Albert Edwards On Why "The Farce That Is US Reporting Season" May Be Different This Time

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Thu, 07/07/2011 - 12:52 | 1433035 The Axe
The Axe's picture

Buy=52 week high   Sell=52 week low....bullshit game

Thu, 07/07/2011 - 13:01 | 1433071 Ahmeexnal
Ahmeexnal's picture

It's NEVER different this time.

Thu, 07/07/2011 - 13:21 | 1433130 Max Fischer
Max Fischer's picture

Ok...  so if it's never different, and we evaluate the past 20-30 years, then one should expect the stock market to soar from here:

http://www.bloomberg.com/news/2011-06-19/stocks-cheapest-in-two-decades-...

Even if companies posted no growth, price-earnings ratios would be lower than on 96 percent of days in the past two decades.

- Max Fischer, Civis Mundi

 

 

 

Thu, 07/07/2011 - 13:37 | 1433197 MFL8240
MFL8240's picture

Still believe in PE ratios in the days of computerized fraud in the markets?

Thu, 07/07/2011 - 14:01 | 1433277 trav7777
trav7777's picture

well i had a friend who was short happy a couple weeks ago, and I said, nah, I see the SP, if it's gonna drop, it will put in a big H&S formation.  Wait for a rally to SPY 135ish.  And here we are.  The next couple of days are meak or break but I ain't shorting shit until I see a break of the neckline.  Learnt the hard way back in '10.

If the QEx isn't coming and the austerity is and all of that deflation shit, then this is what's gonna happen.  We'll slog sideways to down, and then break south

Thu, 07/07/2011 - 14:09 | 1433318 chartcruzer
chartcruzer's picture

exactly!   we've got historic CCI spikes on both the intraday and daily SPX charts - very rare - especially given pomo wind down.   backtesting indicates a nice pullback probability ahead.   And, wait for a clear direction in price first (trendline break, PSAR flip, or whatever you use).

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s162488959]&disp=P

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s162497802]&disp=P

Thu, 07/07/2011 - 15:35 | 1433607 HpDeskjet
HpDeskjet's picture

So? In the last 2 decades stocks have been the most expensive ever... I read that article too, its total bullshit. The guy is comparing EXTREMELY expensive to expensive/normal prices... Stocks haven't been cheap for over 2 decades. It's all relative ya know.

 

Based upon Shiller PE, stocks are now at best "fair value". However, margins are at all-time record highs + sales growth is topping => Earnings can only go down from here.

Thu, 07/07/2011 - 16:07 | 1433841 nantucket
nantucket's picture

To Max Fischer:

Careful of that metric. It's not an apples to apples compare over time.  Most analysts now cite "operating earnings" which are very different (i.e., higher) from gaap earnings.  Operating earnings are created by the companies themselves and it leaves out certain expenses (rightly or wrongly) that leads to higher reported earnings. 

The 20+ years ago historic data to get that PE use gaap earnings and the recent 20 years or so PEs typically use operating earnings....so it's not apples to apples, so buyer beware. 

What's worse is that the percentage difference between gaap and operating has steadily grown from 2-3% when they were first widely used in the early 1980's up to 20% recently. 

Here is the real test to see if a valuation metric is worth anything.  Look at the level of the metric in the past and then look at the ensuing 5-10 year market returns and see if the metric has any reliable forecasting power.  Me thinks you'll find that when gaap or shiller 10 year PE is used, the market is in the upper third quartile of historic valuation and, better yet, when the PE is this high, ensuing 5, 10 year market returns are extremely weak.

Thu, 07/07/2011 - 16:14 | 1433874 nantucket
nantucket's picture

Max:

 

Here is the link to the shiller pe valn chart, I stand corrected, we are in the upper quintile.  very rich.

 

http://advisorperspectives.com/dshort/charts/valuation/PE-ratio-overview...

 

Thu, 07/07/2011 - 16:22 | 1433910 HpDeskjet
HpDeskjet's picture

Amen, I do all kinds of tests (for work) for all kinds of asset classes. There is only conclusion that one can draw nowadays => EVERYTHING IS EXPENSIVE on aggregate levels. Bonds, Equities, Commidities, Real Estate, etc. etc. Of course there some specific investments that are attractive (still a reasonable amount of corporate bonds for example), but the excess liquidity worldwide, makes sure that these become rare...

Fri, 07/08/2011 - 03:36 | 1435284 qussl3
qussl3's picture

Cash is cheap.

Fri, 07/08/2011 - 05:25 | 1435339 Tampa Boat Transport
Tampa Boat Transport's picture

Oh really Ahmeexnal ?
 but you should review this and then comment

 <a href="http://www.tampaboattransport.com/">Tampa Boat Transport</a>

 

Thu, 07/07/2011 - 12:53 | 1433036 The Axe
The Axe's picture

Buy=52 week high   Sell=52 week low....bullshit game

Thu, 07/07/2011 - 12:53 | 1433042 Gubbmint Cheese
Gubbmint Cheese's picture

You mean 25% EPS growth on a 2% increase in revenues can't go on forever?

