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财经观察 1935 --- If Market Falls on Earnings, Bottom More Likely

(2009-04-08 18:10:19) 下一个
If Market Falls on Earnings, Bottom More Likely


What is going to happen when – or we’ll concede to if – the market starts to fall on earnings? Mood will sour quickly in our view and once again we’ll hear the doomsday analysts back on the air looking for Dow 3500.

Bring it on. The more people that get scared the better the chance that we are indeed carving out a bottom. We think the next leg down within the giant trading range that began a few months ago will deflate investor psyches worse than before even though we do not see a lower low in our future.

Here is an obscure movie reference that drives home this point. Sorry, youngsters, you will have to be a real student of Hollywood to know this one.

In the 1973 movie Papillion, starring Steve McQueen and Dustin Hoffman, the main character was in a nasty prison and the powers that be wanted to break his spirit. After years of confinement, they told him he finally had a visitor, likely someone important to him. He washed, shaved and dressed in nicer prison garb after anticipating the visit for days. When he got to the meeting room they told him there never was any visitor coming – ever.

Imagine his mental state deflating like the Hindenburg. To us, this is what is going to happen during the next leg down in the market, as the economic recovery everyone thought was at hand is not to be. But like the prisoner, the market will physically be no worse than it was last month. Only its psychology will be smashed.

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