DEUTSCHE Bank could lose more than $1 million after a bungle that underpriced a keenly-awaited new warrant being sold to Singapore investors.
The bank suspended trading of the warrant - issued on Hong Kong-listed China Railway - from 9am yesterday, and it might ask the Singapore Exchange (SGX) to cancel the mispriced trades.
Traders said, however, that should the SGX decline to do so, Deutsche Bank's losses could well exceed $1 million.
Deutsche Bank announced yesterday afternoon that trading in the warrant would resume at 9am tomorrow.
The bank's call warrant on China Railway started trading on Monday last week, two weeks after the stock started trading in Hong Kong. Holders can use one warrant to buy two China Railway shares at HK$9.50 each. The warrant expires in June this year.
One dealer said, based on China Railway's close of HK$10.74 last Friday, the warrant should now be worth over $1, given its long period before maturity.
The new warrant was issued by Deutsche Bank at 78.7 cents apiece. It closed last Friday at 77 cents on a heavy volume of 10.65 million shares, after it gained 44.5 cents from Thursday's close of 32.5 cents.
Deutsche Bank said trading in the warrant was suspended pending the resolution of error trades - 'due to significant mispricing on its part in the warrant'.
Dealers contacted by The Straits Times believed the warrant attracted heavy trading last Friday, as traders became aware of the serious mispricing. 'Deutsche Bank will be making a big loss if the bulk of the 10 million warrants was sold by the bank,' said a remisier.
Still, many were amazed that errors in pricing the warrant went undetected for two days.
'When Deutsche Bank announced that it was launching the new warrant, it clearly stated that the issue price was 78.7 cents,' said a market observer.
Warning bells should have been sounded when the warrant was trading at only 32.5 cents last Thursday, even though China Railway's share price was surging at the time, he added.
Given the two currencies involved, the error could have been caused by a Deutsche Bank trader entering the wrong conversion price into a pricing model.
Still, unless the SGX allows Deutsche Bank to cancel the error trades, there is nothing much the bank can do. 'There is a consultation paper to give the SGX the power to adjust the transacted price of the trade, rather than cancel them outright, but this policy has not been implemented yet,' a banker said.
Some traders are also wondering if it is advisable for a warrant issuer to suspend trading of a warrant simply because of error trades.
Deutsche Bank's warrant mispricing follows error trades at other warrant issuers.
Societe Generale apparently had to pay millions three years ago when a wrong keystroke sent shares of and warrants on Total Access Communications into a tailspin. Last year, DMG & Partners stopped online warrants trades completely, after an Internet trader nearly lost $426,000 on a warrant sale.
MoS Int'l takes suit against S'pore licensee to High Court
By Chua Hian Hou
A LONDON-BASED nightlife company is taking its lawsuit against the firm running the Ministry of Sound (MoS) club in the Republic to Singapore's High Court.
Ministry of Sound International earlier filed a suit against the Singapore licensee in the British courts, but it seems it has now moved this legal action over to the courts in the Republic.
The MoS outlet at Clarke Quay, which opened in 2005, is run by LB Investments, a subsidiary of listed Singapore firm LifeBrandz.
LifeBrandz told the Singapore Exchange last Friday that Ministry of Sound International has served a writ of summons on LB Investments.
It said the writ 'alleges breaches of certain terms and conditions of a licence agreement pertaining to the 'Ministry of Sound' brand'.
LifeBrandz said it would 'vigorously defend' the 'unmeritorious' allegations.
The same announcement also said that Ministry of Sound International had 'discontinued' its 'entire claim' against LB Investments. These claims had been originally filed with the High Court of England and Wales in mid-November.
The lawsuit earlier filed in Britain alleged that LB Investments had violated its licensing guidelines. The alleged violations included not playing the right type of music, not maintaining a stable website and not using the right staff uniforms.
Ministry of Sound International was reportedly suing LB Investments for damages and to force it to stick to its licensing guidelines.
