(Bloomberg) -- Goldman Sachs Group Inc. raised its forecasts for most industrial metals prices as a recovery in the world economy reduces spare capacity and boosts output costs. Copper for delivery in three months will climb to $7,650 a metric ton by end-2010, from a prior forecast of $5,800, analysts Jeffrey Currie, Janet Kong and Allison Nathan wrote in a report e-mailed today. Prices of the metal used in cars and pipes more than doubled this year as government spending programs revived automobile production.
“Investor expectations about continued future economic growth will support prices across base metals as spare capacity gradually disappears and the cost of production steadily climbs,” they wrote. “We remain most constructive on copper.”
The London Metal Exchange index of six industrial metals has risen 69 percent this year, driven by lead and copper, after a record slump of 49 percent in 2008. China, the world’s largest consumer of metals from aluminum to zinc, increased overseas purchases of copper to a record level in the first half. China’s copper stockpiles, including purchases by the nation’s State Reserve Bureau, totaled about 590,000 tons in the first seven months of the year, Goldman Sachs estimates.
Supply of the metal will outpace demand by 178,000 tons this year, a narrowing from the surplus of 706,000 tons in 2008, the bank said. The market will switch to a production shortfall of 88,000 tons in 2010, according to the forecast.
‘Least Constructive’
Goldman is “least constructive” on aluminum and nickel, the report said, adding the metals’ excess production capacity is enough to satisfy a recovery in demand. The analysts still raised forecasts on the metals because of rising output costs.
Aluminum will gain to $2,050 a ton, from a prior forecast of $1,950, and nickel will climb to $18,800 a ton, compared with the previous estimate of $15,200, according to the report. The analysts forecast an aluminum surplus of 1.78 million tons for the year, a decline from the 2008 oversupply of 2.27 million. This will shrink to 622,000 tons in 2010, they said. The zinc forecast was lowered to $2,170 a ton, from $2,600, because of “a large Chinese supply,” Goldman said.
Wednesday, September 9, 2009
Tuesday, September 8, 2009
Stocks Show Why Analysts Dismiss Economists on Growth
(Bloomberg) -- Never before have Wall Street stock analysts diverged more with economists at their own firms over the outlook for earnings in the Standard & Poor’s 500 Index. Profits for companies in the S&P 500 will rise 25 percent next year, according to the average estimate of more than 1,500 equity analysts tracked by Bloomberg. That’s 10.9 times faster than the expansion in gross domestic product foreseen by 53 economists surveyed last month. The ratio of income to GDP growth is the highest on record and compares with an average of 6.1, based on data compiled by Bloomberg going back 60 years.
Concern that profits won’t measure up to estimates may limit returns after the S&P 500 rose 50 percent since March, the steepest rally in seven decades. While shares trade close to the cheapest levels relative to earnings since 1989, based on next year’s projections, forecasts for the economy by Goldman Sachs Group Inc.’s Jan Hatzius, Morgan Stanley’s Richard Berner and Bank of America Corp.’s Drew Matus show equities are no bargain. “Earnings are going to be dependent on the overall economic growth,” said Barry James of Xenia, Ohio-based James Investment Research Inc., which oversees $2 billion and whose James Balanced Golden Rainbow Fund beat 98 percent of competitors over the past five years. “While things are not as bad as they have been, we don’t see next year as being one that will go gangbusters.”
Justifying the Rally
The S&P 500 retreated 1.2 percent last week after a report on factory orders and speculation that China would curb bank lending raised doubts about the speed of the economy’s recovery from the first global recession since World War II.
The S&P 500 added 0.9 percent at 9:32 a.m. in New York today after U.S. markets were closed yesterday. Investors are returning from the Labor Day holiday after the benchmark index for American equities rose as much as 52 percent from a 12-year low on March 9 and the proportion of companies that beat analysts’ profit predictions matched a record.
The gains spurred the steepest rise in the S&P 500’s price- earnings ratio since at least the 1950s, pushing the index to 19 times operating earnings from the past 12 months, the most expensive level since 2004, according to data compiled by Bloomberg. Based on analysts’ forecasts for 2010, the S&P 500 trades for 13.5 times income, the lowest since 1989 when compared with the trailing P/E ratio before Lehman Brothers Holdings Inc.’s collapse a year ago.
Too Optimistic
The U.S. economy will expand at a 2.3 percent annual rate next year as the longest recession since the 1930s ends, according to the average estimate of economists surveyed by Bloomberg. U.S. companies are expected to halt a two-year slump in profits next quarter, the longest since the Great Depression, according to analyst projections compiled by Bloomberg. While the individual forecasts may prove accurate, as a whole they are overoptimistic, based on economists’ expectations for U.S. growth.
