Great earnings, pity about the whispers

October 15, 2009

It says a lot about the way investors are thinking at the moment that very good earnings from Goldman Sachs were greeted with a mini-stock selloff and a bounce for the dollar. But it is not that people are glum and selling even on good news — more a case of them being so ebullient that anything which is not outlandish is a disappointment.

The top-of-the-pile investment bank was supposed to report quarterly earnings of $4.24 a share.  Instead, it stormed in with $5.25 a share, a good 23 percent higher and an increase of 190 percent over the year earlier figure.

But on the wilder fringes of the market, speculation had been doing the rounds that the earnings-per-share figure would be around $6. It wasn’t, so Wall Street futures tanked, the dollar went positive and world stocks pared gains.

Remember, this was not because Goldman did not beat expectations. Neither was it because did not beat expectations by a lot. It was because they did not beat the so-called whisper number, which would have been a massive achievement.

JPMorgan may have raised the bar earlier this week when it came in with better results that forecast.

But does this not suggest that investors are now so positive about what is happening that their dreams are getting the better of them?

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