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Economy

Analysts Getting It Wrong, And No Recovery?

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.

  • bhushan says:

    >so sir wat should be the strategy for coming time.

  • Anonymous says:

    >so wat should be the stretegy for coming time as election is coming near

  • Anonymous says:

    >John Mauldini writings are very practical and impressive.

  • Anonymous says:

    >OK. Analysts all over the world have the same characterstics. Better to ignore them. Their main goal is to enrich themselves at the cost of pop and mom investors.
    It is actually same as rating agencies giving AAA stamps. These analysts are actualy perpetrating fraud.

    So as intelligent investor one has to make one own decision.

    1. How much exposure you will have to equity or equity funds.

    2. When to purchase and when to sell.

    Considering the present situation Globally and Locally (India) seems better to wait for valutions to come to reality.

  • Arkad says:

    >Deepak,

    If sensex falls to 6000-7000 levels again in 2009,do you see any hammered down stocks to capture,so we could benefit from it.

    Happy Investing !!!

  • Anonymous says:

    >Analyst get it wrong, YES.
    I remember Sell advice by Leading FII Desk on Tata Steel & it doubled from those levels in quick Time.

    Nifty Technically looks poised for 3800 from where it can again retrace to 3000 levels. 2500 is a Bottom in place.

    After Elections stock market is likely to give correction, the magnitude would be decided by the Govt formed. Anyways this would be opportunity to buy for Long Term.

    Team TradersPlace
    http://www.TradersPlace.in