Tuesday, August 9, 2011

Barclay's tip sheet

1) BULLISH stocks right here, right now. SPX most oversold since Oct 10, 2008
2) Risk lvls down signif while SPX has diverged from copper--our fav indicator
3) Proof? Cmdty stocks vs underlying have unglued--AA/Alum, GDX/Gold, FCX/copper
4) This tells us how indiscriminate the derisking has become among equities
5) Retail selling accelerating, what you'd expect @ mkt bottom like last summer
6) Sentiment as bearish it's been in years as evidenced by AAII bull/bear stats
7) Aug skew at steepest lvls in yrs, implieds at highs = protection scramble
8) Fundamentls strong-equity risk prem on fwd 4Q ets is 6.75%,highest since 70's
9) Clearly the view is that these fwd ests are not accurate given macro slowdown
10) If you blv equity risk prem should be 5%, close to 30 yr high, that implies
11) EPS of $88/sh vs current est $108 implies fwd guide needs to decline by 18%
12) But unlike past recoveries cos haven't relevered, rehired, massively invest.
13) Therefore,  in much better place to withstand slower activity and we note
14) Unlike '08 private sector lev low, cash lvls highest ever, massive liquidity
15) Attached-Italian bond spread to Germany vs S&P.Led us down, will lead us out

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