Tags: byron wien | s&p | stocks | tax

Byron Wien: S&P to Drop 200 Points as Market ‘Oblivious’ to Looming Debt, Cliff Backlash

Wednesday, 06 Feb 2013 05:40 PM

By Glenn J. Kalinoski

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Image: Byron Wien: S&P to Drop 200 Points as Market ‘Oblivious’ to Looming Debt, Cliff Backlash
Byron Wien: S&P to Drop 200 Points as Market ‘Oblivious’ to Looming Debt, Cliff Backlash (Blackstone photo)
The runup in the stock market during January has done nothing to change Byron Wien’s outlook. The vice chairman of Blackstone Advisory Partners LP is maintaining his forecast for a 200-point drop in the Standard & Poor’s 500 Index in the first half of the year.

“The market started with people complacent and now almost euphoric,” Wien told CNBC. “Everybody you have on the program thinks the market is going higher. I think this market is vulnerable,” he said.

Two major economic obstacles - the federal debt ceiling battle and the fiscal cliff - haven't been resolved, only delayed by lawmakers.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

"We only took temporary action. It's not like these two problems are going away," Wien said. "They're going to hit us later in the spring, and the market seems to be oblivious to it."

Other hurdles facing the market include the 2 percentage point increase in the payroll tax and the possibility of higher gasoline prices.

“I think it will sink in,” Wien said. “There’s a certain momentum that comes out of the fourth quarter. When the first 2 percent payroll tax hits your paycheck, you don’t really react to it. But it comes later on. At the upper income, the top 20 percent of income owners account for 40 percent of consumer spending and I think they will be affected by the new taxes.”

Wien also discussed commodities, predicting greater demand and reduced supply based on climate change producing crop failures with additional pressure coming from the developing world continuing to increase its standard of living.

He also addressed gold and its relationship to “continuous monetary expansion.”

“The dollar is being debased on a continuous basis, so is the euro and the yen,” Wien said.

“When you have the major currencies of the world being debased, gold ought to do well. Gold doesn’t do well when stocks are doing well. The gold forecast, thinking gold can go higher, is consistent with my concern in the equity market.”

A record $77.4 billion flooded into stock mutual funds and exchange-traded funds in January, a worrisome indicator for the stock market, according to TrimTabs Investment Research.

“As we survey the liquidity landscape, we increasingly do not like what we see,” TrimTabs analysts write in a report obtained by Barron’s. “Investors are piling into stocks at a record pace, while companies are no longer supporting share prices. In the past, a combination of massive investor buying and net corporate selling has often coincided with market tops.”

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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