A LifeBrandz spokesman could not be reached for comment yesterday.
LifeBrandz shares closed unchanged at 5.5 cents yesterday.
Persian Gulf Oil-Tanker Rates May Fall After Demand Declines
By Alaric Nightingale
Dec. 31 (Bloomberg) -- The cost of transporting Middle East crude oil to Asia, the world's busiest market for supertankers, may fall as year-end holidays slow demand for cargoes.
Some ship owners are trying to attract bookings by cutting rates, which have risen more than fivefold since the start of November.
``Owners will want to catch the high rates and will offer a little less to get them,'' Charlie Fowle, a director at London shipbroker Galbraith's Ltd., said in an e-mailed note today.
Rental rates surged earlier this month amid signs Japanese refineries were buying tanker-loads of oil to replenish depleted stockpiles and as the Organization of Petroleum Exporting Countries pumped extra crude.
China International United Petroleum & Chemical Corp., or Unipec, hired the tanker Hyundai Banner at a rate of 232.5 Worldscale points, according to a report today from Simpson, Spence & Young Ltd. That's 15 percent below a comparable assessment for voyages to Japan, according to data compiled by Bloomberg.
Hyundai Banner is fitted with one steel hull. Tankers fitted with double hulls to cut the risk of an oil spill normally cost more to hire. The London-based Baltic Exchange's last assessment was on Dec. 24 and the next will be on Jan. 2.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
$251,357 a Day
Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.
At 275 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $251,357 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, 2007 flat rates, and Bloomberg marine fuel prices.
Frontline Ltd., the world's biggest VLCC operator, said Nov. 15 it needs $30,000 a day to break even on each of its supertankers.
Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.
Central Huijin Investment Co. (Huijin), an investment arm of the Chinese government, signed a contract with the China Development Bank (CDB) Monday to inject US$20 billion into the state-owned policy bank.
The investment, ratified by the State Council, would sharply raise the CDB's capital adequacy and improve its risk-prevention capability, said a press release by the People's Bank of China, the nation's central bank.
The release indicated CDB was undergoing a fundamental reform to become a fully commercial financial institution.
Huijin had formerly invested in major Chinese commercial banks, including ICBC, CCB and the EverBright Bank, to help them shake off the heavy burden of bad loans before being restructured into a joint-stock company.
On December 25, Lou Jiwei, chairman of the China Investment Corp. (CIC), the country's state forex investment company, indicated at a public occasion that it controlled Huijin and was confident in the CDB's reform and restructuring.
CIC had formerly promised to invest a third of its US$200 billion capital, or about US$60 billion, in the CDB and the Agricultural Bank of China.
CDB is one of the country's three policy banks, the other two being the Eximbank and the Agricultural Development Bank. CDB's public financial data revealed it was in far better financial condition than most of the country's commercial banks.
Air China parent calls SIA-China Eastern deal "unfair"
Reuters - HONG KONG, Jan 1 - Air China's parent called on Tuesday a US$920 million investment by Singapore Airlines in rival carrier China Eastern unfair and too cheaply priced, suggesting the aviation firm will vote against the impending acquisition.
In the first formal expression of its views, China National Aviation Corp Ltd -- which owns more than 12 percent of China Eastern's stock -- urged China Eastern, Singapore's flag carrier and investment group Temasek Holdings [TEM.UL] to return to the negotiating table to tweak their acquisition proposal, but did not elaborate.
Investors have long speculated that CNAC, whose Air China completed a two-way investment deal with Singapore Airlines' rival Cathay Pacific last year, would vote against the deal, under which Singapore Air planned to buy 24 percent of China Eastern for HK$3.80 per share.
The Chinese carrier's shareholders vote Jan. 8 on the deal.
The deal "is unfair to the domestic and international investors, and other domestic airlines, and may also place a potential obstacle to the future development of the domestic airlines industry as a whole," CNAC said.
