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Earnings: Stock Market's Brightest False Beacon
Four times a year, investors and Wall Street watch the quarterly corporate earnings reports, trying to anticipate the trend in stocks. Another earnings season is upon us right now, so read this excerpt from our free Club EWI report, "Market Myths Exposed."
"Myth No. 1 -- 'The bottom line is earnings drive stock prices' -- Investopedia.com.
"To try to get around this, pundits use analysts' estimates of future earnings as a guide. In doing so, however, they are subject to the same herding impulses as investors. As [Robert Prechter's] Conquer the Crash puts it, 'Earnings estimators are too pessimistic at bottoms and too optimistic at tops, just when you most need the indicator to tell the truth.'"
