At the Value Investor Conference this week, Kevin Gibson of Eastspring Investments discussed an amusing chart.It showed the path of corporate earnings over time, overlaid with analysts' forecasts of said earnings. Changes in the latter lagged changes in the former by pretty much the same margin all the time. Why? Because most analysts don't read the future, they read the past.
They look at last year's results and assume the next year's will be the same plus a bit. They "echo, they extrapolate, and then they miss the turning points". The same is true of almost everything. In the 1960s it was true of Japan.
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