The offer price "does not reflect the fair value of China Eastern."
CNAC's strongly worded comments came days after news emerged that Air China Chairman Li Jiaxiang had been appointed chief of the country's top civil aviation regulator, though sources close to the situation could not explain the abrupt shift.
Li told Reuters in October he did not rule out voting against the agreed purchase.
Air China -- the world's most valuable airline -- and partner Cathay had pondered buying into China Eastern months ago, but then announced in September it would abandon that effort for at least three months.
China Eastern and Singapore Airlines were not immediately available for comment, and it was not clear if the carriers would be forced to re-open discussions.
Chew Choon Seng, chief executive of Singapore Airlines, said last month his firm would not raise its bid for the stake in China Eastern.
Air China's Hong Kong-listed shares jumped 4.7 percent on Friday morning, buoyed in past by speculation Singapore Air might have to raise its offer price.
Market strategists expect a volatile year for stocks and that the housing market will swoon. Sound familiar?
By David Goldman January 1 2008
NEW YORK (CNNMoney.com) -- Wall Street's top forecasters have some good news and bad news for 2008. Many think stocks will head higher but that unemployment will rise and the overall economy will slow.
In other words, 2008 is going to look an awful lot like 2007. Despite falling housing prices and the subprime mortgage meltdown igniting fears about a broader economic slowdown, stocks are still on track to finish higher in 2007.
For 2008, experts said investors need to be prepared for more woes in the slumping housing market and a slight rise in unemployment.
"2008 will be a sluggish year," Abby Joseph Cohen, Goldman Sachs' chief U.S. investment strategist, told CNNMoney.com. She said many investors are concerned about what could be weak earnings growth in 2008.
"Portfolio managers sense that 2008 will be a very difficult year for corporate profits," she said.
But Cohen believes that stocks could finish 2008 in the plus column as investors anticipate better news in the latter part of the year.
"We believe that the worst time is right now. The worst numbers will be at the end of 2007 and in the first half 2008. We expect an improvement in the second half," she said.
Cohen isn't the only strategist who feels this way. Research firm Thomson Financial pointed out in a recent report that Wall Street analysts expect profits for the S&P 500 to increase in just the single-digits in the first two quarters of 2008 but that overall earnings for the year will be up nearly 15 percent.
With this in mind, Cohen expects the Dow Jones industrial average to end the new year around 14,750, a gain of more than 10 percent from current levels, and that the S&P 500 will close at 1,675, up nearly 14 percent.
Analysts at Thomson Financial are predicting a more modest rise for the market, however. The firm believes the S&P 500 will end at 1,580, a gain of 7 percent.
Still, how can stocks have a good year if so many market strategists are predicting a rough year for the economy?
In a recent report, Cohen wrote that the market is relatively cheap when compared to previous periods of comparable inflation and that stocks are priced for the worst case scenario, i.e. a recession.
But Cohen thinks the economy will not slip into a recession. And one big reason for her optimism is that she thinks the Federal Reserve is likely to keep lowering interest rates in order to make sure the economy doesn't grind to a halt.
Investors like interest rate cuts since they tend to lead to more borrowing by consumers and businesses, which in turn helps to boost economic activity and corporate profits.
"Recent speeches and policy actions suggest that the Federal Reserve is paying close attention...to the smooth functioning of markets and recession avoidance," Cohen wrote.
The Fed cut interest rates three times in the second half of 2007, lowering the key federal funds rate from 5.25 percent in August to 4.25 percent by the end of December.
Economists at Lehman Brothers wrote in a report that they expect the Fed to cut rates several more times in 2008, perhaps to as low as 3.25 percent. The Lehman economists suggested that the economy "may bend but not break" in the new year.
But much of 2008 could be rough. Though the economy is expected to begin to rebound later in the year, economists believe that the slumping housing markets and credit crunch will continue throughout at least the first half of 2008.
Standard and Poor's predicts that the housing market will not finally bottom until October.
