Wednesday, July 11, 2012

a look at the archives

Now let's talk S&P 500 earnings.

It's 2007, and the stock market is booming to an all-time high. Analysts foresee the S&P 500 earning $94.20 in 2008, a new record. "It's a really good investing environment in general right now," an analyst tells Bloomberg. In fact, it was one of the worst in history.

The S&P ended up earning half the amount analysts expected in 2008, and stocks plunged nearly 50%.

Another whoops.

By 2009 gloom was pervasive. Bloomberg lamented "the longest earnings slump since the Great Depression." Analysts expected the S&P 500 to earn $53 a share in 2010, and $63 in 2011.

In reality, the index earned $83 and $96, respectively. Here again, for the last five years you could have been a top performer by taking analysts' earnings estimates and multiplying or dividing them by two.

Can we just admit that no one knows what earnings will do in the future?


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