- Wealth PMS (50L+)
John Mauldin’s latest, Is this Recovery that we see? brings up some interesting points about where we are and if this really is a recovery. A particularly hilarious point in there was how analyst estimates were so way off it’s amazing they even get paid. (Wait, they probably got bonuses. The current fad is to reward the incompentant).
The last number below is the actual figure. The rest were “estimates”.
At this point I’d also like to mention that a truckload of people had said the Sensex EPS estimate for year ending March 2009 was “between 955 and 1050”. (Read: The Sensational Sensex EPS Story, Jul 6 2006)
Right now, just before any Sensex company has announced results, the BSE India page shows the Sensex at 10,804 and P/E as 15.13. That makes the current Sensex trailing EPS (Jan 08 to Dec 08) equal to 714.
Unless some spectacular results come and take the EPS up 35% in the last quarter, we are likely to see our own analysts get their face full of mud, and therefore, collect hefty bonuses.
That apart, the US recovery looks like a sham. With 80K foreclosures a month, and a large number of foreclosures not even in the market, housing prices will take a long time to recover. Plus, Mauldin notes further inventory bump-ups because of the huge number of Option ARM resets in 2010. If you look at this crisis as a one-way bet on housing prices – that means it will only end when the folks who took the bets go down, or prices recover substantially. The latter will take years, probably a decade; and the US doesn’t want the former to happen.
Lastly, read Zero Hedge’s article on how this “rally” is likely an harbinger of tough times; the big liquidity providers seem to be out of the market, and are “deleveraging” – and the rally itself seems to be based on low volume overnight trades rather than market moves itself. Must keep a close eye on how this pans out.