Yet Another Expert Opinion

They are coming out of the woodwork as TV and radio are feasting on the big story of "Markets in Turmoil". In recent days I am sure you have seen all manner of analysts, fund managers, floor traders, and pundits coming on to give their take on the state of the markets and what they believe is in store.

I discount much of it but am always most interested in a few of the fund managers I respect, like Doug Kass, and senior strategists at the big institutional firms, mostly out of curiosity for what the "party line" is. Have heard interviews recently from senior people at Citi, Credit Suisse, Morgan and Goldman, among others.

This morning on Bloomberg Radio it was Abby Joseph Cohen from Goldman Sachs, who was their widely respected forecaster, economist and chief equity strategist for many years, until taking a bit of a demotion after some disastrous calls for 2008. She is now reportedly "forbidden" from publicly talking about specific investment themes or targets for the S&P. Throughout her long stint at the top she was known for being a "perma-bull".

Her comments today, in brief:

• Although Goldman has reduced 2011 and 2012 GDP and earnings estimates somewhat, she and they still believe corporate earnings of S&P 500 companies are still very strong and balance sheets in good shape. Thinks the situation very different from 2008. -Strong companies, however, need to keep dividends steady or raise them, reinvest in research and growth initiatives, and buy back stock if that makes sense....leading to some steady improvements in GDP and jobs growth. They need to be the economic recovery leaders for the U.S.
  
• Drops in commodity prices should be very favorable development, especially for China and India, where fear of inflation is high.
  
• While stocks are "favorably priced" at these levels, acknowledges the large macroeconomic risks which are priced in, especially from the European situation.
  
• Once things "stabilize", the "path of least resistance" should be higher for equities "over time" (can't get more non-committal than that).

One direct quote from Ms. Cohen:

"Balance sheets are very strong. This market volatility is happening at a time when U.S. companies, especially those in the S&P 500, are performing extremely well. Stocks, not just in the United States, but in some of the other major markets, are also priced at very low levels.”

(Footnote: Does anyone else sort of wonder why we and the viewing/listening public hang on the every word of "experts" who are senior leaders at companies which effectively led us into the 2008 crisis, are laying off their own employees in bunches, have mixed recent financial results, and have seen their own stock prices lead the markets down in '08 and right now?).

 

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The Underground Trader posts are authored by a long-time friend and colleague who specializes in trading futures and options. The Underground Trader is a very close watcher of the indices and is a market junkie who cruises message boards, trading groups, news feeds and opinion sites for any edge he can get. Do not bet the ranch on any of his comments but they are usually interesting and definitely food for thought.