29/05/2002
Yesterday Abby Joseph Cohen the chief equity strategist for Goldman Sachs issued a price target for the S&P 500 of 1250; currently 1074. Before you all rush out and buy shares there are a few things you should know. This is the woman who earlier this year, in an interview with Barrons, was asked if she had to tip one stock what would it be. She tipped IBM at $124. Older hands will remember that we disagreed strongly with her and entered a short position on the basis that we felt they were fiddling their figures. This was proved to be the case and IBM is now $82.
Right now to why we think she is a Muppet with regards to the S&P. In short the "hot money" (movable money) is not comfortable with being in the US. The president, who campaigned on a free trade ticket, has passed not one but three protectionist bills on steel, timber and most ridiculously farming. Though the US stock market has fallen so have profits and now that companies figures bare a slight resemblance to the truth P/E levels are still very high. When you add in the high trade and budget deficit and the problems in Kashmir money will move out of the US stock market to find a safer home. We have already started to see this with Gold and the swiss franc being the main benificiaries. I fear a career in Stand up comedy beckons for Miss Cohen.
Other news. Two-thirds of prescription drugs approved by the FDA between 1989 and 2000 were identical to existing drugs or modified versions. We are now looking at the Pharmas as potential shorts but in mitigation a war in Kashmir would provide a boost for the sector.
The 2001 Financial report of the US government stated that it had "misplaced" $17.3 billion. Page 110 if anyone is interested. They certainly do things bigger and better out there.
MacDonalds is exploring how to use its restaurants to sell items other than food. They sell food? Judging by the people I see coming out of their restaurants I suggest dietary supplements might be a good start!
Harry