Month: March 2013

Goldman’s risky corporate loan book

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Federal Reserve’s latest stress tests provide a rare look inside the balance sheets of some of the biggest banks. And a few oddities are popping up.

One that nearly leaps off the page is the extreme risk in the corporate loan book of Goldman Sachs.

The Fed said the median loss from commercial and industrial loans across the 18 banks tested would be 6.5 percent under the severely adverse scenario. But Goldman’s loss would be a stunning 49.6 percent.

Goldman doesn’t have a giant CandI loan book. According to the Fed, it has just USD 1.4 billion of these loans, whereas JP Morgan has USD 11.1 billion and American Express has USD 2.6 billion. But Morgan Stanley has a similar sized book, at USD 1.2 billion, and the Fed estimates its loss would be just 7.8 percent.

No other bank even comes close to Goldman on this measure. It literally breaks the chart in the Fed’s stress test.

Goldman did not respond to my request for information about why its portfolio of this class of loans is so much riskier than its peers.

I suspect that these are mostly syndicated leveraged loans. Goldman is active in the syndicated loan market, although it typically doesn’t hold much of the loans it brings to market. These are probably the remnants of leveraged loans used in things like private equity deals, pieces that Goldman never sold off. That would go a long way to explaining why they are so much riskier than the loans held by other banks.

Follow me on Twitter @Carney

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Good news’ driving dollar bull run, at last

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Strong US jobs data have given the dollar a leg up in the forex market, suggesting that an improving outlook for the world’s largest economy is taking over as the main driving force for dollar gains.

The dollar index, a measure of its value against a basket of other major currencies, touched a seven-month high on Friday after data showed the US economy created 236,000 new jobs last month. The dollar held on to those gains in Asian trade on Monday.

(Read More: US Job Creation Surges as Unemployment Falls to 7.7%)

“For the first time in a number of years stronger US data are leading to a stronger US dollar after a dynamic over the previous couple of years where good news, no matter where it stemmed from, led to dollar weakness,” John Horner, currency strategist at Deutsche Bank in Sydney said on CNBC Asia’s “Squawk Box.”

“We are seeing a multi-year trend in the dollar which will see it have broad-based gains against other major currencies as well as emerging market currencies,” Horner added.

He expects the dollar to rise to 100 yen later this year, adding that dollar strength will push the euro to around USD 1.20 and sterling to USD 1.41 by the end of the year. That implies a fall of almost 8 percent for the euro and just over 5 percent for sterling from current levels. The overall dollar index has risen about 3 percent over the past month.

That move has coincided with stellar gains in Wall Street shares, which analysts say are contributing to the changing dynamics behind the dollar’s performance. The Dow Jones Industrial Average is up about 10 percent this year compared with gains of just over 5 percent in European stocks and almost 4 percent in Asian equity markets.

(Read More: Why Dow Record Could Be Good News for the Dollar)

“The dollar is the best currency among a sad group [of currencies] and that will continue as anticipation of strength in the economy grows,” said Warren Gilman, chairman and CEO of investment firm CEF Holdings.

Analysts say the strong US economic news is infusing a new force into currency markets.

In fact the payrolls numbers are the latest in a string of data painting a brighter picture of the US economy: The number of Americans signing contracts to buy new homes rose in January from December to the highest level in more than two and a half years, while the pace of growth in the manufacturing sector picked up to its fastest rate in more than a year and a half in February.

Westpac Bank described the rally in the dollar following Friday’s jobs data as a “textbook example of the changing relation between the dollar and economic news.”

“This is of course the historical relationship but was very frequently reversed during the GFC [great financial crisis] and years since, where the safe haven dollar usually weakened on positive US data surprises,” Westpac analysts said in a note on Monday.

“We have seen price action such as Friday’s at times in the past year or so without being consistent, so it is too soon to be confident that the correlation has shifted sustainably,” they added.

Still, Horner at Deutsche Bank said that with a gap growing between the outlook for the US economy and other major economies, the direction of the dollar was clear.

“One of the key reasons things have changed for the dollar is the clear disparity in the US economic outlook and what’s going on in Europe, which has a poor outlook for a period to come, and Japan where we have a more aggressive monetary policy coming through,” he said.

– By CNBC.Com’s Dhara Ranasinghe; Follow her on Twitter: @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US economy may be sending ‘wrong signal’: Goldman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Goldman Sachs’ top economist cautioned on CNBC that major economic indicators such as Friday’s better-than-expected jobs report could be sending the “wrong” signals.

