I have just read your May 2006 Money Show Key note speech which is wonderfully clear and offers a great way of managing client expectations.

I have read elsewhere that nominal earnings have grown at about 6% for many decades. However, the current IBES data indicates expectations of twice this figure! Can this be justified in anyway? Could it be that in a globalized world the long term correlation between US GDP and earnings is now breaking down and we should expect the growth of international company’s earnings to be linked more to world GDP – with an obvious boost from emerging markets? Or is it just blind optimism and extrapolation of recent trends?

I also note your warning about risk and the ‘pleasant sensation of more saftey when and if stocks take a tumble’. Given low risk premiums, does it make sense to advise clients to be more conservative than normal and maintain liquidity until there is more value in the market, or is this simly falling into the market timing trap? I would be interested to know what you mean by protection – allocation to fixed income or buying some form of insurance via options?

Best regads,
Benjamin