What?

Are you sure?

Thu, 07/07/2011 - 12:53 | 1433044 dexter_morgan
dexter_morgan's picture

Saw the CEO of CocaCola on TV this morning and he says all is well, MUCH, MUCH better than 18 months ago, so who am I to doubt him?

Thu, 07/07/2011 - 12:58 | 1433065 equity_momo
equity_momo's picture

Hardly typical though. Buffets best investments were his early ones : spotting the bluest of bluechips of which Coke are right up there as.   

If you are no.2 or 3 in any sector though , prepare to shrink at best , die at worst. The big get bigger and the also rans fold. Thats how GD2.0 will play out. 

Monopolies bitchez.

Thu, 07/07/2011 - 14:05 | 1433290 trav7777
trav7777's picture

take a look at Five Guys franchise requirements.  They wanted 500k in liquid and 1.3M+ total net, along with capability to do at least 5 locations.

Only the rich have a chance to get richer.  If you're just a hardworker with a dream, you're not gettin on no gravy train.  Life is like No Limit poker where the tall stacks just bully the shorter ones off of pots and the only way the short stack gets parity or comes back is via a hail mary on the river.

Oh and every guy I know who was in the Clitton WH is a sellout lobbyist now, cashing in on their connections (and I mean mfing cashing in kaching).  All those idealists from the party of the little people sure have managed to get filthy rich.

Thu, 07/07/2011 - 14:33 | 1433403 Johnny Lawrence
Johnny Lawrence's picture

I actually looked into opening a Five Guys, that's completely right.  All of their franchise rights are sold out in the US & Canada.  Sucks, I'd love to open one, especially with commercial lease rates where they are.

Thu, 07/07/2011 - 17:13 | 1434155 equity_momo
equity_momo's picture

You're both correct.  So why dont we start playing these fuckers at their own game? Only problem is it takes trust and commitment. 

I know , you know , the collapse is coming. We also know it wont be even handed. I therefore want to be surrounded with like minded individuals where i live and where i do business.

Start thinking about pooling resources and moving to smaller communities where you trust your neighbours/local beaurocrats etc.

Setting up a website to start putting these business and home communities together wouldnt be a bad start

Thu, 07/07/2011 - 14:09 | 1433312 trav7777
trav7777's picture

take a look at Five Guys franchise requirements.  They wanted 500k in liquid and 1.3M+ total net, along with capability to do at least 5 locations.

Only the rich have a chance to get richer.  If you're just a hardworker with a dream, you're not gettin on no gravy train.  Life is like No Limit poker where the tall stacks just bully the shorter ones off of pots and the only way the short stack gets parity or comes back is via a hail mary on the river.

Oh and every guy I know who was in the Clitton WH is a sellout lobbyist now, cashing in on their connections (and I mean mfing cashing in kaching).  All those idealists from the party of the little people sure have managed to get filthy rich.

Thu, 07/07/2011 - 17:15 | 1434161 equity_momo
equity_momo's picture

Im equal opportunity in my hatred for big government and as i see it , each Administration justs gets larger and larger regardless of persuasion. But Clintons watch was one of the most insidious , corrupting bunch of hypocrits this Nation has ever seen.

Thu, 07/07/2011 - 13:04 | 1433081 Astute Investor
Astute Investor's picture

Have a Coke and a smile....

Thu, 07/07/2011 - 13:00 | 1433054 SheepDog-One
SheepDog-One's picture

100 P/E's market-wide in a depression may be a wee bit over valued? Frankly, I'm SHOCKED at such a suggestion! DOW 30,000!! Because any form of REALITY entering the picture here is simply 'unthinkable' according to many top economists and hedge fund mgrs.

Thu, 07/07/2011 - 12:56 | 1433057 nobusiness
nobusiness's picture

Stocks are setting new highs.  Where are the downgrades he mentions???

Thu, 07/07/2011 - 13:22 | 1433132 BeerWhisperer
BeerWhisperer's picture

I'm seeing just as many upgrades and downgrades as normal. Most of the Earnings coming out so far have been to the positive. Will this be the end of market conspiracy or will zerohedge be proven right again?

Thu, 07/07/2011 - 14:05 | 1433292 chartcruzer
chartcruzer's picture

first, US 'stimulus' is proceeding in many forms like gov mortgage relief, food stamps, many people living in homes mortgage free, extended unemployment, et. al,..   Debatable what you call 'stimulus',, I guess.  This buy no means represents a sustainable economy (and thus corporate earnings) especially given the total public+private sector debt load.

Regarding the equity markets the luquidity pump is now in trickle mode.  Note the effect in the past per the chart below.   Corporate earnings are a side show in this manipulated environment.  

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s206018187]&disp=P

as such this feels like a total short covering rally.   But,,,,, I'll just follow the trends....

 

Thu, 07/07/2011 - 12:56 | 1433059 mynhair
mynhair's picture

In other news:

Squirrel Alert issued.  Turn to your local teleprompter at your own peril.

Thu, 07/07/2011 - 13:02 | 1433077 buzzsaw99
buzzsaw99's picture

Does JPM have anymore loss reserves to book as bonuses, er, profits?

