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Revenue And EPS Deterioration Continues As Earnings Season Progresses
It was a short 5 days ago that we wrote about CNBC's misrepresentation of this earnings season as a stellar success for companies. Earnings and revenues were down 32.4% and 15.1% then. Since then the economic situation has deteriorated even more: as of today earnings were down 33.4% and sales have declined 17.4%, respectively, quarter over quarter. And while earnings are now supposed to increase by 114.9% in two quarters by inhaling green shoots and what not, more curious is out of what hat will revenues stage a dramatic 22% increase in just 6 months. If anyone held a gun to my head to indicate when disappointment with guidance/analyst expectations would finally set in, i would have to say middle of February 2010 when miss after miss, both top and bottom line, will demonstrate just what an unjustified joke this rally truly is.
Revenue change YoY to date:
Earnings change YoY to date:
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Fourth Qtr if not before is my schedule. Is there anything left they can put a buy rating on? Kiss of death when those start flying around. Thanks for all you do TD and team.
I know I shouldn't be surprised anymore but I am. Unbelievable.
i would have to say middle of February 2010
------------------------
is this a joke? are you saying stocks were a "buy" all this time and this rally has another 6 months to run before (IF ANY) disappointments in earnings????
not at all - just saying the ultimate divergence between reality and stocks will hit then.
As the old saying goes. The market can stay irrational a lot longer than you can stay solvent. That expression took on a whole new dimension in the past five months. Sometimes I wish I dropped 50 IQ points - my trading would increase markedly ... with that thought... hand me that bottle of tequila...
I'm pretty sure the rally can last indefinitely!
Here's my evidence....
http://en.wikipedia.org/wiki/Ghost_Dance
Indeed, had I not been reading Zero hedge and Business Insider I could have made a lot more money over the last 5 months. Although I would be functionally retarded, or perhaps clinically brain dead.
Yeah, sometimes understanding reality is a handicap. I watched you call this rally, like so many other bears including myself, but it was tough to bring yourself to actually buy a doomed market. And after it took off, the higher it went the more doomed it became.
Yet another case for the supremacy of a purely technical trading discipline. This rally won't fail until the technicals say so. I say within a few weeks, if not this one, but then I've been looking at earnings spreadsheets so what do I know.
At the moment, my trading philosophy is, whatever trade is sensible to you - do exactly the opposite. Thats why the quant traders are there to sniff out sensible sentiment and then blast you away with 'liquidity' trades.
GDP forecast down again - stock market up - ping.
Unemployment nos. sustained or down (don't even mention lagging) - stock market up - ping
Revenue beats expectations by 25% - stock down - ping.
Revenue losses exceed estimates - stock up - ping.
And the greatest thing for me is how CNBC, Yahoo, Bloomberg reporters have to try and legitimize it.
insightful post. i'm looking forward to religion hitting the mark some time.
I was thinking similar timeline. A plain vanilla unravel same as last year, just like in the Great Dep, is too predictable.
No gear stick cruise-control on this rocket. It'll be riden until it disintegrates, imho
A monster rally through early next year (with a blip), plus some, would astonish me, and then...?
I sold everything yesterday. I've been in since February and the air was getting a little thin. Small caps are moving crazy high.
Are these Operating Earnings to date or As Reported? Hugely important question. See the S&P site for clarification.
Was't aware you got to put operating earnings in your pocket
Depends on your accountant.
ohhhh, so neeeeeyhative!!! c'mon, drink the GreenShewtz Kool Aide. It's soooo dlish! As a bonus, the overabundance of FD&C Red No. 7 in it causes mild deafness, which is great when the batteries in your remote give out and you happen to have CNBS on, for whatever reason one might do that....
Got to love the CNBC interview this am with Wells. The guy has remained steadfastly bullish and feels he is being vindicated. Of course CNBC didn't ask him about his mental jujitsu that enabled him to bake into his prophesy the unprecedented governement intervention. His thesis is of course supported by the record drop in tax revenue and those strong income numbers Geithner alluded to. Wages down, transfer payments up is a more profitable mix these days
http://news.yahoo.com/s/ap/us_plummeting_taxes
Anybody who has been bullish so far this year or continue to be bullish is privy to information that the other investors do not have. The fed has been buying stocks from wall street at a premium with prior notification to these banks who run up the stock and dump it to the fed. What a scam.
