Full sarcasm drip: Many of you will recall the “book report” that we shared regarding the outlook of one Michael Belkin at last autumn’s Big Picture Conference. Belkin was decidedly bearish on the tech sector — and his concerns have become manifest during 4Q2012 (the current earnings season could be a roller coaster) and it should be interesting to see how the sector fares during 1Q2013. Some have questioned our 6% total return forecast for 2013 (actually -3% to 14%). We noted that Jeff Gundlach shared a similar outlook, observing that “2012 was a whole lot better than it should have been.” Continuing to read between the lines and with a sarcastic bent, it appears that Belkin doesn’t have the highest bar for 2013 either …
1) Congress and the Administration have spending, taxes and the budget deficit completely under control. Fiscal imbalances have been solved and won’t be a problem for the economy or markets anymore.
2) S&P500 earnings are declining and everyone knows stocks go up when earnings go down.
3) Hedge funds have their highest stock market exposure since just before the last time the S&P500 tumbled 50%. 10,000 hedge funds controlling $2 trillion can’t be wrong.
4) NYSE margin debt of $327 billion is the highest since Feb 2008. Forthcoming margin calls like those of 2008 are bullish, because leveraged investors will be forced to liquidate into a declining market.
5) Taxes are going up and government spending growth is going down – which Keynesian economists agree stimulates economic growth, corporate earnings and the stock market.
6) Bernanke has deliberately squeezed investors into equities and the Fed has a perfect contrary record at preventing the last two 50% S&P500 bear markets during 2001-02 and 2007-09. Don’t fight the Fed.
7) Goldman is in bed with the Fed and bullish GS bigwigs say buy cyclicals. Don’t fight the squid.
8) Apple’s gargantuan $160 billion market cap loss (-24%) since September 19th is a generational stimulative event, since AAPL was a top 10 holding of 800 hedge funds and mutual funds at the end of Q3 2012.
9) Even if the market somehow goes down, every other portfolio manager will be down too – so your fund’s investors won’t care and won’t redeem their money.
10) 90% of market strategists and analysts polled by Reuters have a higher end-2013 market forecast. The sell-side consensus is always right and since they anticipate bear markets with pinpoint precision – this is an enormous green light.