Outside the Box

Asleep at the wheel, or, How I learned to stop worrying and love the bomb

John Mauldin

April 7, 2008

For the last few months in my regular letter I have been pounding the table that corporate earnings are going to decline this year, which is always a negative atmosphere for stocks. Since today is the beginning of the earnings season for the first quarter, I thought it would be helpful to look at this piece from our old friend James Montier, head of equity research at Societe Generale based in London. It seems that analysts are behind the curve when it comes to predicting future earnings. James shows us why and then goes on to demonstrate that even the meager earnings reductions that are projected are not priced into the market as many bullish commentators suggest. This should make for an interesting Outside the Box.

John Mauldin, Editor
Outside the Box

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Asleep at the wheel, or, How I learned to stop worrying and love the bomb

by James Montier

About a month ago I wrote a note suggesting that analysts were like rabbits caught in the headlights (see Mind Matters, 21 January 2008). It now appears that the analysts may well have fallen asleep at the wheel!

The chart below is an updated version of the one I presented in the original note. It…

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