In a recent essay you state that without Apple’s earnings we go from earnings growth in the mid-teens for the market to 2 percent. Apple is that big a deal?
Apple obfuscates the fact that the underlying trend in earnings is really weak. You have also had stronger growth outside the U.S. and high oil prices—both of which are good for S&P profits—plus a weaker dollar. Those things overstated how strong the profit trend was.
So what in the economy was Apple masking?
You had about 2 percent economic growth, and yet you had 16 percent or 17 percent earnings growth. How did you get that earnings growth? It cannot just be cost-cutting by companies, because the earnings are just too good. If you take away that one name [Apple], you get greater clarity on the fact that earnings are moving much closer with the direction of the economy.
How do you see the market in 2012?
I think we are going to have other months in 2012 which look like January, where risk aversion comes down, volatility comes down, and the market races ahead. But we also are likely to see months like September or April of last year where the market takes a hit because concerns about Europe, about Greece, about macro issues—whatever those things are—are going to create months with the opposite type of a move.