posted on Oct, 28 2008 @ 12:24 PM
(from Roubini's site)
Roubini, Oct 24: Equity prices may have to fall another 30% based on fundamentals alone before they bottom out. Why so? In a severe two year US and
global recession S&P 500 firms earnings per share (EPS) could realistically fall to $50 or $60. If P/E ratios fall to 12 this implies the S&P 500
index falling to a 600 to 720 range. If P/E ratios fall - as likely in a recession - to 10 then the S&P 500 index could fall as low as 500 to 600. So
even based on fundamental factors alone there is another 30% or more downside risk to US equities; and now, on top of such fundamentals, there is also
an ugly and nasty panic-driven market dynamics at work.
Oct 21: According to S&P, dividend payments by companies in the S&P 500 may drop 10% in the 4Q, the biggest decline since 1958, as bank failures and
slowing economic growth stifle payouts. S&P also cut its estimated 2008 dividend from all S&P 500 companies to $28.05 from $28.85, representing the
slowest annual growth since 2001. Finance companies in the index reduced their payouts 35 times in 2008, almost triple the past five years combined
Mauldin, Oct 17: Operating earnings estimates are "bottom up" (no pun here). That means that S&P gets the estimates from each of the analysts that
follow the individual companies, and adds them up for the estimate. The top-down estimates take into account economic conditions. It makes a HUGE
difference as to who is more accurate. If the optimists are right, we are at single-digit price to earnings ratios (around . If the as-reported team
is right, we are at relatively high levels, even after the recent large drop. How high? Today, the 2009 P/E projected ratio is 20. That is not a level
from which major bull markets are launched.
BMO, Oct 3: The equity bear market is now a year old, with the S&P 500 down 29% from its Oct 07 peak. At a year old, the bear market lags the
historical norm of about 16 months in duration. The market will continue to grapple with the possibility of a long earnings recession. A turnaround in
corporate profits will need to be on the horizon to drive stocks higher on a sustained basis.
JPMorgan AM, Oct 20: So far, Q3 earnings for the S&P 500 have fallen -35.4% y/y (though they have increased 10.5% excluding financial stocks). 2009
remains a concern, however, with forecasts of S&P earnings growth of almost 18% looking wildly optimistic.
NBC, Oct 17: The S&P 500 earnings will fall further from the actual peak earnings of 93.3. This is in sharp contrast to the consensus expectation of a
22.2% increase from the current level.
Comstock, Oct 16: On reported (GAAP) earnings, the metric we prefer, the S&P 500 is now selling at 15.9 times trailing 12-month earnings compared to a
an 82-year average of 16. At a number of past bottoms the index has troughed at P/E multiples between 6 and 10. We don't sense that the market has
yet discounted the potential length and depth of the recession, and history tells us that stocks can still decline significantly from current
Economist, Oct 12: Smithers&Co has a measure called cyclically-adjusted p/e, which averages earnings over the last 10 years. In America, that has
fallen sharply in recent weeks and is now around the historical norm of 15. But in deep bear markets, the bottom was 5
ML, Oct 6: For the first time ever in the modern era, we have a situation where in 2007-2008, S&P 500 operating earnings have collapsed nearly 30% and
yet real GDP has managed to grow at a positive albeit below-average 2% pace. This is because 70% of the decline in corporate profits over the past
year has reflected the unwinding of all the financial leverage; only 30%has been due to the softer pace of economic activity and margin compression.
DB, Oct 6: Despite the less than ideal macroeconomic outlook, the primary reason for investing in equities is attractive valuations. Fundamentally,
the P/E of the S&P 500 is at its lowest level since 1995 (12.34 NTM), and its dividend yield at 2.4% is outpacing the two-year Treasury note yield of
GMO, Oct 17: S&P 500 at 900 means stocks are cheap in the U.S. However, the market can still fall dramatically lower
CS, Oct 16: Equities offer deep value. On trend earnings the equity risk premium is 5.9% (compared to a deep value target of 5% and a long run average
of 3.4%). On P/E (on trend earnings) is 12.2X compared to previous lows of 15.7X (2002), 14.2X (1990) and 13.7X (1987) at the three previous bear
market lows. If the crisis is contained as a recession, we think the S&P 500 can rally to around 1,200. If there is a depression, we think that the
S&P 500 needs to fall to 700 or lower. We attribute a small probability to this outcome
Hussman, Oct 13: Stocks are now at the same valuations that existed at the low of the 1990 bear market. Relative to 30-year Treasury yields, the S&P
500 is priced to deliver the highest excess return since early 1980's
Citi, Oct 10: Technical indicators argue for a return to 800 on the S&P 500. If one assumes that investors choose to only look at technical indicators
and thereby assume a re-test of the 2002-03 lows, there may be another 10% downside risk vs. the 10% upside potential using the very ugly kind of
earnings estimates of an extraordinarily hard global economic landing.
Barclays, Oct 6: Equities are more likely to trade in a range rather than surge. S&P500 at 1050-1100 looks to be an attractive entry point
[edit on 28-10-2008 by leo123]