The bullish crowd talks about the strength of earnings and their relationship with the stock market. The graphs they show are compelling -- earnings rise and stocks rise. Then they go on and say earnings are bound to rise. Outcome: the market will rise.
There is only one big problem with their logic. They always show the section of the chart when earnings and stocks go up together.
They do not show the periods when earnings rose and the market declined or when earnings declined and the market rose.
How can you trust a relationship that is correct some of the times?
More on www.peterdag.com.
George Dagnino
aka Peter Dag
Editor, The Peter Dag Portfolio
Since 1977
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