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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: MythMan who wrote (395994)10/16/2009 10:26:54 AM
From: Giordano Bruno  Read Replies (1) of 436258
 
Team magic

Rosenberg - WHAT’S PRICED IN AGAIN?

At a series of client meetings this week, we stressed that there were fewer and fewer securities left in the market that were priced inexpensively. Ain’t that the truth. We re-ran our regressions with the latest tightening in spreads and breakout in equity valuation and found that U.S. investment grade credit is now priced for 2.5% GDP growth in the coming year (was 2.0% two-months ago) and the S&P 500 is now de facto pricing in 4.8%, which, by the way, is now basis points shy of what it was discounting in the summer/fall of 2007. And, backing out the fair-value P/E from the corporate bond market, and yields have been backing up sizably in recent weeks, we can see that the S&P 500 is now pricing in $85 of operating earnings, which we think will be, at best, a 2013 story.
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