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- 8 May 2009
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I have put some thought into the latest rally, and for what it’s worth it’s going to go backwards - I don’t know by how much, nor the sectors it will effect.
My reasoning is:
1. 12 months ago the world was going to be sucked into a black hole from which there was no return, hence profits and earnings were decimated and any forward looking statements reflected the end of days for which many predicated. So, no money to borrow, no money to invest, no money to pay people, put people off, produce less product as no one is buying and cant afford to keep employees means no money coming in and very bad results.
So ... why is the market going ahead on the most silliest of pretences?
My reasoning is:
2. If the world doesn’t sink into a black hole, as many predicated, then it means borrowing has increased (by whatever amount), people are buying the product, hence the product is being produced and therefore there is a cash flow coming in and people (some) are keeping their jobs, which means people (some) have cash (some) to spend on those products - and so the wheel keeps turning.
So ... why are all the Mickey Mouse analysts surprised at all the earnings from these companies when it is more than their 'forecasts'?
We all know many of these analysts couldn’t forecast rain even if they were standing in it, yet why seemed so surprised?
My reasoning is:
3. World doesn’t end. Things (generally) stabilise and pull back from the end of day’s predication and hence earnings can’t be as bad as first thought when we were sinking into the black hole, and thus earnings/revenue has to be better than first thought.
However, getting or missing the forecast is one thing, yet this is my thought on why it has to go backwards:
My reasoning is:
4. World is going to collapse. Earnings and outlook very very bad. World doesn’t end. Earnings look better than first thought. However, if in the process of ensuring the world doesn’t end you cut production, reduce prices, cut staff, don’t put as much into R&D or any sort of innovation then your cost base has suitably reduced, yet because of a lack of buying 12 months previous you have a stockpile of stock/goods, hence lots of goods to sell when things pick-up and due to little production and little staff and massive savings in cost means your balance sheet/profits look amazing.
This is just rubbish! So why are people so ready to believe that things have turned? I think they have bottomed, yet turned? You have to be kidding me. Maybe when these companies reduce their goods stockpile, produce more to replace the reduction, hire back some of the staff they put-off, invest in advertising and innovation again and they still manage to make these 'nice' and 'unexpected' earnings upgrades I might believe that we are once again on a true upward trend.
Don’t kid yourself people. Sell now, and buy later, if you think by not buying in now you are missing the move up, just think again. Think, why is it really moving up?
My reasoning is:
1. 12 months ago the world was going to be sucked into a black hole from which there was no return, hence profits and earnings were decimated and any forward looking statements reflected the end of days for which many predicated. So, no money to borrow, no money to invest, no money to pay people, put people off, produce less product as no one is buying and cant afford to keep employees means no money coming in and very bad results.
So ... why is the market going ahead on the most silliest of pretences?
My reasoning is:
2. If the world doesn’t sink into a black hole, as many predicated, then it means borrowing has increased (by whatever amount), people are buying the product, hence the product is being produced and therefore there is a cash flow coming in and people (some) are keeping their jobs, which means people (some) have cash (some) to spend on those products - and so the wheel keeps turning.
So ... why are all the Mickey Mouse analysts surprised at all the earnings from these companies when it is more than their 'forecasts'?
We all know many of these analysts couldn’t forecast rain even if they were standing in it, yet why seemed so surprised?
My reasoning is:
3. World doesn’t end. Things (generally) stabilise and pull back from the end of day’s predication and hence earnings can’t be as bad as first thought when we were sinking into the black hole, and thus earnings/revenue has to be better than first thought.
However, getting or missing the forecast is one thing, yet this is my thought on why it has to go backwards:
My reasoning is:
4. World is going to collapse. Earnings and outlook very very bad. World doesn’t end. Earnings look better than first thought. However, if in the process of ensuring the world doesn’t end you cut production, reduce prices, cut staff, don’t put as much into R&D or any sort of innovation then your cost base has suitably reduced, yet because of a lack of buying 12 months previous you have a stockpile of stock/goods, hence lots of goods to sell when things pick-up and due to little production and little staff and massive savings in cost means your balance sheet/profits look amazing.
This is just rubbish! So why are people so ready to believe that things have turned? I think they have bottomed, yet turned? You have to be kidding me. Maybe when these companies reduce their goods stockpile, produce more to replace the reduction, hire back some of the staff they put-off, invest in advertising and innovation again and they still manage to make these 'nice' and 'unexpected' earnings upgrades I might believe that we are once again on a true upward trend.
Don’t kid yourself people. Sell now, and buy later, if you think by not buying in now you are missing the move up, just think again. Think, why is it really moving up?