Sal Tharani, Goldman Sachs’s analyst who covers metal producers, told investors to buy Phoenix-based Freeport-McMoRan Copper & Gold Inc. on Aug. 18, saying in a research note that higher metals prices will help 2010 per-share profits increase 48 percent at the largest publicly traded copper producer. Among the 14 companies he covers, Tharani’s stock picks during the past year have been more profitable than any other analyst’s, according to data compiled by Bloomberg. Tharani was unavailable to comment, said Ed Canaday, a spokesman for the bank.
‘Conviction Buy’
Goldman Sachs, Wall Street’s most profitable investment bank, added Freeport to the “Conviction Buy List” of stocks it expects to rise the most. The firm predicts copper prices will climb 34 percent next year. Futures linked to the metal have doubled in New York trading so far in 2009.
Freeport will have to reach that profit target without the help of an economy expanding faster than about 2 percent next year, according to the growth forecast from Hatzius, Goldman’s New York-based chief U.S. economist. Consumer spending will be weaker than at the end of previous recessions, Hatzius wrote in a Sept. 1 note. He doesn’t have a prediction for earnings growth and declined to comment on analyst estimates in a Sept. 4 interview.
Earnings, GDP
Based on the historical relationship of earnings and GDP compiled by Bloomberg since 1949, the U.S. economy would have to expand by 4.1 percent for profit among S&P 500 companies to match analysts’ prediction for a 25 percent gain in earnings.
The last time S&P 500 profit growth was more than 10 times GDP was in 2002, when earnings climbed 19 percent as the economy expanded 1.8 percent following a recession spurred by the bursting of the Internet bubble. The S&P 500 slid 23 percent that year. The only other year in which earnings grew more than 10 times the economic expansion was 1993. The S&P 500 added 7.1 percent.
The most optimistic forecast in a Bloomberg survey of 53 economists taken from Aug. 5 to Aug. 11 was for a gain of 4 percent, by Michael Darda of MKM Partners LP in Greenwich, Connecticut. The lowest was London-based First Global economist Nikhil Gupta’s call for a 0.5 percent expansion.
Post-War Record
Firings boosted the U.S. unemployment rate to 9.7 percent last month, the highest in 26 years. That brought the number of Americans thrown out of work since the recession began in December 2007 to 6.9 million people.
Concern that profits won’t measure up to estimates may limit returns after the S&P 500 rose 50 percent since March, the steepest rally in seven decades. While shares trade close to the cheapest levels relative to earnings since 1989, based on next year’s projections, forecasts for the economy by Goldman Sachs Group Inc.’s Jan Hatzius, Morgan Stanley’s Richard Berner and Bank of America Corp.’s Drew Matus show equities are no bargain. “Earnings are going to be dependent on the overall economic growth,” said Barry James of Xenia, Ohio-based James Investment Research Inc., which oversees $2 billion and whose James Balanced Golden Rainbow Fund beat 98 percent of competitors over the past five years. “While things are not as bad as they have been, we don’t see next year as being one that will go gangbusters.”
Justifying the Rally
The S&P 500 retreated 1.2 percent last week after a report on factory orders and speculation that China would curb bank lending raised doubts about the speed of the economy’s recovery from the first global recession since World War II.
The S&P 500 added 0.9 percent at 9:32 a.m. in New York today after U.S. markets were closed yesterday. Investors are returning from the Labor Day holiday after the benchmark index for American equities rose as much as 52 percent from a 12-year low on March 9 and the proportion of companies that beat analysts’ profit predictions matched a record.
The gains spurred the steepest rise in the S&P 500’s price- earnings ratio since at least the 1950s, pushing the index to 19 times operating earnings from the past 12 months, the most expensive level since 2004, according to data compiled by Bloomberg. Based on analysts’ forecasts for 2010, the S&P 500 trades for 13.5 times income, the lowest since 1989 when compared with the trailing P/E ratio before Lehman Brothers Holdings Inc.’s collapse a year ago.
Too Optimistic
The U.S. economy will expand at a 2.3 percent annual rate next year as the longest recession since the 1930s ends, according to the average estimate of economists surveyed by Bloomberg. U.S. companies are expected to halt a two-year slump in profits next quarter, the longest since the Great Depression, according to analyst projections compiled by Bloomberg. While the individual forecasts may prove accurate, as a whole they are overoptimistic, based on economists’ expectations for U.S. growth.
Sal Tharani, Goldman Sachs’s analyst who covers metal producers, told investors to buy Phoenix-based Freeport-McMoRan Copper & Gold Inc. on Aug. 18, saying in a research note that higher metals prices will help 2010 per-share profits increase 48 percent at the largest publicly traded copper producer. Among the 14 companies he covers, Tharani’s stock picks during the past year have been more profitable than any other analyst’s, according to data compiled by Bloomberg. Tharani was unavailable to comment, said Ed Canaday, a spokesman for the bank.
