This week we will look at two shorter essays for this edition of Outside the Box. The first is some thoughtful words by Tom Au on whether or not we have put in a true bottom for the market. I particularly want you to read his thoughts on what earnings will look like going forward, and whether we can get back to the highs in corporate earnings we saw in 2006.
In last Friday's letter I mentioned an article by William Hester, CFA, who is the Senior Financial Analyst at the Hussman Funds. (www.hussmanfunds.com) While I quoted a few paragraphs from his essay, on reflection I think I will re-produce it below, as this is a very important concept. I have written in past letters and in Bull's Eye Investing about how powerful a driver earnings surprises can be (both positive and negative). Powerful bear and bull markets develop when there are numerous surprises in the same direction, re-enforcing market psychology.
So, read Hester's essay with the knowledge of what Au writes about earnings. I think the two make a very powerful, thought-provoking concept. And I am off to Europe.
John Mauldin, Editor
Outside the Box
Watch Out For the Second Leg of the Downturn
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