“[The jobs number] certainly holds out a hope that we are shifting to a stronger pace of payroll gains, but it’s a little puzzling if you compare what’s going on in the job numbers with other measures of activity, such as GDP tracking,” Jan Hatzius told “Squawk on the Street.”. “It’s not stellar, with other indicators not being quite so strong.”

“It either means that there is weak productivity growth or it means that one of the two sides of the coin is sending the wrong signal,” Hatzius said. “Maybe what we’ll see is that the labor market sends a more accurate signal than some of the other indicators. I think there are some open questions here.”

“On the household survey, it’s a bit more mixed than the headline would suggest, because (of) the drop in labor force participation, which was surprising. It looked (like) over the prior six months that that had been stabilizing,” he said. “It’s nevertheless a strong household survey and a strong establishment survey.”

(Read More: Job Creation Surges as Rate Falls to 7.7%)

Hatzius said he expects “slower job growth, partly because the job numbers and the real activity numbers should converge to somewhat greater degree.”

“It does hold out the hope that things are getting better,” he added.

On the Fed, Hatzius said that if we’re adding jobs at the current rate, it would certainly bring down the overall unemployment rate. “At 236,000 jobs, it is a pretty sizable gain and it should bring down unemployment over time.”

(Read More: Cramer: Markets ‘Have Great Faith in Bernanke’)

Maintaining growth in jobs could shift Fed policy toward hiking rates, although this depends more on whether this growth is sustainable, he said. “The question is more, how many months of this do you have to see to be convinced that job growth is an underlying trend. If you had a very long period at this kind of pace, of course they would make some changes.”

“This is a very good number on the establishment survey but really how sustainable is it and how are we going to be looking at this three to six months down the road? What they will want to see is sustained strength,” Hatzius said. “We’ve had accelerations in payroll growth that have proven to be short-lived in a couple of cases. They want to see broader signs of improvement,” including in household and an increase in the hiring rate. He pointed to Fed Vice Chairwoman Janet Yellen’s speech on Monday as an indication of exactly what the Fed is looking for.

(Read More: Aggressive Fed Stimulus Still Needed: Yellen)

– By CNBC’s Paul Toscano. Follow him on Twitter and get the latest stories from “Squawk on the Street” @ToscanoPaul

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Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Brace for market correction later this yr: Nouriel Roubini

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tax increases on wealthy Americans and reduced government spending will have a severe impact on economic growth in the United States this year, wiping out the positive effects of a revival in the housing market and cheaper energy, Nouriel Roubini told CNBC on Friday.

His comments come as investors eye the release of non farm payrolls data in the U.S for further clues on the health of the economy.

Speaking at the 2013 Ambrosetti Workshop, Roubini – the co-founder and chairman of Roubini Global Economics dubbed Dr Doom for his pessimistic forecasts – warned that despite some positive indicators for growth, a number of key issues would hold it back.

“These taxes, taxes for the rich are going to significantly reduce disposable income and retail sales have been a disaster. And there are already signals of consumption growth slowing down as well as the sequester and the fiscal drag this year will be 1.5 percent of GDP (gross domestic product) for an economy that was barely growing last year,” he said.

The sequester refers to a series of spending cuts and tax increases which began to take effect last Friday aimed at reducing the budget deficit.

Despite encouraging signs of a renewed housing market, a revolution in shale gas which could result in cheaper energy and the effects of quantitative easing QE), US growth would be “1.5 percent at best this year,” Roubini said.

“Even without USpolitics [there would be a drag]. We’ve stolen growth from the future and now there needs to be payback for the mistakes made in the past.[The US] needs to start some austerity,” Roubini said.

Barclays revised its GDP forecast for the US lower on Friday to incorporate the effect of the spending cuts. It now sees 1.5 percent growth in the second quarter of 2012 from a previous forecast of 2 percent. For the third and fourth quarter of 2013 it revised its forecast from 2.5 percent growth to 2 percent.

Roubini agreed that while equity markets were a positive, investors should brace for a shock in the latter half of the year as revenue begins to disappoint.

“It’s positive because of the direct wealth effect and a signal that things might be improving but of course sometimes the stock market gives the wrong signal and I think the markets will be surprised by how much the US will slow down even compared to last year and the second half of the year. The US stock market could correct somehow,” he said.

Jim O’Neill, the chairman of Goldman Sachs Asset Management, disagreed with Roubini’s gloom over the US economic recovery and his view of the equity markets.

“If we get further follow-through (on the US non-farm payrolls on Friday) I can see people starting to get really excited about the cyclical momentum of the U.S. economy,” he said.

