Published earnings may be rather better because companies in a mess tend to take one-off charges against income. (This week AOL Time Warner said it will take a one-off charge of between $40-$60bn this quarter, among the largest ever taken by a commercial company.)As you can see profits have fallen faster than at any time since 1960. To some extent this fall reflects irresponsible accounting – earnings were over-inflated in the late 1990s – rather than a deterioration in underlying performance, but it is a bit of a clunker however you explain it.The tension between loadsa money swishing around and nowhere attractive to put it will dominate US financial markets for the rest of the year. Don Straszheim, the former chief economist of Merrill Lynch, now running Straszheim Global Advisers, puts it succinctly in his new newsletter: “All want to be bullish on economy, on markets Up is more fun than down .. But some p/e’s [price-earnings ratio] already far too high. Red flag.”The investment message that emerges from this analysis is very much caveat emptor. The BCA team reckon that the markets will be much more like those of the 1960s than anything that current investors will find familiar Markets will be cyclical.

They may well be flat overall but there will be plenty of ups and downs on the way. Getting timing right will be very important, in contrast to the “buy and hold” rule that has held very well for the past two decades until 2000.Don Straszheim comes to much the same conclusion: it will be a traders’ market and a stock pickers’ market. “Buy on the dips,” he urges.The interesting thing about both these position is that they come from independent advisers, not from the mainstream investment banks that have been so dreadfully, almost wickedly, over-optimistic for the past two years. Implicit in both these independent views is that there will be bad news ahead. This could be further terrorist attacks, very weak consumer spending, a really serious banking collapse – who knows? The key point here is that ordinary investors should be prepared for bad news, even if the markets are not.Does the position change if one looks outside the US? Not a lot. Valuations in the UK and in the eurozone are on average more reasonable than in the US, but it really is unlikely that the eurozone will bounce back faster than the States this year.

One of the great lessons of last year was that the size of the eurozone did not protect it from the debris of the US downturn. Yes, conditions for growth should be solid enough but given this experience it would be naive to expect it to outperform the US to any significant extent.In the UK we are exposed to a much slower rise in consumption as and when interest rates have to be raised That will hit profits. As for Japan, well, the balance of probability is that there will be some cathartic event this year, perhaps a banking collapse that will shake the world economy as well as the Japanese one.Pull together these concerns and my guess would be that there will be only a halting, uncertain recovery this year. There may even be a double-bottom to the recession in the US. Economies are self-healing unless policies are really dreadful (Argentina, Japan) so the doubts about this year have to be seen in the context of a real recovery being eventually secured But do not expect it to get under way until 2003.. By hinting that BT was considering morphing into a media company, Sir Christopher Bland, its outspoken chairman, has set the industry’s imagination running wild.

“On the other extreme, we can build a fully integrated model like BSkyB, which makes and distributes its own programmes over its own and other networks and also distributes other content over its system.”That the company was looking into the idea could hardly have come as a surprise since Sir Christopher, the former chairman of the BBC, is steeped in the media industry.Nor is it a secret that BT must come up with new ways to drive growth from its existing assets before the cable companies and other new entrants prise away too many more of its precious 20 million residential customers.The cable companies’ so-called “triple play” packages, where customers are offered telephony, television and high speed internet services, have proved a resounding hit with customers. Indeed, BT already has a cross-marketing deal in place with BSkyB and ITV Digital.How, when and indeed if BT will offer its own trio of services, though, remains to be seen. The answers will undoubtedly depend on whether the Independent Television Commission awards BT a broadcast licence next month.While BT insiders say there are many options and contingency plans on the table, Sir Christopher hinted yesterday that, even if it did gain a licence, becoming a rival “BSkyB” operation was extremely unlikely.”We are more likely to focus on distribution rather than creation or ownership of broadcast content. We are less likely to become a television content owner or creator and more likely to seek to participate in content provision through suitable partnerships,” he said at yesterday’s conference.Steve Trowbridge, a telecoms analyst at SG Securities, said he thought BT’s potential plan to offer “entertainment services” alongside telephony was, nevertheless, “a credible strategy”. However, he said: “I’d rather see them de-risk the process as best they can with partners rather than do everything themselves. I’d rather see them partner, say with ITV Digital, or HomeChoice, or someone like that, just to try to get some expertise and assistance in that area.”Until a year ago, BT had been banned from owning a broadcast licence although it had a temporary one in the mid-1990’s to enable it to trial different high-speed internet technologies in the Ipswich area.