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Notes to myself, possibly of interest to others.
-- Bill Northlich

Thursday, September 1, 2011

Rosenberg Yesterday - Market range for the six months or so; fundamentals vs. technicals

One thing to note: If this is a correction in an expanding economy, then we could look forward to the P/E multiple on the S&P 500 heading back to a mid-cycle normal level of around 15x and earnings estimates remaining close to $100. For the bulls, that means 1,500 on the S&P 500 before long. But if this is a classic recessionary bear market, then it is a P/E closer to 12x that on an earnings stream is around $80, which takes you to below 1,000. That is the range based on these two outcomes; 1,000 on the downside to 1,500 on the upside...

The fact that the S&P 500 could manage to tack on 72 points in the two-plus weeks since that horrible recessionary Philly Fed index was released, not to mention the ability to dismiss the awful consumer confidence report yesterday, is a sign that the market is moving more on technicals, fund flows and market positioning than anything related to economic reality. But we all know that in the end, what happens to the economy will matter for the market since earnings are part of the economy, and in the final analysis that is what the equity investor is paying for.

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