Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Trend Setters and Range Riders -- Ignore unavailable to you. Want to Upgrade?

To: Frederick Langford who wrote (19253)	6/11/2002 9:42:44 PM
From: Susan G	Respond to of 26752

Analysts Scream Buy! (best sell signal there is <vbg>) By Ron Taylor 6/11/2002 2:16 PM ET "Four major market strategists have filled our ears with bullish statements over the last two days. Leading the pack is Goldman Sachs' (GS: sentiment, chart, options) Abby Joseph Cohen. She's making an appearance after a long stint in the shadows. Maybe her lack of visibility is due to the fact that the market has gotten pummeled since her last bullish call? Is Goldman trying to save what's left of her once considerable influence? The problem with Cohen's model is that it is based on earnings and valuations. This worked great during a bull market, but in this bear market, every time the market sells off it gets more attractive. Around here we call that the "fundamentalist trap." I remember that just a couple months ago everyone was screaming about how cheap Tyco International was at 20 on a valuation basis. Well, as they say, "If you liked it at 20, you gotta love it at 10!" Also out yesterday was Tom McManus of Bank of America (BAC: sentiment, chart, options) . He raised his equity allocation to 55 percent from 50 percent. I will at least give him credit for being on the low side of the average analyst allocation of 68.8 percent to equities. However, increasing your exposure during a bear market, particularly after last week's major technical break-downs, definitely loses you some big points. Today, Morgan Stanley Dean Witter (MWD: sentiment, chart, options) rolled out both Galbraith and Wien for a special tag-team bullish call. So there you have four major analysts from the big name brokerage firms coming out telling you to buy stock. This gushing of bullish sentiment comes on the heels of a major earnings warning by Intel (INTC: sentiment, chart, options) and today's minor warning by Nokia (NOK: sentiment, chart, options) . What's more, the second-half rebound the major brokerage firms were talking about doesn't seem to be developing based on what INTC and NOK have been saying. So if it isn't due to a second-half rebound, could it be because of valuations? To quote Tom McManus, "Despite our continuing downbeat view of the economy, valuations in the market have improved and investor sentiment has become more cautious." The price/earnings ratio of the S&P 500 (SPX - 1026.92) is above 40, which is well above historically cheap valuations. Sentiment has become more cautious, but as I wrote last week in Bottom? What Bottom?, it is nowhere near the levels needed for a long-term bottom. Basically what all of these strategists are saying is that the market got beat up pretty bad last week, the mutual funds are holding a ton of stock, and so are our trading desks. Maybe the retail guys and gals can take some of this merchandise off our hands for us. They don't want you to make money. They want you to be holding the bag. The Merrill e-mails proved they don't care about the retail customer, they care about their bottom lines. I can't put it any more bluntly. At the very least, this loud outpouring of bullish sentiment in the face of the market's terrible price action causes me to adopt a very cautious stance on the market. Bullish talk from strategists in the face of deteriorating fundamentals, terrible price action, and complacent sentiment is a big warning flag. I hope our readers are paying attention." schaeffersresearch.com