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« A Bogus Dip? | Main | ETF Update: A Time for Caution »

September 04, 2009


Market Sniper

Good work Jeff! Only one basic question: from whence will come the growth in earnings? We have the consumer deleveraging his balance sheet and crawling under large rocks, we have continuing net job loss (the talking heads spin increased productivity with fewer workers. Well, fewer workers mean fewer consumers). Only "growth" area I see is in government! I do not ask for much, just show me ONE solid area of economic growth. All of this fundamental stuff is for the birds as a short term trader and I do not even think about it on a day-to-day basis, I just trade price. However, could be hell to pay in the long run. Fundamentals do have a way of catching up to price.

terence chan

Great piece Jeff! I like it when you mentioned: As investors, we are buying the earnings and/or cash flows of companies, not GDP futures.

I believe that markets can continue to perform well on a rebound in S&P 500 earnings even if the US economy recovers with a whimper. 45% of S&P 500 earnings are now tied to the global economy (including indirect effects of commodity prices on revenues... I believe emerging markets secular demand as well as weakness in dollar will continue to drive prices up!)


Good points, as usual!

>> "With lower costs, they are poised for improving earnings if and when revenue increases."

--The IF and WHEN part may present the problem. An analogy might be if someone created a more efficient catch-basin, during a time of drought. If the rains do not come, or don't come within the discounting period, the enhanced potential-efficiency will not actualize.

The pessimistic argument, as I understand it, is that this is not a typical inventory overstock recessionary cycle, but a multi-factorial deleveraging phase spanning years rather than months.

I'm not a fundamentalist, and therefore have earned no right to an opinion on this myself, but it seems to be the most cogent bearish argument extent, for why normal 'recovery' metrics are not applicable in this case.

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