This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Richard Beales (The New York Times): Exuberance defies sober new reality, September 17, 2009. Is irrational exuberance back in the markets? Evidence abounds that it may be. With financial chaos abating, the return of risk appetite in stock and lending markets is logical - up to a point. But risk-taking that aspires to the boom-time norm, rather than a more sober new reality, could be premature and dangerous.

• James Grant (The Wall Street Journal): From bear to bull, September 19, 2009. Grant argues the latest gloomy forecasts ignore an important lesson of history: The deeper the slump, the zippier the recovery.

• John Hussman (Hussman Funds): Strenuously overbought, September 22, 2009. Our measures of market action

It is interesting to see how close the institutional S&P 500 forecasts for 2009 come to the price level possibilities suggested by the S&P 500 chart.  Maybe fundamentals and technicals are converging on an idea, or maybe the institutions use technical indicators more than one might expect.

click image to enlarge

This chart of S&P 500 rather readily suggests a range of around 750 to 1,000 for the S&P, and also a possible retracement level of about 800.  Those numbers are not too different from the range of forecasts put out by the big boys.

On the chart, the 750 and 1,000 levels could be seen as significant resistance and support levels, and 800 could be seen as a likely 50% retracement from the recent high to the March low.

Those same price levels correspond generally to the

There are many institutional S&P 500 forecasts in the media for 2009, generally ranging from 850 to 1100 with some outliers on each side, but seldom is the underlying detail provided. One of the more common methods of estimation involves normalization of earnings times a reasonable multiple based on history.

This article will attempt to back into some of the leading institutional projections using normalized earnings and historically experienced multiples.

Key Historical Index Price Levels:

The S&P stands now at 924. It had a low of 741 last November and 666 in March. The high in 2007 was approximately 1575. The low in 2002-2003 was approximately 770.

Institutional Estimates:

We cataloged a number of institutional forecasts in a recent article. The forecasts here come from that article plus a few newer ones. Estimate publication dates range from early May through now (issued within approximately a month).

Goldman this week

There are many institutional S&P 500 forecasts in the media for 2009, generally ranging from 850 to 1100 with some outliers on each side, but seldom is the underlying detail provided.  One of the more common methods of estimation involves normalization of earnings times a reasonable multiple based on history.

This article will attempt to back into some of the leading institutional projections using normalized earnings and historically experienced multiples.

Key Historical Index Price Levels:

The S&P stands now at 946.  It had a low of 741 last November and 666 in March. The high in 2007 was approximately 1575.  The low in 2002-2003 was approximately 770.

Institutional Estimates:

We cataloged a number of institutional forecasts in a recent article.  The forecasts here come from that article plus a few newer ones.  Estimate publication dates range from early May through now (issued within approximately a month).

Goldman this week stated an expectation of 950

Apparently, the horrifying news of negative interest rates does not register with these morons; the bartender went back to talking to the pretty girl at the end of the bar, and the other barfly customers were flipping those little beer-stained cardboard coasters at me saying, ‘Shut up!

The bartender bent down real close to my face so that I could not miss him, and since that is never a good sign, I decided that I would let him get a good whiff of my breath to show him the folly of his ways.

So I brightly said, “Hi!”

He immediately backed up a couple of feet and said to me, “This is the last time I am going to tell you about keeping your voice down, and to stop insulting the customers and Democrats by calling them idiots. The idiots who are not customers or Democrats are complaining about being insulted by the

In spite of Friday’s 6% US stock market rise, the general mood is gloomy and getting gloomier.  This week’s Barron’s was particularly gloomy.

Multiple articles said there is no place to hide.  We have said the same, as in our Oct 26 post of the same name, “No Place to Hide”.  The fact is, however, there have been places to hide that persist today.  They should be considered, but cautiously in these volatile times.

A specific example of the gloom comes from one of our favorite columnists, Alan Abelson, who said;

November 24 (Barron’s)

Was Friday’s late and sharp rebound another of those one-day wonders or is it, at long last, the start of something a bit more enduring … We earnestly hope it is. But … this market has been filled all the way down with deadly head feints. So the best advice we can offer for the nonce is to wait

Financial Week, November 2, 2008

Jeremy Grantham, chairman of Boston-based GMO LLC and a renowned wet blanket in the face of irrational exuberance, sounds uncharacteristically giddy these days.

… equity markets are “below trend lines” for the first time since 1994.

… CFOs should phase back into equities “with all deliberate slowness, as opposed to all deliberate speed,” Mr. Grantham warned, noting that markets typically overshoot on the downside by 20% or more.

… He predicted that the scars from the current downturn will be long lasting, and the effect on the money management industry profound. “A very substantial fraction of a generation of investors” is likely to be leery of stocks, just as they were in the 1930s, “40s and “50s, and again for most of the “70s, he said.

This is “truly the end of an era, and almost everything will be re-evaluated,” from interest

Market timing is not a good idea, but standing aside when a global train wreck is happening in proportions that rival the worst periods in modern history is not market timing — it is self-preservation.

Being out of the market makes deciding how to re-enter problematic, and some opportunity could be missed, but far greater opportunity is missed if capital is destroyed.

We are in cash from 80% to 100% in various accounts since mid-summer.

We believe that discretion is the better part of valor in this situation. Nobody really knows what comes next. We are in a Black Swan. The unknown unknowns dominate.

In times of such lack of clarity, we think keeping powder dry is probably a good thing to do.

As Alan Abelson said in his editorial this week in Barron’s:

The climate, in our jaundiced view, remains treacherous. The economy is destined to get worse - much worse, before it gets