“As chaotic as Washington seems, the way they’re tightening fiscal policy is better than in Europe…Slowly but surely, the US fiscal picture is improving. Here in Europe and the UK, they’re focusing too much on austerity,” he said.

O’Neill, who is also attending the Ambrosetti Forum in Italy, said that the momentum in the U.S. equity market was solid.

“We have come a long way. I’m generally in the bullish camp so nothing happens in a straight line, the momentum behind the U.S. numbers is good. It’s pretty interesting despite the so-called fiscal drag,” O’Neill said. “Valuation wise, the US market is nothing like as attractive as it was but the momentum from the numbers is there so what’s going to cause it to top?”

Roubini also warned that the power of QE was now “becoming ineffective.”

“The net wealth of the household has increased in the last quarter and it boosts confidence but it has less effect on the real economy. If you take away QE too fast there could be a significant back up in long rates and that would kill the recovery,” he said.

Thursday saw the Dow reach new record highs after stocks finished higher for the third day in a row, up by 33.25 points to 14,329.49 largely on the back of an expected boost from nonfarm payrolls data later Friday.

Recent sessions have also seen the dollar continue to rise against other key currencies – it reached a 3-1/2 year high against the yen earlier Friday – as positive sentiment on the US economy continues. Roubini added that its upward trajectory could still have some momentum left as other global currencies,sterling, the euro weaken in comparison and it’s seen as a safety trade.

“As other countries continue aggressive QE and suffer from broader economic weakness (that implies) that the dollar can have some upside risk in a situation where the other currencies whether it’s the yen, the British pound or the euro may be weakening,” he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gradual recovery in second half of 2013: Draghi

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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European Central Bank President Mario Draghi called on euro zone governments to implement structural reforms on Thursday, warning that the economy should stabilize later in 2013 but that downside risks to growth remained.

The bank left its main refinancing rate unchanged at a record low of 0.75 percent on Thursday, as expected.

“Our monetary policy stance will remain accommodative,” Draghi told reporters at a press conference shortly after the decision. “The continued implementations of structural reforms should work their way through the economy,” he said. The euro hit a new session high above 1.3050 against the dollar as Draghi spoke.

Draghi sought to reassure investors concerned about the political stalemate in Italy following elections almost two weeks ago. Under Mario Monti’s technocrat government the country made progress in implementing economic reforms which calmed investors’ nerves. Some now fear that his work could be undone.

“Markets… have now reverted back more or less to what they were before. Markets understand that we live in democracies…You have to consider that much of the fiscal adjustment that Italy went through will continue going on on automatic pilot,” Draghi said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bernanke drives bull market to 4th birthday, 130% gain

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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One of the longest and most powerful equity bull markets in history turns 4 years old today. And traders believe there is just one man to thank: Federal Reserve chairman Ben Bernanke.

At 1,461 days and counting, it’s the eighth longest bull market since 1928, using data from Bespoke Investment Group. And if the S&P 500 climbs another 3 percent to surpass its 2007 high, the 136 percent total price increase will make it the fifth greatest bull market during that same time frame.

“I think Bernanke has sort of carried the load himself during this period,” remarked investing legend Warren Buffett in an interview with CNBC this week. “Cheap money makes things happen.”

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In the wake of the greatest financial crisis since WWII, the S&P 500 fell to 666.79 during the trading day on March 6, 2009. Bernanke’s first round of quantitative easing would follow just 12 days later.

Two more rounds of bond purchases later — along with an “Operation Twist” — and the market finds itself entering its fifth year of existence on Bernanke’s juice. The other US market barometer — the Dow Jones Industrial Average — rose to a record high Tuesday.

“The next step is where it will get interesting,” said Mike Murphy of Rosecliff Captial. “Will the Fed be able to pass the baton to the economy and will the economy be able to run with it?”

While Bernanke has certainly lifted asset values, economic and job growth remains anemic. GDP increased by just 0.1 percent in the fourth quarter. A report Friday is expected to show the unemployment rate in February was unchanged at 7.9 percent.

That is key as the Fed chief said last week that the central bank wouldn’t stop QE until unemployment reaches 6 percent, an occasion Bernanke doesn’t see happening until 2016.

“Ultimately, we need job and income growth to continue supporting the economy and stock market once central banks decide to pull back,” said Michael Sheldon, chief market strategist for RDM Financial Group.

Still, many investors believe others are not giving consumers and corporations enough credit. Sure, Bernanke got the ball rolling after the bursting of maybe the biggest credit bubble ever, but tangible improvements are behind the bull, they argue.