‘Conviction Buy’
Goldman Sachs, Wall Street’s most profitable investment bank, added Freeport to the “Conviction Buy List” of stocks it expects to rise the most. The firm predicts copper prices will climb 34 percent next year. Futures linked to the metal have doubled in New York trading so far in 2009.
Freeport will have to reach that profit target without the help of an economy expanding faster than about 2 percent next year, according to the growth forecast from Hatzius, Goldman’s New York-based chief U.S. economist. Consumer spending will be weaker than at the end of previous recessions, Hatzius wrote in a Sept. 1 note. He doesn’t have a prediction for earnings growth and declined to comment on analyst estimates in a Sept. 4 interview.
Earnings, GDP
Based on the historical relationship of earnings and GDP compiled by Bloomberg since 1949, the U.S. economy would have to expand by 4.1 percent for profit among S&P 500 companies to match analysts’ prediction for a 25 percent gain in earnings.
The last time S&P 500 profit growth was more than 10 times GDP was in 2002, when earnings climbed 19 percent as the economy expanded 1.8 percent following a recession spurred by the bursting of the Internet bubble. The S&P 500 slid 23 percent that year. The only other year in which earnings grew more than 10 times the economic expansion was 1993. The S&P 500 added 7.1 percent.
The most optimistic forecast in a Bloomberg survey of 53 economists taken from Aug. 5 to Aug. 11 was for a gain of 4 percent, by Michael Darda of MKM Partners LP in Greenwich, Connecticut. The lowest was London-based First Global economist Nikhil Gupta’s call for a 0.5 percent expansion.
Post-War Record
Firings boosted the U.S. unemployment rate to 9.7 percent last month, the highest in 26 years. That brought the number of Americans thrown out of work since the recession began in December 2007 to 6.9 million people.
The Crumbliest Flakiest Stocks Bull Market Never Tasted Before
By: Nadeem_Walayat
Stock-Markets
Diamond Rated - Best Financial Markets Analysis ArticleThe $17 billion hostile bid for Cadbury 'should' bring home the inherent underlying actual strength of this bull market as the bid signals that business is returning to normal. Today's bid by Kraft Foods sent the Cadbury stock price soaring by more than 38% and clearly illustrates that multinationals are increasingly awakening from credit crisis fear to taste greed at being able to pick up corporate giants such as Cadbury at rock bottom recession prices even after a 38% one day price hike. Watch this space for many more mega bids to come as the bull market momentum continues to gather steam as we have a long, long way to go before we reach the Merger and Acquisition mania levels associated with BULL market Peaks.Meanwhile bull market deniers in the face of overwhelming evidence of a bottom i.e. as evidenced by the price trend continue to cling on to literally anything that leaves the door ajar towards revisiting the March lows and below. Even resorting to delving back into the midst of time to the 1930's for any glimmer of hope. It should be obvious by now to everyone that transposing current price action onto a graph of the 1930's bear market makes it rather obvious that THAT is NOT going to happen?
One of my fundamental rules of analysis is that the further one deviates from the present the more probable that one is going to be wrong, and the 1930's is more than just a deviation, at most I would go back perhaps a year to look for relative strength and weakness. But nearly 90 years? That era is long gone and buried and bears NO significance to the PRESENT! Yes we have echo's through time, but NOT THAT FAR BACK ! For actual market impact events on to today's markets one needs to look at the peak in the housing markets and credit crisis events of the past 2 years where the three most notable events were -
a. The Lehman's sparked Financial collapse of Sept / October 2008
b. Zero Interest rates.
c. the implementation of Quantitative Easing.
They are the most important echo's from the recent past impacting on the present, rather than trying to match a chart from the 1930's to the present.
Is this a Bull Market or a Bear Market Rally?
My point of view is simple (it is good to keep it simple)- Pick up any reputable technical analysis book and you will read that that a bull market in stocks is confirmed when an major stock indices (that's the DJIA) rallies by 20% from the low (allowing for a few days of whipsaw), similarly a bear market is confirmed when an stock indices falls by 20% from the high , therefore regardless of perma views of this being a bear market rally, the facts are clear that under the basis of technical analysis this rally has long since been confirmed as a bull market more than 30% ago!
Stock-Markets
Diamond Rated - Best Financial Markets Analysis ArticleThe $17 billion hostile bid for Cadbury 'should' bring home the inherent underlying actual strength of this bull market as the bid signals that business is returning to normal. Today's bid by Kraft Foods sent the Cadbury stock price soaring by more than 38% and clearly illustrates that multinationals are increasingly awakening from credit crisis fear to taste greed at being able to pick up corporate giants such as Cadbury at rock bottom recession prices even after a 38% one day price hike. Watch this space for many more mega bids to come as the bull market momentum continues to gather steam as we have a long, long way to go before we reach the Merger and Acquisition mania levels associated with BULL market Peaks.Meanwhile bull market deniers in the face of overwhelming evidence of a bottom i.e. as evidenced by the price trend continue to cling on to literally anything that leaves the door ajar towards revisiting the March lows and below. Even resorting to delving back into the midst of time to the 1930's for any glimmer of hope. It should be obvious by now to everyone that transposing current price action onto a graph of the 1930's bear market makes it rather obvious that THAT is NOT going to happen?
