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4B Daily News – Monday, September 26, 2011 NEW YORK (AP) — Someone is about to play the fool — Wall Street ana- lysts or investors. For months, analysts who write reports praising or panning stocks have been saying they were cheap. Investors were unconvinced, buying one day, selling the next. Last week, they mostly sold, and stocks got cheaper yet. The Dow Jones industri- al average rose slightly Fri- Stocks may be cheap, but they can get cheaper yet Wall Street day but closed the week down 6.4 percent, its worst showing since the depths of the financial crisis three years ago. In the broader Standard & Poor's 500, the selling pushed down all variety of stocks — sexy high techs and staid utili- ties, risky small companies and cash-rich big ones. Stock prices compared to expected profits are now nearly as low as they were in March 2009, a 12-year nadir that marked the beginning of one of the greatest bull markets in his- tory. Have investors sold too much, as they did back then? ''I'd be buying the mar- ket,'' says Citigroup's chief U.S. strategist Tobias Lev- kovitch, who warned that prices were too high in the spring. Says Harris Private Bank's Jack Ablin, who sold $6 billion or so of From a TV Select weekly advertiser: "My weekly ad is super-valuable because TV Select stays in homes and is referred to all week long by thousands of Tehama County TV viewers" Jeni Adams General Manager Tehama Estates stock in August, ''We're sharpening our pencils to figure out when to get back in.'' Who's right — or who's about to play the fool — may turn on earnings, or rather, analysts' estimates of how fast they will grow. Recently, they've been cutting them for companies in the S&P 500 as fears of another recession spread. But they're still predicting they will earn 13 percent more earnings in the three months through September than they did in the same period a year ago, accord- ing to data provider Fact- Set. That would mark the eighth straight quarter of double-digit gains. And for the full year, analysts say earnings will hit a record. ''You can toss (those estimates) in the garbage,'' says Peter Boockvar, equity strategist at brokerage Miller Tabak & Co. ''Will Greece go bankrupt? What will be the extent of the global economic slow- down? I can't get that out of an analyst report.'' If history is any guide, more cuts from analysts are coming. One ominous sign: Those who changed their estimates this month chose to cut them more than six out 10 times, according to Citigroup. Early last month, raised estimates outnum- bered lowered ones by nearly the same ratio. Analysts are easy to bash. They usually tend to far too optimistic, cheering on stocks long after they've headed down. Now they want us to believe that com- panies can continue making record profits in the face of falling housing prices, tightfisted consumers, sput- tering U.S. growth and a European debt crisis that is pushing a crucial market for U.S. exports closer to reces- sion. But it's worth remem- bering that it's been the naysayers, the investors, and not the optimistic ana- lysts, who've mostly been wrong lately. At the start of the bull market, investors worried that companies couldn't generate enough profits in such an anemic economy. Then companies cut expenses to the bone, and Win WinWin Win You could A Retirement Community for the Active Senior Citizens 750 David Avenue, Red Bluff • 527-9193 $100* Just for sharing your local shopping and media preferences! 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And then companies defied expecta- tions again with higher rev- enue, much of it overseas. In fact, if anything, ana- lysts haven't been opti- mistic enough. For several quarters, nearly three out four companies have posted profits greater than analysts had estimated, FactSet says. At Friday's close, the S&P 500 was trading at 10.6 times analyst estimates for earnings over the next 12 months. That's low for this so-called earnings mul- tiple, which could mean stocks are cheap. When stocks bottomed on March 9, 2009, they were trading at 10.4 times estimated earnings. The 10-year aver- age is 15. Of course, the multiple might not look so appetiz- ing in hindsight if compa- nies' results show the esti- mates were too high. That won't be clear at least for another two weeks when companies start reporting third-quarter results. But already investors are getting a taste of might be in store. On Thursday, FedEx Corp., the world's second- biggest package delivery company, met earnings expectations for the three months that ended in August. But it cut its target for full-year earnings, citing a slowdown in shipments from Asia. The stock fell to a two-year low. FIRST ANNUAL BOOSTER FALL BONANZA Featuring "1987 State Championship Girls Basketball Team" Saturday, October 15, 2011 Social Hour: Tri-Tip Dinner: 6:30pm Dancing: Live Band - Northern Heat Tyler-Jelly Building Red Bluff Fairgrounds Pre- Ticket: $30 (available from a Red Bluff Spartan Athlete) Tickets at the Door: $40 Sponsored By 5:30pm 8:30pm