Home prices are expected to fall 11 percent over the course of 2008, according to Standard & Poor's.
As the housing market continues to slump, economic growth is expected to slow in 2008. This year, gross domestic product, or GDP, was aided by a strong third quarter, and analysts believe that at 2007's end, the economy will have grown 2.2 percent from the close of the fourth quarter in 2006.
At the end of 2008, however, Lehman Brothers predicts 1.8 percent overall growth, and Merrill Lynch believes that GDP growth in 2008 economy will be only 1.4 percent. Thomson Financial more optimistically expects GDP to grow between 2 percent and 2.5 percent over 2008.
Many analysts point out that although the economy and housing market will struggle in the new year, this may not necessarily result in recession.
But other economists warn that there is still a high risk of recession. "We are at the brink of a recession," Standard and Poor's senior economist Beth Ann Bovino told CNNMoney.com. "We are certainly concerned about the 2008 economy."
Standard and Poor's thinks there is a 40 percent chance of a recession in 2008.
And as the economy slides in 2008, unemployment is expected to increase as well. Standard & Poor's is predicting an unemployment rate of 5.2 percent by the end of 2008, up from the current rate of 4.7 percent. Goldman Sachs expects the unemployment rate to be between 5.5 percent and 5.8 percent.
Nonetheless, Goldman Sachs' Cohen thinks consumer spending and confidence will pick up in the second half of 2008, despite the rise in unemployment.
And analysts at Thomson Financial wrote that they also think the consumer will stay afloat. The firm is forecasting monthly same-store sales growth of about 2 percent to 5 percent throughout the year.
So even though the financial headlines for 2008, particularly the ones about the housing market, may be as scary as the ones from 2007, many investors and consumers could do reasonably well. Just like in 2007.
7 comments:
'Mispricing' could cost Deutsche Bank over $1m
By Goh Eng Yeow
DEUTSCHE Bank could lose more than $1 million after a bungle that underpriced a keenly-awaited new warrant being sold to Singapore investors.
The bank suspended trading of the warrant - issued on Hong Kong-listed China Railway - from 9am yesterday, and it might ask the Singapore Exchange (SGX) to cancel the mispriced trades.
Traders said, however, that should the SGX decline to do so, Deutsche Bank's losses could well exceed $1 million.
Deutsche Bank announced yesterday afternoon that trading in the warrant would resume at 9am tomorrow.
The bank's call warrant on China Railway started trading on Monday last week, two weeks after the stock started trading in Hong Kong. Holders can use one warrant to buy two China Railway shares at HK$9.50 each. The warrant expires in June this year.
One dealer said, based on China Railway's close of HK$10.74 last Friday, the warrant should now be worth over $1, given its long period before maturity.
The new warrant was issued by Deutsche Bank at 78.7 cents apiece. It closed last Friday at 77 cents on a heavy volume of 10.65 million shares, after it gained 44.5 cents from Thursday's close of 32.5 cents.
Deutsche Bank said trading in the warrant was suspended pending the resolution of error trades - 'due to significant mispricing on its part in the warrant'.
Dealers contacted by The Straits Times believed the warrant attracted heavy trading last Friday, as traders became aware of the serious mispricing. 'Deutsche Bank will be making a big loss if the bulk of the 10 million warrants was sold by the bank,' said a remisier.
Still, many were amazed that errors in pricing the warrant went undetected for two days.
'When Deutsche Bank announced that it was launching the new warrant, it clearly stated that the issue price was 78.7 cents,' said a market observer.
Warning bells should have been sounded when the warrant was trading at only 32.5 cents last Thursday, even though China Railway's share price was surging at the time, he added.
Given the two currencies involved, the error could have been caused by a Deutsche Bank trader entering the wrong conversion price into a pricing model.