One of my fundamental rules of analysis is that the further one deviates from the present the more probable that one is going to be wrong, and the 1930's is more than just a deviation, at most I would go back perhaps a year to look for relative strength and weakness. But nearly 90 years? That era is long gone and buried and bears NO significance to the PRESENT! Yes we have echo's through time, but NOT THAT FAR BACK ! For actual market impact events on to today's markets one needs to look at the peak in the housing markets and credit crisis events of the past 2 years where the three most notable events were -
a. The Lehman's sparked Financial collapse of Sept / October 2008
b. Zero Interest rates.
c. the implementation of Quantitative Easing.
They are the most important echo's from the recent past impacting on the present, rather than trying to match a chart from the 1930's to the present.
Is this a Bull Market or a Bear Market Rally?
My point of view is simple (it is good to keep it simple)- Pick up any reputable technical analysis book and you will read that that a bull market in stocks is confirmed when an major stock indices (that's the DJIA) rallies by 20% from the low (allowing for a few days of whipsaw), similarly a bear market is confirmed when an stock indices falls by 20% from the high , therefore regardless of perma views of this being a bear market rally, the facts are clear that under the basis of technical analysis this rally has long since been confirmed as a bull market more than 30% ago!
Agri-Food Stocks Tied to Positive China Economic Trends
By: Ned_W_Schmidt
Commodities
Best Financial Markets Analysis ArticleFor more than a decade investors have been misled. Was the misinformation intentional? Was the misinformation simply due to ineptness? Whatever the cause, the business media, the Street, and many advisors have not served investors well! This author, like many of you, has listened to countless hours of investment gurus talk. We have all read millions of words written in print about how to invest, as advised by experts. How many of them told us ten years ago that future returns in the U.S. equity market would be negative? Go ahead, name two. Not two that you read, but two that were presented by the main stream media.ur first chart this week, above, portrays the ten-year performance of $Gold and the S&P 500. That black line is the total return, including dividends on the S&P 500. Over the last ten years those that invested in U.S. stocks have lost money. They not only lost the money put into the market, they also lost the dividends received as this is a total return measure. On top of that, some were extracting a fee from the investors for losing them money. We assure you that money can be lost in the market without paying a management fee.
And then we have to hear and read the continuing blather on some bank stock that is up 500% from the low. If one had the misfortune of buying a bank stock on the advice of some investment strategist, that magnificent rise from the low is little comfort. After that 500% rise, the loss on the bank stock is only 91%. That would make me feel better. How about you? Further, the strategists applauded as hedge fun ran commodity prices up in 2008. Then, we were all told to sell commodities, forever. The Chinese economy was about to disappear, and demand for commodities would never recover. Well, we are still waiting. But, seems the Chinese economy is still in existence. Wealth is still being created in China while in the U.S. wealth may become an endangered species under the wealth confiscation policies of the failing and fading Obama Regime.
Commodities
Best Financial Markets Analysis ArticleFor more than a decade investors have been misled. Was the misinformation intentional? Was the misinformation simply due to ineptness? Whatever the cause, the business media, the Street, and many advisors have not served investors well! This author, like many of you, has listened to countless hours of investment gurus talk. We have all read millions of words written in print about how to invest, as advised by experts. How many of them told us ten years ago that future returns in the U.S. equity market would be negative? Go ahead, name two. Not two that you read, but two that were presented by the main stream media.ur first chart this week, above, portrays the ten-year performance of $Gold and the S&P 500. That black line is the total return, including dividends on the S&P 500. Over the last ten years those that invested in U.S. stocks have lost money. They not only lost the money put into the market, they also lost the dividends received as this is a total return measure. On top of that, some were extracting a fee from the investors for losing them money. We assure you that money can be lost in the market without paying a management fee.
And then we have to hear and read the continuing blather on some bank stock that is up 500% from the low. If one had the misfortune of buying a bank stock on the advice of some investment strategist, that magnificent rise from the low is little comfort. After that 500% rise, the loss on the bank stock is only 91%. That would make me feel better. How about you? Further, the strategists applauded as hedge fun ran commodity prices up in 2008. Then, we were all told to sell commodities, forever. The Chinese economy was about to disappear, and demand for commodities would never recover. Well, we are still waiting. But, seems the Chinese economy is still in existence. Wealth is still being created in China while in the U.S. wealth may become an endangered species under the wealth confiscation policies of the failing and fading Obama Regime.
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