Rubin is still optimistic for a dramatic 30% turnaround in 2009.

Rubin still optimistic about a turnaround next year; Oil Will Rebound

Eric Lam
Financial Post
10/10/2008
National Post
National
FP6
(c) 2008 National Post . All Rights Reserved.

Despite predicting the benchmark TSX composite index to close out 2008
at 9,500 points, CIBC World Market's Jeff Rubin is still optimistic for
a dramatic 30% turnaround in 2009.

Expecting a big rebound in oil to lead a surge in commodities next year,
CIBC's chief economist projects a 2009 year-end total of 12,000 points
for the TSX.

"If US$90 [per barrel] is the price of oil during what is being
perceived as a deep global recession, what is the price of oil in the
recovery?" he said in a new strategy report released yesterday. "We
continue to believe that oil prices will average US$150/bbl over the
second half of next year on the back of even a modest recovery in global
economic growth."

But in the meantime, massive sell-offs in North American markets as
investors drop assets "tied to a strong economy" will take a big bite
out of the senior index in 2008.

This suggests a very real possibility the TSX will end the year at less
than 10,000 points after closing below the mark for the first time since
July, 2005 on Tuesday.

As well, repeated 800-point drops in the last few weeks have created an
atmosphere of fear for Canadian investors.

"That de-leveraging story is likely to hold sway for the balance of the
year," he said.

Mr. Rubin argues that this knee-jerk reaction from investors is actually
making a manageable problem worse, even if the most recent economic
figures for the United States and other members of the Organization for
Economic Cooperation and Development (OECD) show a firm recession.

"The recession is neither deep enough nor global enough to warrant the
massive haircut in energy and other resource stock valuations that have
taken place over the last several months," he said.

"While there is little to warrant near-term optimism, investors at the
same time should not lose sight of the fact that many of yesterday's
fundamentals have not changed."

Fuelled by commodities, worldwide economic growth will not slow as much
as nervous investors are expecting.

Mr. Rubin predicts the growth rate will not dip to less than 3.5% in the
rest of 2008 or all of 2009. This rate is a step down from recent years,
but still "a far cry" from figures historically associated with bear
markets, he said.

As for the roots of the U. S. subprime mortgage fiasco, Mr. Rubin
believes there is a light at the end of the tunnel for housing prices.
Within the next six months, he sees a "trough" in U. S. housing prices
and a price decline of an additional 5% at most.

Mr. Rubin's pessimistic readjustment of his 2008 yearend numbers for the
TSX is the latest in a series of downward projections he has made since
boldly predicting a 16,000-point close in December, 2007.

"Our year-end target for 2008, of 16,200 for the composite index,
implies a year of double-digit gains, including the dividend," he said
at the time.

Mr. Rubin also said he did not expect the fallout from the U. S.
subprime lending crisis to lead to a recession, or that it would last as
long as it did.

His most recent predictions, made in September, pegged the TSX to close
at 13,000 points by the end of 2008 and 14,000 at the same time in 2009.