Market poised to wake up today

The market analysts are waking up to the new opportunity of record low PE ratios and cash suddenly being available now to even buy up the American automobile industry. The capitalists who act now will easily do 20% better than Warren Buffet, president elect Obama's financial advisor. But it will take to the end of January 2009 not just to Dec 31 2008 for this to be accomplished so the gains will not necessarily be taxed until 2010.
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Believing in Estimates Means 20% Advance for S&P 500 (Update1)
By Eric Martin and Elizabeth Campbell
Nov. 10 (Bloomberg) --

David Kostin of Goldman Sachs Group Inc. predicts an advance because U.S. companies are cheap relative to earnings. Strategas Research Partners' Jason Trennert is counting on a resumption in bank lending to lift equities. Thomas Lee at JPMorgan Chase & Co. says stocks are swinging so much that a 25 percent jump by Dec. 31 isn't out of the question.

The S&P 500 is poised for its worst year since the 1930s after almost $700 billion in bank losses froze credit markets and spurred concern the economy will shrink. U.S. equities posted the steepest monthly loss in 21 years in October and $6 trillion was erased from U.S. markets in 2008.

``It's very difficult for us to see that kind of turnaround by year end,'' said Richard Weiss, who oversees $53 billion as chief investment officer at City National Bank in Beverly Hills, California. ``The stock market would need to see a bottoming of this economic cycle, and that is nowhere in sight.'' (This is not true. The market need only rise to its 200 day moving average for this to occur.)

Futures on the S&P 500 expiring in December gained 2.7 percent to 961.60 at 5:47 a.m. New York time after China unveiled a $586 billion economic stimulus package and the Group of 20 nations urged central banks to cut interest rates.

Kostin, Trennert and Lee are among the most pessimistic of Wall Street strategists with year-end estimates tracked by Bloomberg. The three expect the benchmark for American equities to end 2008 at an average of 1,075, up 15 percent from its closing level last week. ``I wouldn't call it extremely bullish,'' said New York- based Lee, who says the S&P 500 may rise to 1,125. ``The high level of volatility means you're going to have a pretty wide range of possible outcomes.''

The average Wall Street forecast calls for the S&P 500 to break out of a bear market and surge 20 percent to 1,118 by Dec. 31 -- more than twice as much as the biggest-ever advance to close out a year, according to data compiled by Bloomberg. Strategists were even more bullish at the beginning of the year, predicting that the S&P 500 would end 2008 at a record 1,632.

The S&P 500 trades at 10.39 times next year's estimated earnings from continuing operations, compared with the weekly average of 21.1 times historical operating profit over the past decade, according to data compiled by Bloomberg.

Borrowing Costs
Trennert expects the S&P 500 to increase 18 percent to 1,100, even after cutting his estimate twice between the end of September and mid-October. He says stocks will rebound as borrowing costs fall. ``The market discounted what we believe will be a recession in 2009'' when it reached a five-year low of 848.92 on Oct. 27, Trennert said.

Fair Value
``The U.S. is going to be the first market out of the bottom,'' Barton Biggs, a former Morgan Stanley strategist who now runs Traxis Partners LLC, a New York-based hedge fund, said on Bloomberg Television. ``We're at a major buying opportunity.''