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« Warren Buffett and the "Soft Landing" Quotation: A Prediction | Main | Mortgage Availability and Personal Consumption: Some Dubious Evidence from Doug Kass »

March 05, 2007

Comments

oldprof

Mr. X -- Thanks for your comment. You have your finger on the key issue: future earnings growth.

We simply do not agree about whether or not current earnings are at a peak. I am curious about your evidence for this and why you are so confident that a market cycle must be four years. Enter these as search terms (like forward earnings) for the site, and you'll find a lot of information to consider.

As to the "documented slow down" in next year's earnings, we must be careful. I agree that profits will not grow at a double-digit rate forever, but that is not necessary. The market still has a lot of catching up to do from the last three years, and next year's earnings forecast is OK. There is nothing wrong with growth at the historic average.

Thanks again for making a point that is probably on the minds of many. A more complete discussion of the peak earnings theory is on my agenda.

Jeff

Mr. X

"Mr. Market is offering investors an opportunity to buy good companies at discounted prices."

True, but the adjective 'expensive' needs to precede 'discounted'. Stocks are at peak earnings now after a four year bull market, and price-to-earnings ratios are bound to rise in light of the documented slow down in next quarter's (and next year's) earnings estimates. Buyers of stocks at these levels need to be aware of where we are in the earnings cycle.

marlyn trades

You nailed it again Jeff - it is so nice not to read "the 10 myths about the meltdown" and other ill-informed garbage. I don't study economics but I basically said the same thing you did the other day in one of my posts. I figured it out on my own because you won't get any real information from CNBC - it's too complicated for the Cramer nation.

Shrek

Why do you keep citing backword looking economic data? The market discounts the future. You guys are a perma bull blog whether you realize it or not.

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