So says Bob Froehlich.
Careful with this one. More often than not big turns in the market don't occur because of earnings. Big turns happen for many reasons besides earnings.
The internet bubble was not about earnings as those companies had no earnings. The short, but painful, selloffs of 1997 and 1998 were caused by external shocks. The tech crash, it could be argued, was not about earnings because again net stocks really had no earnings. The nasty decline in summer 2002 was about things like tension between India and Pakistan (do you even remember that one?), worry about CEOs certifying earnings and more tech bubble fallout. The run up in 2003 was probably more about things like tax cuts than earnings. We may still be trying to figure out what the current decline that started six weeks ago is about but earnings is far down on the list.
The big one, the crash of 1987 was more about rising rates than earnings.
This repeats over and over. I'm sure a good historian can find a time when earnings was the thing but that is more the exception than the rule.
This is not to say earnings are worthless, far from it in my opinion, but in circling back to this morning's post there is not much predictive value for assessing the stock market in earnings or PE ratios.
6 comments:
Roger,
In the short term stock prices have almost nothing to do with earnings. In the long term they have everything to do with earnings. As you say, no major turning point is likely to be earnings driven. Like Hussman says, over the long term the stock market will move in time with earnings - and it has a long way to go before earnings catch up to valuations.
fair enough Trent.
It should be nited that the cocontext of the TV segment this piece references was for the next few months.
It sound like you might agree with the following, whatever happens in the next few months, earnings will have little to do with it.
Frankly, my budget has a long way to go to catch up to $3.00 gasoline. So, I guess the price of Gas will be falling ( with falling stocks ) so that the prices will be more in line with my budget.
g
Froehlich? You gotta be kidding me.
I'm shocked he still has a job - maybe he snuck into the CBNC archives and burned all his clips.
Going from memory, Bob seemed to be the only bull on this week Bulls and Bears over on Fox. Lenny was practically yelling at the guy.
also from memory, he does not think the Fed will hike next week,
Post a Comment