– JPM’s Tom Lee Announces His Dow Jones Industrial Average Price Target: 20,000 (ZeroHedge, Jan 28, 2013):
Back in July 2008, just before all hell broke loose and the S&P was trading in the upper 1,200s, everyone’s favorite permabull, JPM strategist famously reiterated his S&P 500 price target for the end of 2012: 1450. Two months later Lehman filed for bankruptcy, and 4 months later the S&P closed 2008 some 40% lower than said price target. Another two months later and anyone who had listened to Tom Lee lost 50% of their investment.
Today, as the Fed’s balance sheet crosses $3 trillion, and the global central banks have pumped a total of some $15 trillion into the markets, Tom Lee ws back on CNBC with what is his most permabullish prediction ever: he now expects the S&P to generate some 150 in earnings to which he applies a 17x multiple. His conclusion “If you put a 17 multiple on $150, the S&P really sort of peaks around 2,400 or 2,500.” In Dow terms, this means a Dow Jones Industrial Average of, drumroll, 20000. He does, caveat it, however: “that’s obviously 4 years away.” And if Tom Lee was off by 40% in 4 months, we can’t help but wonder what the hit rate on his 4 year prediction will be, and if, by using the same ruler extrapolation mechanism he applies to corporate earnings nand multiples one extrapolates the Fed’s balance sheet at some $7 trillion in 4 years, what a loaf of bread will cost just as the DJIA crosses 20,000. For future humor purposes, it may be useful to bookmark this post.
Why anyone listens to this clown is beyond me.