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Former Goldman trader: why greed is not good

Talking Numbers

How long until we get to S&500 2000?

For some inexplicable reason, people really like round numbers.

Can you imagine if the film “300” were, instead, “307”? Or how about saying something is a perfect 8.3? Even here in the US, where the metric system is viewed with deep suspicion, there’s a fondness for integers ending with “0”.

So, when looking at the S&P 500 Index (note, it’s 500, not 423), Talking Numbers asked its contributors, “How long until we get to 2000?”

That’s not such a far-fetched question. S&P 500 2000 (not “S&P 2000”), is only 18.5% above from here. And, that’s roughly how much the index has climbed so far in 2013.

Even with the annus horribilis of 2008, the index averaged a return of nearly 7% over the last decade.

Taking a look at the charts and fundamentals on the S&P 500 are Talking Numbers contributors Richard Ross, Global Technical Strategist at Auerbach Grayson, and Enis Taner, Global Macro Editor at RiskReversal.com.

“Given the strong performance across sectors in the energy, financial, industrials, and continued strength in the consumer technology space, I see no reason why the market can’t power higher into the end of the year,” says Ross, who says the charts are pointing to a higher S&P 500.

But the fundamentals may be telling a different story. “The fundamental outlook, for me, does not look that good,” says Taner. “The earnings power in the S&P 500 has not grown more than 2% a year over the last two years.”

“You want to be fearful when others are greedy,” says Taner. “And right now, I sense a lot of greed in the current market.”

Which side is right? Watch Taner and Ross debate the S&P 500 and decide for yourself.

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