“Profit margins, productivity and real demand is at work here,” said Joe Terranova, chief market strategist for Virtus Investment Partners. “It’s been earnings driving it and they will continue to grow.”

The S&P 500 earned just USD 60.43 per share at the end of 2008, according to Virtus. That will double to USD 123 a share in 2014, according to consensus estimates from Wall Street strategists.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dow marches higher, extends all-time high

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stocks climbed Wednesday, with the Dow adding to its gains a day after hitting an all-time high, lifted by a better-than-expected private sector employment report.

The Dow Jones Industrial Average opened in positive territory, crossing above its all-time high. Bank of America and Hewlett-Packard led the blue-chip gainers.

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Almost four years after the bear-market low, the Dow Jones Industrial Average pierced through levels last seen in 2007 on Tuesday, amid signs of a strengthening economy and ongoing monetary support from the Federal Reserve.

The S&P 500 also rose, while Nasdaq toggled in and out of negative territory. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slid near 13. Most key S&P sectors opened higher, led by materials and financials.

Meanwhile, some analysts warned that the rally may be the beginning of a bubble. U.S. shares are up almost 7 percent since the start of the year, European markets have gained about 5 percent, while in Asia, Japanese shares have soared almost 13 percent.

“I think stocks could very well rally through the rest of this year, even into 2014 based on this wave of money, but at some point it will pop and collapse, and that’s what investors need to bear in mind,” Jim Rickards of Tangent Capital, told CNBC Asia’s “Squawk Box”.

On the economic front, private sector employment jumped by 198,000 in February, according to ADP’s monthly report. Economists polled by Reuters expected a gain of 170,000. The report comes two days before the Labor Department reports the widely-followed non-farm payroll figures, with economists expecting a gain of 152,000.

Meanwhile, factory orders fell 2 percent in January amid weak demand for transportation equipment, according to the Commerce Department, against expectations for a decline of 2.2 percent. Orders gained 1.3 percent, excluding transportation.

The Federal Reserve is scheduled to release its Beige Book, its region-by-region assessment of the economy, at 2 pm ET. Crude oil inventories for last week will be released by the Energy Department at 10:30 am ET. Inventories rose by 1.13 million in the prior week.

Apple edged lower, putting a damper on the tech-heavy Nasdaq, after a batch of brokerages turned sour on the iPhone maker, Berenberg cut its rating on the company to “sell” from “buy.” Citi lowered its price target to $480 from $500 and Barclays slashed its price objective to $530 from $575. Apple has plunged nearly 20 percent so far in 2013.

Qualcomm declined after Goldman Sachs removed the chipmaker from its “conviction buy” list, saying the chipset market has peaked this year.

Microsoft slumped to lead the Dow laggards after the European Union fined the software giant a hefty $731 million for breaking a pledge to offer PC users a choice of Internet browsers when they install the Windows operating system.

Among earnings, American Eagle Outfitters posted a higher quarterly profit, but shares tumbled after the teen apparel retailer handed in a disappointing current-quarter sales forecast, citing a tough economy.

Staples posted earnings that edged past expectations and also raised its quarterly dividend by one cent, but shares declined to lead the S&P 500 laggards after the office supply retailer reported revenue below estimates and estimates a lower-than-expected full-year forecast, due to weakness in Europe and North America.

Big Lots rallied to lead the S&P 500 gainers after the retailer topped Wall Street earnings and revenue expectations. PetSmart and Vail Resorts are among notable companies slated to post earnings after the closing bell.

JCPenney slipped after Citi and Openheimer downgraded the retailer to “neutral” from “buy and to “perform” from “outperform,” respectively. (Read More: Martha Stewart Denies Wrongdoing With JC Penney Deal)

European shares traded higher, led by the telecommunications sector, boosted by reports that Vodafone is in talks with Verizonregarding a merger. Meanwhile, euro zone officials confirmed that the region’s economy had shrunk by 0.6 percent in the fourth quarter of 2012, its five consecutive quarter of decline.

However, political uncertainty in Italy kept investors on edge amid a Reuters report that President Giorgio Napolitano is considering appointing a new technocrat government, led by a non-politician, as a way out of Italy’s political stalemate.

Also on the economic front, weekly mortgage applications jumped 14.8 percent last week to its highest level since mid-January, reversing three weeks of declines as interest rates dropped, according to the Mortgage Bankers Association.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dow smashes record: End of the ‘lost decade’?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Now that the Dow has undone all the damage of the financial crisis, it might be a perfect time for the hard-charging stock index both to admire its handiwork and catch its breath.

