If a tree falls in the forest and no one is around to hear it, does it make a sound? This longtime philosophical riddle centers on the difference between reality and perception. In a similar tone, I ask the question….

If earnings expectations formed 3 months ago were 81 cents per share and today the company reports 82 cents, did the company beat?

Don’t dismiss the basic math so quickly. Give it some thought. I’ll give my opinion later.

UPDATE 9:00 am EST 10/30/07.

This riddle of mine really doesn’t have just one answer. Everyone’s perception of reality differs and all are relevant. My take is that the 5% decline in the USD index since the end of July means that the example I gave above is actually a miss. The value of the dollar means something to me. If at the same time (3 months ago) I would have had an expectation that the dollar would depreciate by 5%, then I would feel like the 1 cent beat was truly a beat. But 3 months ago and for much of the past last quarter, I was expecting the dollar to stablize around 80-81 on the USD index and head marginally higher. Obviously I was wrong on that but when it comes to the value of earnings for me, I need to see companies exceeding their estimates.  I know this sounds knitpicky but after all the talk from large cap lovers who are constantly saying how wonderful the weak dollar is for exports and the currency translation bump to earnings, isn’t it reasonable?  If the incremental benefit of a falling dollar gives us more nominal earnings, the real value of those dollars should be relevant.  Maybe I am the only one that cares.  It’s kinda like that falling tree in the forest, except in this case there are many people there to hear it.  They choose to be deaf.