen aren't alone in predicting the S&P 500 will surpass its October record high of 1,565.15 by New Year's Eve. Five of eight other Wall Street strategists with year-end forecasts tracked by Bloomberg see the index reaching 1,600.

    Nick Sargen said deteriorating profit growth and a slower economy will show the S&P 500 forecasts were too optimistic.

    ``I just don't see how you get to 1,600 by year end,'' said Sargen, who helps oversee about $30 billion as senior vice president at Fort Washington Investment Advisors in Cincinnati. ``I'll settle for where we are. I'm just hoping we can hold on.''

    YRC, JetBlue

    The transportation average, which surged to its record of 5,446.49 in July, is now down 2.2 percent for the year. YRC Worldwide Inc., the biggest U.S. trucking company, has lost the most in the measure, tumbling 53 percent to $17.56. JetBlue Airways Corp. has slumped 51 percent to $7.01.

    The Dow industrials' gain this year is 4 percent after it dropped 8.5 percent from a record on Oct. 9. The S&P 500 has added 1.1 percent, falling 8.4 percent from its all-time high.

    ``Transportation is a good economic indicator,'' said Richard Weiss, who manages more than $59 billion as chief investment officer at City National Bank in Beverly Hills, California. ``We're holding off in our investment strategies until we see better values out there. That's not going to happen until 2008.''
  2. That's the kiss of death for the bulls...
  3. lol keep in mind though that the year isn't over

    Fed still has another meeting and dec. most bullish month for stocks. Even if we end the year at just 14,000 it will still be a solid finish.
  4. S2007S


    14k hahaha

    not happening......
  5. good God, 2 weeks ago it was 15k! Now were down to 14. In December it will be "hopefully we close at 13k, but 2008 will be monster year". What an amateur.
  6. I'm still sticking with 15K but 14K will still be good
  7. LT701


    Rule number 1 of financial survival

    Never listen to Abby Joseph Cohen

    She said Nov 2000 was a great time to buy

    "Do they really get paid 7 Figures + to say foolish statements like this."

    that's exactly why she's paid it

    they need someone to sell to, dont they?

    Think! Who PAYS that 7 figure salary, the big guys, or the small investor?
  8. Seeing as how Cohen is perfectly willing to screw over anyone willing to listen to her, does she by any chance have a background in law?

    I think that she, and those of her ilk, should construct a model portfolio for public consumption and that any intended amendments must be announced before the fact to an independent overseeing body, which would then immediately disseminate this information to any interested party. In this way, each such visionary would have a cumulative numeric value attached to their commentary (annualized percentage returns, percentage drawdowns, etc.). The inception date should be noted, and none of them can ever choose to "start over." Yeah, I know. It'll never happen. :mad:
  9. ElCubano


    i dont know about end of year...but a 2:30 seems to be in the works....rally rally rally
  10. Even after that big overseas sellof the shorts can't knock the market more than a few tenths percent

    the buyers are in control now. Paulson bernanke not gonna let market go much lower.
    #10     Nov 21, 2007