Last week the Pragmatic Capitalist ran a post which suggested that analysts would continue to underestimate earnings for the next couple of quarters, setting the market up for positive earnings surprises and a consequent continued rally in prices.  Swamp Report was skeptical of the reasoning at the time as the end result of such logic is that analysts will just continually forecast negative earnings.  The contra argument is that companies stop giving guidance when things are bad, so analysts are “groping in the dark” and thus are to be excused for underestimating earnings, but we just don’t buy it.  Swamp Report believes too many analysts work for banks and banks tend to manage expectations (and sometimes manipulate prices) as directed by the FED.  Today, Morgan Stanley posted a research note in which it raised its earnings forecast for the S&P for ‘09 to $51 from $40 (a 20% increase!) and to $62 from $57 in 2010.  At the same time, MS said the market had peaked for a while.  Could be that the expectations are becoming not so conservative anymore, or… maybe the FED/Treasury needs to sell some bonds…