Goldman Sachs: "The Margins Are Not What They Seem"

Tyler Durden's picture

And for today's exercise in surreality, in your best Agent Cooper voice repeat after us: "The margins are not what they seem." Why? Because in his latest Weekly Kickstart, the next incarnation of A Joseph Cohen, David Kostin appears to be channelling David Lynch when he says: "Company-level margins can fall while aggregate margins for the market continue to rise. If high margin stocks grow sales faster than low margin stocks, the index-level margin still expands." We won't even parse the logic of the first sentence. As for the big "if", so that's what Goldman bets its FYE 2011 S&P 1,500 target on - now we know. "The apparent fallacy of composition may be explained by the simple fact that revenue growth matters." See, David, that's why you get paid the big bucks. But it does not end there: "Analysts expect 66% of S&P 500 ex Financials and Utilities stocks will expand margins in 2011." Now that with Brent at nearly $130 makes absolute sense. In other news, we now know who killed Laura Palmer.

Here is how Goldman resolutely refuses to change its margin forecast for 2011-2012 despite crude now 30% higher than where it was when this chart was first conceived. To be honest, we haven't flipped to the risk factors but we assume the first one would read: "Goldman may and will, in addition to trading against its clients, make the assumption that said clients are all bloody idiots."

And in some news actually based on a Euclidean reality, here is something that is oddly enough factual: the Earnings Calendar as earnings month is now upon us.

The complete and unabridged attempt by one David to channel another:

Kostin Chartology 4.9