When was the last time that you heard a talking head on the financial news speak about earnings per share (EPS), book value, or a PE ratio? The truth of the matter is that nobody cares about fundamentals of a stock anymore, they only care about central bank inflation creation. This past earnings season was absolutely horrible yet the major stock indexes are just off of their multi-year highs.
Leading corporations such as FedEx Corp (NYSE:FDX), Norfolk Southern Corp (NYSE:NSC), Intel Corp (NYSE:INTC), and Caterpillar Inc (NYSE:CAT) are just a few leading companies that guided lower for the next quarter. In normal times, these warnings would send these stocks sharply lower, however, all that matters is if the central banks will continue to print money via there bond purchasing programs to keep the stock markets buoyant
Earlier today, the Federal Reserve Chairman Ben Bernanke defended his latest and greatest quantitative easing infinity program (QE-3). The central banks of the world have jawboned these markets up to new highs and now we shall see how the stock markets react once the inflation news is baked into the current stock price.
Most traders and investors will usually tell you that recessions and stock market corrections are normal and healthy for the markets. It allows the stock markets to work off the excess inflation and eliminate bubbles that are bound to occur. For example, just look at all of the recent bubbles that have been created throughout the years. In 2000, there was the tech bubble. Later in 2005, there was the housing bubble, and finally the great credit and banking bubble occurred in 2007. Now, we can all guess at what is going to be the next great bubble from all of this artificial inflation being created by the central banks around the world. Believe me, I’m not sure what it will be, but another massive bubble is being made at this time.
Traders should stick with the technical charts and forget the fundamentals. The fundamentals such as EBITA, and PE ratios are virtually useless at this time. Traders and investors have to simply ride the wave in both directions as money flow is simply all that matters. It is safe to say, you can throw the fundamentals out of the window.