“This week the market seemed to like financial stocks and was buoyed on news that Pulte Homes would buy Centex to create the largest US homebuilder. And with banks having some room to adjust their writedowns as mark-to-market is modified, the market saw significant increases in the financial sector. Everywhere I keep hearing the old saw that the market predicts a recovery about six months out, so won’t we see a recovery in the fourth quarter of 2009?
Operating earnings typically do not take into account one-time, nonrecurring events. The number of items which get classified as “nonrecurring” has mushroomed to the point where projected operating earnings for 2009 are more than double the estimates of as-reported earnings. Operating earnings for 2008 were almost three times actual, or as-reported, earnings. We certainly seem to have entered an era of really bad one-time events, which just keep on coming and coming. As recently as 2006, there was less than a 10% difference between the two. In some quarters it was only 5%. A far cry from today’s 100%-plus.”
Read full article by John Mauldin
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