Thu, 07/07/2011 - 13:08 | 1433100 Robslob
Robslob's picture

Bookmark article for same time next year...Thanks!

Thu, 07/07/2011 - 13:08 | 1433101 TooBearish
TooBearish's picture

I eagerly await the wide eyed money honeys on CNBS with blouses a bulging breathlessly screaming "beats the street!"

Beat this bitch

Thu, 07/07/2011 - 13:22 | 1433133 Franken_Stein
Franken_Stein's picture

 

This is a farce.

 

Thu, 07/07/2011 - 13:23 | 1433137 Zonker
Zonker's picture

You are right, it IS a game, so play hard, play well and be a good sportsman.  Ranting and raving all the time is not good for your game.  Being happy supports better trading - this IS the maxim.

 

Z

Thu, 07/07/2011 - 14:36 | 1433415 Orly
Orly's picture

To steal from an old adage myself, "The worst day trading is better than the best day working."

Live to trade another day and life is all smiles.

:D

Thu, 07/07/2011 - 13:28 | 1433151 Global Hunter
Global Hunter's picture

A company trying to influence analyst estimates a few days before reporting seems like a pretty big conflict.  I don't know for sure but I would think that CEOs and CFOs have a pretty good idea how the quarter went a few days before press release.

If I'm wrong on that, set me straight please.

Thu, 07/07/2011 - 13:35 | 1433166 Doyle Hargraves
Doyle Hargraves's picture

"This time, it's different" are the four most expensive words in the English Language-Ludwig von Mises bitchez!

Thu, 07/07/2011 - 13:50 | 1433247 slaughterer
slaughterer's picture

At last, an earnings season strategy report.  Thanks ZH.    

Thu, 07/07/2011 - 14:00 | 1433264 Greeny
Greeny's picture

ha-ha-ha, Booyah, bitchez, keep whining, told ya,

buy the f* deep! Now just sit a side and cry.. Markets are

smoking hot.. "May Be Different This Time" Right,

it is different, corps going to blow away estimates, as

usual... Collapse, Collapse.... :))) *LOL*

Thu, 07/07/2011 - 14:28 | 1433384 SheepDog-One
SheepDog-One's picture

Bought the dips in gold and silver, theyre rockin! Fuck your paper junk Greenie!

Thu, 07/07/2011 - 14:15 | 1433335 mayhem_korner
mayhem_korner's picture

Everyone file in here.  Nothing to see.  Don't pay any mind to the nozzles above your heads, keep moving in...

Thu, 07/07/2011 - 14:38 | 1433425 slaughterer
slaughterer's picture

POLL:

IS THIS EARNINGS SEASON SHORTABLE?

CHOOSE ONE:

1.) NO

2.) NO

Thu, 07/07/2011 - 14:39 | 1433429 JR
JR's picture

"Obviously, everything revolves around the corporation and the health thereof, not around the people and their economic or other wellbeing. This capture is definitely a huge part of the problem;  most people’s reality is being spun by media whose interest is their own profit." – Nathan Martin, Nathan’s Economic Edge

Thu, 07/07/2011 - 15:02 | 1433542 LooseLee
LooseLee's picture

Just another example of the criminal, deceptive, and fraudulent nature of many human beings and especially those that are the ones responsible for this phoney market and economy. The lack of character prevelent in many of our corporate and political leaders is a sure sign that the 'end' is near.....

Thu, 07/07/2011 - 16:00 | 1433821 Sherman McCoy
Sherman McCoy's picture

Hasn't this dipshit been wrong for the last 400 S&P points? The only job on the street he's qualified for, is sweeping it!

Thu, 07/07/2011 - 16:28 | 1433943 css1971
css1971's picture

QE2 has been active for 99% of the last quarter. I'd expect the next reports, not the current ones to show problems.

Thu, 07/07/2011 - 16:38 | 1433983 RichardP
RichardP's picture

I still think the goal is to be in the vicinity of Dow 14000 by election day.  I think they will do whatever it takes to make that happen.  Any bets on whether they make it?

Thu, 07/07/2011 - 17:30 | 1434228 mynhair
mynhair's picture

Already have my Dow 20K hat.

Thu, 07/07/2011 - 22:49 | 1434881 Juice Box
Juice Box's picture

Prince Albert in a can!

Thu, 07/07/2011 - 23:09 | 1434920 Itsalie
Itsalie's picture

The OECD topped out in 1998 and 2003 while the ISM graph topped out a year later in 1999 and again in 2004. but in each case, stock market managed to rally on and on thanks to the Fed. The hopium crowd won't bail out without a major rapid shock when even government manipulation of statistics can no longer take place. The crowd is drinking the hopium that the eurocats are trying to create a brownout to cushion the on-going Italian and Spanish trainwrecks by printing away, followed by B Gross' twit that the fed would take over from there by August Jackson Hole. There would be more and higher frequency coordinated efforts to oil the perpetual motion machine until the end. But Edwards would eventually be proven right, maybe just a couple of years too early.

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