Authers notes (like us) there is still way too much optimism on Earnings growth; Even ex-financials, expectations are for double digit gains:
click for video:
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Source:
Short View
FT, March 27, 2008
http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=699507360&
This is why I always laugh at perma bulls on Kudlow & Co that always say that the market should go up because the PEs are so attractiively low. Of course, they are assuming that the future earnings will the same or better. The fallacy that they never seem to mention is that in an economic downturn, earnings will likely be falling, making the forward PE much higher. But then, they are out to sell their point and not the truth.
No matter what the economic evidence is many will choose to believe whatever suits them.
Take the following comment from a fee paying blog. Apparently the author of the blog believes that markets dropped last week because of the sun, not the mountain of economic problems!
This is seriously deluded.
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While pandering politicians continued to turn off prospective voters (this campaign started early enough, and has now exposed all of the candidates as liars to various degrees, that they may have to pay disgusted voters to vote this Fall for any one of the sorry lot), that wasn’t the real reason stocks declined last week.
Last week, the sun unleashed powerful bursts of charged particles called CMEs (no relation to the Chicago Mercantile Exchange, CME stands for “Coronal Mass Ejection”). These clouds of powerful particles rushed by Earth, missing our planet by a nice margin of safety. You would certainly have known it had they hit our planet, however. Your cell phones and power would have gone on the blink, most likely, had any of the clouds hit the Earth. As it was, we simply got a glancing blow from the storms.
That glancing blow, though, turns out to have been enough to unnerve traders and cause them to continue selling. After two weeks’ worth of gains which sent the market near the top of the recent trading range, who can blame them for taking profits? In any case, most did not even realize they were responding to the sun’s input into their sell decisions. Most probably thought that banking profits was a great idea.
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