> From Brian D Williams.
> I saw on NASDAQ that Abby Joseph Cohen from Goldman Sachs has
> recommended to their customers with cash that this is a good time
> to buy stocks. <snip>
Warren Buffet must have been thinking about a market
like these days when he said:
"I will tell you the secret of getting rich on Wall Street.
You try to be greedy when _others_ are fearful.
You try to be _very_ fearful when others are greedy."
But are _others_ fearful enough?
Goldman Sachs' influential strategist Abby Joseph Cohen raised
her recommended equity exposure in a model portfolio to 70 percent
from 65 percent while reducing her cash position to zero from 5 percent.
Fixed-income exposure was unchanged at 27 percent, with most of the
exposure in intermediate bonds, including corporate issues.
This is the strategist's first change since March 2000, when equity exposure
Cohen said she's increasingly confident that a too-gloomy consensus scenario
is priced into share prices, encouraging the increase in recommended equity
"We believe that attractive equity valuation has been restored and forecast
year-end 2001 prices levels of 1,650 and 13,000 for the S&P and Dow
Industrials" Cohen said in a note to clients.
That represents a roughly 31 percent increase for the S&P from current
levels and a roughly 22 percent gain for the Dow from current levels.
"Many of the imbalances identified during the past year have now been
largely reduced. Risk tolerance has been replaced by risk aversion.
Moderate overvaluation of the S&P 500 has been followed by notable
undervaluation" Cohen commented.
She expects the current economic slowdown to be followed by trend
growth rates in gross domestic product and profits - and not by an
intractable recession as the U.S. economy still benefits from favorable
trends, including a productive workforce, well-managed companies,
mild inflation and a large federal surplus.
"The upturn in growth in the coming months is unlikely to reach the
gregarious levels of late 1999, nor would these rapid rates be appealing.
Instead, trend rates for both GDP -- roughly 3 percent -- and S&P EPS --
about 7 percent -- are more likely. These moderate rates are likely to be
sustainable," she said.
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