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July 30, 2010 – Comments (10)

If you ever wanted proof that government economists have an overly-optimistic bias, here is a nice piece of supporting evidence.

Jake at Econompic put together this gem: Great Recession was Worse than Thought

I detailed that Q1 GDP was revised up one full point... great news right?

Not when past quarters have been revised down. Per Calculated Risk:
The recession was worse in 2008 than originally estimated.Q1 2010 was revised up, but Q3 and Q4 2009 were revised down. So the recovery is a little weaker than originally estimated. On a cumulative basis over this time frame, the current level of GDP is 0.8% smaller than previously estimated.

10 Comments – Post Your Own

#1) On July 30, 2010 at 12:13 PM, TMFBabo (100.00) wrote:

I've read before that analysts' earnings estimates suffer the same type of optimistic bias. 

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#2) On July 30, 2010 at 12:23 PM, binve (< 20) wrote:

bullishbabo ,

Exactly. I believe John Hussman (if not him then maybe Mauldin?) once did a similar chart of earnings estimates by Wall Street analyst consensus one quarter before earnings compared to reported earnings and the trend was strikingly similar..

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#3) On July 30, 2010 at 12:37 PM, portefeuille (99.56) wrote:

In early 2009 "consensus 2010 earnings estimates" for most stocks were far too low, at least if the actual 2010 earnings will be close to current estimates.

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#4) On July 30, 2010 at 12:41 PM, portefeuille (99.56) wrote:

Most of the stocks in my portfolio had forward (i.e. 2010) P/E ratios between 1 and 5 at the "late 2008 / early 2009" lows if you use current 2010 estimates and not the ridiculously low estimates that were given by most analysts at the time.

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#5) On July 30, 2010 at 12:56 PM, portefeuille (99.56) wrote:

#4 3 examples:

BASF (BAS:GR) "multi-year low" 17.85 EUR (October 28, 2008), current 2010 estimate 3.9834 EUR -> P/E ≈ 4.48.

EMC "multi-year low" 8.25 USD (November 21, 2008), current 2010 estimate 1.21 EUR -> P/E ≈ 6.82.

Daimler (DAI:GR) "multi-year low" 17.20 EUR (October 2 and October 3, 2009), current 2010 estimate 3.0754 EUR -> P/E ≈ 5.59.

okay, maybe most had P/E between 1 and 7. But 2010 is not over yet, the current estimates may still be too low, hehe ...

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#6) On July 30, 2010 at 1:02 PM, portefeuille (99.56) wrote:

The "caps" game blog post "bears" were busy posting "P/E is over 100 for the S&P 500 index" charts at the time. They thought the analysts were "overly optimistic". Oh well, good old bears, hehe ...

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#7) On July 30, 2010 at 1:03 PM, portefeuille (99.56) wrote:

1.21 EUR

1.21 USD

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#8) On July 30, 2010 at 1:11 PM, portefeuille (99.56) wrote:

October 2 and October 3, 2009

March 2 and March 3, 2009

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#9) On July 30, 2010 at 1:17 PM, davejh23 (< 20) wrote:

Port - Most stocks that I've reviewed lately have full-year 2011 EPS estimates that are at least 20% higher than full-year 2010 estimates (after 2 quarters of reported earnings).  Many have 2011 estimates that are 50-100% higher.  While bear arguments of "P/E...over 100" based on reported earnings seem ridiculous, claims that forward earnings for 2011 are reasonable seem equally ridiculous.  I would bet that full year 2011 estimates will be revised downwards by AT LEAST 20% over the next year.

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#10) On July 30, 2010 at 4:10 PM, binve (< 20) wrote:

davejh23 ,

>>claims that forward earnings for 2011 are reasonable seem equally ridiculous.

Completely agreed...

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