Still, unless the SGX allows Deutsche Bank to cancel the error trades, there is nothing much the bank can do. 'There is a consultation paper to give the SGX the power to adjust the transacted price of the trade, rather than cancel them outright, but this policy has not been implemented yet,' a banker said.
Some traders are also wondering if it is advisable for a warrant issuer to suspend trading of a warrant simply because of error trades.
Deutsche Bank's warrant mispricing follows error trades at other warrant issuers.
Societe Generale apparently had to pay millions three years ago when a wrong keystroke sent shares of and warrants on Total Access Communications into a tailspin. Last year, DMG & Partners stopped online warrants trades completely, after an Internet trader nearly lost $426,000 on a warrant sale.
MoS Int'l takes suit against S'pore licensee to High Court
By Chua Hian Hou
A LONDON-BASED nightlife company is taking its lawsuit against the firm running the Ministry of Sound (MoS) club in the Republic to Singapore's High Court.
Ministry of Sound International earlier filed a suit against the Singapore licensee in the British courts, but it seems it has now moved this legal action over to the courts in the Republic.
The MoS outlet at Clarke Quay, which opened in 2005, is run by LB Investments, a subsidiary of listed Singapore firm LifeBrandz.
LifeBrandz told the Singapore Exchange last Friday that Ministry of Sound International has served a writ of summons on LB Investments.
It said the writ 'alleges breaches of certain terms and conditions of a licence agreement pertaining to the 'Ministry of Sound' brand'.
LifeBrandz said it would 'vigorously defend' the 'unmeritorious' allegations.
The same announcement also said that Ministry of Sound International had 'discontinued' its 'entire claim' against LB Investments. These claims had been originally filed with the High Court of England and Wales in mid-November.
The lawsuit earlier filed in Britain alleged that LB Investments had violated its licensing guidelines. The alleged violations included not playing the right type of music, not maintaining a stable website and not using the right staff uniforms.
Ministry of Sound International was reportedly suing LB Investments for damages and to force it to stick to its licensing guidelines.
A LifeBrandz spokesman could not be reached for comment yesterday.
LifeBrandz shares closed unchanged at 5.5 cents yesterday.
Persian Gulf Oil-Tanker Rates May Fall After Demand Declines
By Alaric Nightingale
Dec. 31 (Bloomberg) -- The cost of transporting Middle East crude oil to Asia, the world's busiest market for supertankers, may fall as year-end holidays slow demand for cargoes.
Some ship owners are trying to attract bookings by cutting rates, which have risen more than fivefold since the start of November.
``Owners will want to catch the high rates and will offer a little less to get them,'' Charlie Fowle, a director at London shipbroker Galbraith's Ltd., said in an e-mailed note today.
Rental rates surged earlier this month amid signs Japanese refineries were buying tanker-loads of oil to replenish depleted stockpiles and as the Organization of Petroleum Exporting Countries pumped extra crude.
China International United Petroleum & Chemical Corp., or Unipec, hired the tanker Hyundai Banner at a rate of 232.5 Worldscale points, according to a report today from Simpson, Spence & Young Ltd. That's 15 percent below a comparable assessment for voyages to Japan, according to data compiled by Bloomberg.
Hyundai Banner is fitted with one steel hull. Tankers fitted with double hulls to cut the risk of an oil spill normally cost more to hire. The London-based Baltic Exchange's last assessment was on Dec. 24 and the next will be on Jan. 2.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
$251,357 a Day
Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.
At 275 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $251,357 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, 2007 flat rates, and Bloomberg marine fuel prices.
Frontline Ltd., the world's biggest VLCC operator, said Nov. 15 it needs $30,000 a day to break even on each of its supertankers.
Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.
US$20b injected into policy bank
Xinhua News Agency
January 1, 2008
Central Huijin Investment Co. (Huijin), an investment arm of the Chinese government, signed a contract with the China Development Bank (CDB) Monday to inject US$20 billion into the state-owned policy bank.