The bluechip index used as a proxy for US economic health on Tuesday crossed the critical threshold of its 2007 highs to set a new record, trading past 14,200 to break both its record close of 14,164.53, on Oct. 9, 2007, and its intraday high of 14,198.10, which happened two days later.

(Special Report: All About the Dow Record)

Though market participants are usually quick to brush off the breaching of psychological landmarks, this one could be different after more than a decade of market trips to the top – and then back to the bottom again.

“With the Dow getting to all-time highs, is this signaling the end of the lost decade?” said Jim Paulsen, chief market strategist at Wells Capital Management in Minneapolis. “Maybe not. It didn’t last time. But you wonder in some sense if that is the significance to this.”

(Read More: Earnings Aside, Fed Is Still Main Market Player)

While the move only kindled the spirits of the many market bulls, some were pondering whether this was as good an excuse as any for investors to take profits.

“It certainly isn’t that we’re bearish. It’s that we’re skeptical anytime the button on the elevator remains stuck on ‘up,'” said John Stoltzfus, chief market strategist at Oppenheimer. “We just question what is driving it. Is it fundamentals or enthusiasm?”

The Dow Jones industrial average, which consists of 30 top industrial stocks, was the first of the major indexes to reclaim its summit following the market reached its crisis low four years ago this month.

It did so on the backs of USD3 trillion of liquidity from the Federal Reserve’s money printing, and an improving corporate and economic picture.

(Read More: CNBC Explains Quantitative Easing)

While the economy is far from fixed and the market remains highly sensitive to the daily headline churn, the importance of breaking the financial crisis shackles did not go unnoticed.

That’s especially true since the looming danger of steep budget cuts in Washington – known as sequestration – remains but has been largely ignored on Wall Street.

The new record “certainly is a statement by the market that it is looking to the improvements in the economy,” Stoltzfus said. “In light of that, sequestration is not the issue many of us thought it would be.”

(Read More: What Investors Are Missing in the Sequester Fight)

That’s not to say expectations are that the market will keep climbing higher without interruption.

Strategists have been waiting for the aggressive 2013 rally to take a healthy break, and the talk on trading floors was that a new record could spur just such a pullback, however brief.

History, in fact, has been unkind to markets that rally back to even after dramatic falls the like of what the US indexes experienced during the crisis.

For the Dow it only took 15 months for the average to go from new high to a 6,547-point drop.

The Standard & Poor’s 500 is within range of its all-time closing high of 1,565.15, from which it subsequently lost nearly 900 points.

“The S&P 500 may have little time to rejoice following the setting of a new record high before collapsing once again,” said Sam Stovall, chief equity strategist at S&P Capital IQ.

In previous rallies from bear markets to breakeven the median additional gain has been just 3 percent before “another meaningful decline within only two months,” Stovall added.

In the 11 other bear markets since 1946, five of them suffered declines of 5 to 10 percent after getting back to even, while six fell 10 to 20 percent. The only good news, according to Stovall, is that none of those morphed into full bear market drops of 20 percent or more.

“So this time around it may be wise to fasten your safety belt once we set a new high,” he said. “We may be in for a bumpy ride.”

-By Jeff Cox, CNBC.com senior writer. Follow him on Twitter at @JeffCoxCNBCcom.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

You haven’t missed the stock rally: Goldman’s Cohen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The rally in the stock market is real and supported by the fundamentals, Goldman Sachs’s Abby Joseph Cohen told CNBC on Friday.

In a “Squawk Box” interview, Cohen said short-term concerns about the automatic spending cuts notwithstanding, her models peg fair value for the S&P 500 index at 1,575 — a 4 percent premium to Thursday’s close. “There are other models, including the Fed model, that show fair value as high as 1,700 or 1,750.”

Also Read: Goldman trims risk-taking to lowest level in seven years

During Thursday’s session, the Dow Jones Industrial Average came within 15 points of its all-time closing high of 14,164 before finishing lower.

“[The rally] is supported by improving fundamentals in the US economy and, very importantly, valuation,” the senior US investment strategist said. “[With] equities at a (price-to-earnings) ratio at 14 times earnings, they’re just not expensive.”

Cohen added: “Our sense is that there is a lot of cash on the sidelines.” She advised that investors may do well to put that money to work in stocks — or to shift out of longer-term bonds into stocks, which she describes as the “better investment.”

Why? Cohen expects the Federal Reserve to keep interest rates low for a long time.

She did note, however, that if interest rates rose in a “dramatic and sudden” fashion, stocks could get hurt.

But even in a rising interest rate environment, equity bull markets historically retain some strength for a while, as the market responds to an improving economy, Cohen said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow