July 10, 2001

Earnings Disappoint Once Again

The multitude of earnings warnings confessed today should not come as any surprise to investors -- and not just those who've been reading our commentary each day. After all, companies have established a clear pattern of missing profit expectations over the past year. Earnings have continued to drop and signs of a turnaround are not on the horizon. And yet, quarter after quarter, investors hold out hope for a quick recovery that never seems to materialize.

Smart investors -- who we define as the poor souls who don't want to lose any MORE money -- should cut their losses. It is clear that earnings won't make a comeback anytime soon. The latest economic data shows that companies are having a tough time unloading inventories that continue to build up on shelves. And that translates into lower earnings. Plus, consumers have begun to slowdown their borrowing pace. Consumers are already buried under mountains of debt, and can't afford to support the economy any longer. Clearly, the burden has become too much to bear.

It won't take long before investors react with a larger wave of selling than even today's three-digit loss. Be prepared for a tidal wave.

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