The investment, ratified by the State Council, would sharply raise the CDB's capital adequacy and improve its risk-prevention capability, said a press release by the People's Bank of China, the nation's central bank.
The release indicated CDB was undergoing a fundamental reform to become a fully commercial financial institution.
Huijin had formerly invested in major Chinese commercial banks, including ICBC, CCB and the EverBright Bank, to help them shake off the heavy burden of bad loans before being restructured into a joint-stock company.
On December 25, Lou Jiwei, chairman of the China Investment Corp. (CIC), the country's state forex investment company, indicated at a public occasion that it controlled Huijin and was confident in the CDB's reform and restructuring.
CIC had formerly promised to invest a third of its US$200 billion capital, or about US$60 billion, in the CDB and the Agricultural Bank of China.
CDB is one of the country's three policy banks, the other two being the Eximbank and the Agricultural Development Bank. CDB's public financial data revealed it was in far better financial condition than most of the country's commercial banks.
胡锦涛2008年新年贺词：
1. 学有所教
2. 劳有所得
3. 病有所医
4. 老有所养
5. 住有所居
Air China parent calls SIA-China Eastern deal "unfair"
Reuters - HONG KONG, Jan 1 - Air China's parent called on Tuesday a US$920 million investment by Singapore Airlines in rival carrier China Eastern unfair and too cheaply priced, suggesting the aviation firm will vote against the impending acquisition.
In the first formal expression of its views, China National Aviation Corp Ltd -- which owns more than 12 percent of China Eastern's stock -- urged China Eastern, Singapore's flag carrier and investment group Temasek Holdings [TEM.UL] to return to the negotiating table to tweak their acquisition proposal, but did not elaborate.
Investors have long speculated that CNAC, whose Air China completed a two-way investment deal with Singapore Airlines' rival Cathay Pacific last year, would vote against the deal, under which Singapore Air planned to buy 24 percent of China Eastern for HK$3.80 per share.
The Chinese carrier's shareholders vote Jan. 8 on the deal.
The deal "is unfair to the domestic and international investors, and other domestic airlines, and may also place a potential obstacle to the future development of the domestic airlines industry as a whole," CNAC said.
The offer price "does not reflect the fair value of China Eastern."
CNAC's strongly worded comments came days after news emerged that Air China Chairman Li Jiaxiang had been appointed chief of the country's top civil aviation regulator, though sources close to the situation could not explain the abrupt shift.
Li told Reuters in October he did not rule out voting against the agreed purchase.
Air China -- the world's most valuable airline -- and partner Cathay had pondered buying into China Eastern months ago, but then announced in September it would abandon that effort for at least three months.
China Eastern and Singapore Airlines were not immediately available for comment, and it was not clear if the carriers would be forced to re-open discussions.
Chew Choon Seng, chief executive of Singapore Airlines, said last month his firm would not raise its bid for the stake in China Eastern.
Air China's Hong Kong-listed shares jumped 4.7 percent on Friday morning, buoyed in past by speculation Singapore Air might have to raise its offer price.
2008 outlook: Fasten your seatbelts
Market strategists expect a volatile year for stocks and that the housing market will swoon. Sound familiar?
By David Goldman January 1 2008
NEW YORK (CNNMoney.com) -- Wall Street's top forecasters have some good news and bad news for 2008. Many think stocks will head higher but that unemployment will rise and the overall economy will slow.
In other words, 2008 is going to look an awful lot like 2007. Despite falling housing prices and the subprime mortgage meltdown igniting fears about a broader economic slowdown, stocks are still on track to finish higher in 2007.
For 2008, experts said investors need to be prepared for more woes in the slumping housing market and a slight rise in unemployment.
"2008 will be a sluggish year," Abby Joseph Cohen, Goldman Sachs' chief U.S. investment strategist, told CNNMoney.com. She said many investors are concerned about what could be weak earnings growth in 2008.
"Portfolio managers sense that 2008 will be a very difficult year for corporate profits," she said.
