Kevin you could just buys puts or put spreads if you are so confident. one to one odds on 60% decline gives anyone that wants to arb that in options plenty of money so just price the trade on your own instead of giving away money to arbitrage. arnie is right on interest rates then vs. now being the part of the model that the article is missing.
I think you misunderstood my post. The language of moo's original post implied that he was confident that a 60% decline would happen. I am fully aware that the 2 year out OTM puts put the likelihodd of that kind of decline at less than 5%, or 19:1. That was my point. .
Only 18. And the streak is now over. Would this be the exit signal for the momentum trader? http://tickersense.typepad.com/ticker_sense/2007/04/earnings_growth.html
Good, now we can start over. Lets make it 20 this time. NEW YORK â It's official: With all the numbers counted, members of the benchmark Standard & Poor's 500 index snapped 18 consecutive quarters of double-digit earnings during the fourth quarter. The rating agency said Tuesday the component companiess of its widely followed index averaged an earnings growth rate of 8.9 percent during the quarter, and put to end a streak that began in the first quarter of 2002. Analysts had expected the fourth quarter to show single-digit growth as the economy and corporate earnings began to exhibit signs of cooling, but as results were reported starting in January, it was thought that the companies might just eke out a double-digit gain. Operating earnings for the 500 companies during the quarter were finalized at $197 billion, or $21.99 per share. On an earnings per share basis, this is up from $20.19 in the fourth quarter of 2005. "The decline had been expected in the second quarter, but consumer spending, energy profits and a strong economy kept it going," said Howard Silverblatt, senior index analyst at Standard & Poor's. "The fourth quarter, however, reflected the impact of a slower economy, difficulties in the automotive and home building market, and strong holiday price competition in the electronic retail group." Standout sectors during the quarter included materials, which surged 47 percent from a year earlier. Energy declined 5.8 percent due to the lower price of oil. Silverblatt said in a statement that "given that the four and half years of growth were the longest in index history, positive single-digit gains are probably as close to a perfect landing as we were going to get." First-quarter results begins next week when aluminum maker Alcoa Inc. posts earnings on Tuesday.
So when 19 proved to be too much, just claim 20 then??? Ever heard of the word 'denial'? How low will profit growth have to fall before you accept the boom is over? Negative? And 'perfect landing' - just another permabullish mantra.