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Wall Street Goes Full Retard Bullish

 March 22, 2012 12:29 PM

Ex-Morgan Stanley strategist and Traxis Partners LP hedge fund manager Barton Biggs is advertised as going bullish on equities before the Standard & Poor's 500 Index rallied this year, and has now gone ultra-bullish. He now says he is 90% bullish now," referring to the proportion of his fund that benefits from higher share prices. "There is an awful lot of money that is out of stocks and in very low- yielding fixed-income instruments. I think the odds are that money is going to migrate back." His optimism however has fluctuated along with the market, with at least eight changes in the past six months, says Bloomberg.

o In a report about oil and gas production in the US and North America in the coming years, Citigroup analysts gush that North America will become "the new Middle East" as  oil and gas production skyrockets in the next 8 years due to strides in natural resource extraction. Citi economists expect total liquids production to as much as double for the continent in the next decade, and predict that the U.S. could overtake both Russia and Saudi Arabia in oil production by 2020, and expect real GDP to increase by 2.0% to 3.3%—$370 to $624 billion—as a consequence of new production, a decline in energy consumption, and the economic activity generated along with this. They also see the current account deficit could shrinking by 80% to 90% due to energy exports at an already low level of production, and predict that the current account balance could move from -3.0% of GDP to -0.6% of GDP by 2020, pushing the value of USD up by 1.6% to 5.4% percent.

o Goldman Sach's portfolio strategists are presenting a big long-term bullish case for stocks, relative to bonds. The report is titled The Long Good Buy; the Case for Equities, and it essentially makes an equity-risk premium argument that stocks are just impossibly cheap relative to bonds, and that the scenario currently being priced into the markets is just unrealistically negative... even with the bug run up in stocks since early 2009.

o On Bloomberg TV, Vince Farrell, the retired chief strategist of Ticonderoga called this the best buying opportunity for stocks in 40 years. Bank of America and Credit Suisse recently have taken up their full-year projections for S&P 500, while JPMorgan Chase has remained strongly bullish, and BlackRock CEO Larry Fink several weeks ago said investors should have a total allocation to stocks.

This after the bull market from the March 2009 depths of the 2008 financial crisis turned four and investors are wondering how much higher stocks can go. Wall Street's wildly bullish calls on stocks may be having just the opposite effect, driving wary mom-and-pop investors out of the market despite the long-standing rally. Just last week, investors pulled another $126 million out of stock-based mutual funds and shoveled $10.7 billion into bond mutual funds, according to the Investment Company Institute. U.S-based stock funds, despite a stunning gain of more than 30% off October lows, lost nearly $1.4 billion. "A lot of people are very skeptical. Look how wrong these guys were last year," says Kathy Boyle, president of Chapin Hill Advisors in New York. 

Consensus forecasts in 2011 were looking for the S&P 500 to finish around 1,400 when in fact it registered an almost perfectly flat 1,257, a 10% miss.


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