But Cohen believes that stocks could finish 2008 in the plus column as investors anticipate better news in the latter part of the year.
"We believe that the worst time is right now. The worst numbers will be at the end of 2007 and in the first half 2008. We expect an improvement in the second half," she said.
Cohen isn't the only strategist who feels this way. Research firm Thomson Financial pointed out in a recent report that Wall Street analysts expect profits for the S&P 500 to increase in just the single-digits in the first two quarters of 2008 but that overall earnings for the year will be up nearly 15 percent.
With this in mind, Cohen expects the Dow Jones industrial average to end the new year around 14,750, a gain of more than 10 percent from current levels, and that the S&P 500 will close at 1,675, up nearly 14 percent.
Analysts at Thomson Financial are predicting a more modest rise for the market, however. The firm believes the S&P 500 will end at 1,580, a gain of 7 percent.
Still, how can stocks have a good year if so many market strategists are predicting a rough year for the economy?
In a recent report, Cohen wrote that the market is relatively cheap when compared to previous periods of comparable inflation and that stocks are priced for the worst case scenario, i.e. a recession.
But Cohen thinks the economy will not slip into a recession. And one big reason for her optimism is that she thinks the Federal Reserve is likely to keep lowering interest rates in order to make sure the economy doesn't grind to a halt.
Investors like interest rate cuts since they tend to lead to more borrowing by consumers and businesses, which in turn helps to boost economic activity and corporate profits.
"Recent speeches and policy actions suggest that the Federal Reserve is paying close attention...to the smooth functioning of markets and recession avoidance," Cohen wrote.
The Fed cut interest rates three times in the second half of 2007, lowering the key federal funds rate from 5.25 percent in August to 4.25 percent by the end of December.
Economists at Lehman Brothers wrote in a report that they expect the Fed to cut rates several more times in 2008, perhaps to as low as 3.25 percent. The Lehman economists suggested that the economy "may bend but not break" in the new year.
But much of 2008 could be rough. Though the economy is expected to begin to rebound later in the year, economists believe that the slumping housing markets and credit crunch will continue throughout at least the first half of 2008.
Standard and Poor's predicts that the housing market will not finally bottom until October.
Home prices are expected to fall 11 percent over the course of 2008, according to Standard & Poor's.
As the housing market continues to slump, economic growth is expected to slow in 2008. This year, gross domestic product, or GDP, was aided by a strong third quarter, and analysts believe that at 2007's end, the economy will have grown 2.2 percent from the close of the fourth quarter in 2006.
At the end of 2008, however, Lehman Brothers predicts 1.8 percent overall growth, and Merrill Lynch believes that GDP growth in 2008 economy will be only 1.4 percent. Thomson Financial more optimistically expects GDP to grow between 2 percent and 2.5 percent over 2008.
Many analysts point out that although the economy and housing market will struggle in the new year, this may not necessarily result in recession.
But other economists warn that there is still a high risk of recession. "We are at the brink of a recession," Standard and Poor's senior economist Beth Ann Bovino told CNNMoney.com. "We are certainly concerned about the 2008 economy."
Standard and Poor's thinks there is a 40 percent chance of a recession in 2008.
And as the economy slides in 2008, unemployment is expected to increase as well. Standard & Poor's is predicting an unemployment rate of 5.2 percent by the end of 2008, up from the current rate of 4.7 percent. Goldman Sachs expects the unemployment rate to be between 5.5 percent and 5.8 percent.
Nonetheless, Goldman Sachs' Cohen thinks consumer spending and confidence will pick up in the second half of 2008, despite the rise in unemployment.
And analysts at Thomson Financial wrote that they also think the consumer will stay afloat. The firm is forecasting monthly same-store sales growth of about 2 percent to 5 percent throughout the year.
So even though the financial headlines for 2008, particularly the ones about the housing market, may be as scary as the ones from 2007, many investors and consumers could do reasonably well. Just like in 2007.
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