Roger...
Crow Eating:
Seems like it is you against some "big time" pundits. A couple of "snipperts" from articles in this weeks Barrons. FYI
Go Roger...Go UCONN
Bob T.
Still Raging
Today's Fifty are Niftier, zero inflation is near, and look for Dow 20,000
An Interview With David Alger
Q: How bullish are you?
A: Extremely! After our little profit-taking episode this week, I believe the market will regain its momentum and close at 11,000 by the end of the year. I think it will go up to 20,000 by 2004.
Q: Can it be true? You're more bullish than Abby Joseph Cohen.
A: Sometimes I chide her when she loses the faith.
Q: How do you arrive at your target?
A: It's straightforward. I am assuming that the rate of inflation is going to go to zero. It's at 1.6% now, year over year. The CPI just released is up 0.1% both on the base and on the core. In terms of product, you have almost zero inflation now. The main inflation pressure is coming from the service industry. A number of factors, especially the Internet, will have downward pressure on pricing over the next three or four years so the nominal rate will get to zero. Historically, in the last five or six years, the real rate of return on the long bond has centered around 4%. Yes, it's been a little higher, it's been a little lower, but that is the central tendency. So it would be presumptive that at zero inflation, the long bond would yield 4%. Take that a step further, and say that the earnings yield of the S&P 500, which is the reciprocal of the P/E of the S&P 500, has traded for 15 years in a range between 50% and 95% of the long bond. The median relationship is about 75%. And let's assume that earnings of the S&P 500 grow at 8% a year, their long-term trend. So by 2004, you get $70 a share of earnings for the S&P 500. And if you assume the long bond is yielding 4%, and the earnings yield of the S&P will be 70% of 4%, that's 2.8%. And it translates into a 35 multiple. Put a 35 multiple on $70, extrapolate the same kind of gain for the Dow, assuming the Dow and S&P 500 move in lockstep, and the Dow doubles. It goes from 10,000 to 20,000. QED. You heard it here.
interactive.wsj.com
Microsoft, Now the Half-Trillion-Dollar Gorilla
By Andrew Bary
Goldman Sachs strategist Abby Joseph Cohen, whose bullish comments after stock dips in the past two years helped stabilize the market, came to the rescue again last week. She lifted her yearend targets for the Dow and S&P 500. She now sees the Industrials hitting 10,300, a 5% rise from current levels, and up from a prior target of 9850. Some would argue that Cohen's Dow target is unambitious for the Street's most prominent bull, but she generally has been conservative in her targets.
Cohen raised her Dow and S&P objectives despite slicing her operating-profit estimate for the S&P to $49 from $52.50. Cohen was way too optimistic on S&P earnings last year, which totaled about $45.80, considerably below her early-year estimate of $50.50. Cohen may have goofed on profits in 1998 but she got the market direction correct last year, which, of course, is what counts.
interactive.wsj.com |
