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LINDSEY VONN
CNBC.com web-only interview
Downhill skier Lindsay Vonn

The Triple Problem For Stocks

We have a simple problem here: no visibility on earnings has led to low volume and high volatility. It's a strange combination. In theory, the market is cheap. In theory, we are due for an oversold bounce. In reality, people are tired of playing this game. Too many failed rallies.

What's the problem? Traders believe that worse than expected a) earnings and 2) economic news is all we can expect for the next couple months.

It's going to be very difficult for the markets to hold up just above their lows with that kind of news flow. There's been a lot of buying at this level for the past two months. What do traders have to show for it? Not much.

What about earnings? Stocks typically trade at trough around 10 times forward earnings estimates. Street consensus for earnings in 2009 is about $80 for the entire S&P 500. That means the S&P should be about 800.

But wait: a lot of analysts are talking about earnings as low as $60 next year. That means the S&P could go to 600. Admittedly, these are comments from the most bearish of analysts, but those are the ones that have been most correct this year.

What about the government programs being a deal changer? That's been out for a while, and all the intervention and money hasn't stopped the market from going down.

Could we get a rally? Yes, but most traders think it is highly unlikely we will end much above 900 on the S&P at best. With that kind of modest upside, why take the risk?

Financials continued their underperformance. Banks and insurance companies have separate issues:

Bank woes:

--lack of profit

--capital raises

--dividend cutting

Insurance woes:

--capital raising

--credit deterioration

--equity market guarantees embedded in annuities

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New from CNBC.com:

- The Dow 30 at a Glance

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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