Retail traders are having a field day

Hey everybody, We hope your day has been fantastic, just like the GameStop stock that just keeps flying high. We covered the unlikely rise in an article earlier this week, and since then, the stock has reached an unbelievable $300/share. Wowza. Another stock riding high this week is Microsoft, that had exceptional earnings yesterday, but it’s not all sunshine and rainbows on Wall Street. Investors are carefully preparing for more earnings reports and a Fed announcement. Yellen’s Historic Confirmation Janet Yellen was confirmed by the Senate on Monday as Treasury Secretary. The 74 year-old economist became the first woman to serve in this position since the department was founded 232 years ago. She was also the first chairwoman to lead the Federal Reserve, and her confirmation has been welcomed by Wall Street. [Read more about the historic appointment here.]( “WallStreetBets” The answer to the question surrounding GameStop, AMC, and Blackberry’s recent rising stock prices may come from the social media platform Reddit. Reddit users have the ability to form subgroups or a “subreddit” to discuss a common topic. (Sort of like a Facebook group page.) Recently the subreddit “wallstreetbets” has come to a consensus regarding some small-cap stocks, and in turn, have found a way to drive the price continually higher. The DPP team did a deep dive into wallstreetbets, and the conversations were wild. Some in the group are worried about being shut down. The general consensus, however, is that retail traders are doing what hedge funds have done for years.  We’ll see what happens next. Analyst Predictions: Fiction and Reality Dear Reader, The consensus of American analysts is that companies in the S&P 500 should expect hefty profit growth—22.7 percent—in the current business year. But when we see numbers like this, it’s easy to miss the important context. This figure is calculated as development compared to last year, and last year was terrible for the majority of US corporations. If we calculate proportional changes for the past two years, we see the following results. In this year, S&P 500 companies will earn—if the analysts are correct—just 2.2% more than in 2019. The index, in the meantime, will list 16.6% higher and is valued at a P/E ratio of 23.5 today, vs. 20.6 13 months ago. Looking at 25 years of analyst predictions Do the predictions of these experts, who are constantly reporting and updating their profit prognoses for corporations, always come true? Let's take a closer look. We'll focus on the consensus opinions of analysts for entire business years. Since these prognoses are created in advance, they are subject to constant adjustments by experts until the actual data is available. These adjustments are made according to market changes and get closer to reality as the year progresses. Dr. Edward Yardeni is the president of Yardeni Research and used to be an investment strategist at Deutsche Bank New York. For many years now, he's been comparing the evolution of analysts' consensus predictions with reality. How reliable are analyst predictions? The following graph shows how profit predictions have changed over each of the past 25 years, and compares these to the actual profits achieved by S&P 500 companies. The blue squiggles show yearly changes in consensus predictions since 1995. The purple line marks actual profits per stock for the S&P 500. We'll need to ignore 2 of the 27 years displayed here. 1995 is not shown in its entirety, and 2021 has just started and has no complete data. Still, we can see that analyst predictions are overwhelmingly too optimistic at the beginning of the year. In the past 25 years, there have been only 6 instances ('04, '05, '06, '10, '11, '18) in which the prognoses were adjusted upward over the course of the year as they approached the end result! 6 out of 25 is 24%. In other words: In 76% of cases in the last 25 years, analysts have been wrong in their profit predictions. Conclusion A lot of people are easily manipulated by data. Data should always be contextualized. This happens far too infrequently. Look here, for example: Profit increases of 22.7% for 2021 compared to 2020 sounds optimistic on its own! But if you do the math, you'll see... In reality, companies in the S&P 500 are only predicted to earn 2.2% more than in 2019! Why is this? Between them lies the awful year 2020, which lowered the basis for comparison! Of course, the experts could adjust their predictions higher over the course of the year and end up having guessed too low. But statistically, they only have a 23% chance of doing that. Sincerely, Dr. Gregor Bauer Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. You may lose more than you invest. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. The information on this website is intended as educational in nature and we do not recommend that you buy or sell any specific financial instrument.   Daily Profit Publishing , 1800 Hughes Landing Blvd. Ste. 200, The Woodlands, TX 77380, United States [Update your subscription]( — [Unsubscribe](