To your point about transfer payments - Is it just me or is this table telling me that more than one in six dollars of income are government transfer payments...Line 17 / Line 1
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2007&LastYear=2009&3Place=N&Update=Update&JavaBox=no
And if you include government wages with transfer payments then government accounts for 27% of personal disposable income.
Almost every line in this report gives me something to be sad about.
Exactly. Quite a few people have been banging on about this for a while.
All those bennies, food stamps etc., have to show up somewhere.
Once the 50 and 100 MA move above the 200 as they did a week or so ago on the SP 500, stocks will keep going up. The same is true for the opposite - once 50 and 100 drop below the 200, the bear market is in full effect.
MA or EMA?
daily, weekly or monthly?
))
You TA guys are so ridiculous.
No, the bad TA guys are ridiculous. Any TA historian worth more than nickels is aware of the MA occillations that occur in "recoveries". Of course, bubbles are another story altogether...
Yeah, because fundamental analysis works so well!
2 weeks ago I quit watching to fundamentals and just hooked to hockey stick stocks here at brazilian Bovespa just like one in the herd, it's working really, really good so far.
it's important to keep an eye on both the
technicals and fundamentals....there is so much
angst on this site about the market not behaving
per the fundamentals....there is more to it than
that folks...
i think that the daily reckoning's guess of 10300 is reasonable before rigor mortis sets in....
I believe that we will see 10,300 and I also believe this thing will run into next year.
The only thing I know for sure is that it will crash in a spectacular fashion.
I still don't want to risk my money in an illiquid market and I am not nimble enough to day trade against computers.
knowing when to hold and when to fold is the
better part of valor and perspicacity...
Yaiii! I love bubbles, wheeee!
and who doesn't after all? lol
anon...I don't come here to get stock picks..and anyone who's traded the last two bubbles or longer knows what they are dealing with....computers, "The Corleone Family" and Red Bull chart chasers.
you want an earnings miss ????Take a look at HURL...I mean HURN...down 30 points enough ?
Also try looking at a shitload of reports that left a stench from the road apples they left behind as their stock prices "discounted" 10 % perpetual GDP growth. Thats the game they are playing now..until it no longer works.
A year from now - many months and weeks and trading days away, what will they(the talking heads) be saying? I can't imagine it will be very good.
They won't be saying a thing - when's the last time they ever felt that they had to be accountable for their bad calls?
They'll blame the anonymous bloggers for spoiling their party.
second week october is my target time.
either that, or spx 1080, whichever comes first.
till then, the trend is yr friend...and party hearty!!
No one knows. The point is the horse is dead but people are still winning by betting on a dead horse. Someday someone will notice that the horse is smelly, and doesn't move. Then they might worry that something is wrong. Last one out of the room turn off the lights.
like someone said on another blog - I just hope those stupid asians will keep buying our debt so I can have more time to prepare for inevitable.
You know Tyler, analysts will contrive something to make it look less horrible. I've watching this market jumping with baseless support. To get this market lower, there must be a negative chain of event happening simultaniously to get this market lower because we are in a period that Bernanke is acting like John Law (reflating the hell out of assets). So far, I can't see anything on the horizon that is shokingly enough to cause this market to reverse. If the negative events can be spread out long enough, they wil squeeze the hell out of the short. JMO.
the turning point will probably happen before any stream of bad news events occurs.
Exactly. Mood makes its own patterns and even creates the news.
Personally I am flabbergasted that the fact BAC and the SEC consummated their wedding night in less than an hour, and at a 33:6.5XXXXX ratio, isn't blaring from every news media in the land.
Then again, I oughta know better.
WTF is going on?
February 2010 seems like a decent target.
During the last economic downturn the highly touted second-half recovery of 2001 evolved into the corporate bankruptcy tsunami of 2002, of which all of the scams underpinning the previous boom were revealed.
I heard an economist on video recently that was not willing to kill the greenshoot recovery theory, he actually stated that he wasn't supposed to say we are struggling because "they" think it is a self-fulfilling prophecy (prior Greenspan quote regarding the market leading expectations for the economy). Well, companies are going to continue to fire employees after each monthly review when revenue continues to fall due to less consumer spending due to each company continuing to fire employees (death spiral) - the executives will be the last to go when the companies go bankrupt.
The only real solution is to institute policies that will add small and medium sized business jobs. The powers that be feel this will take a long time, so to stop the immediate bleeding they are reinflating the bubbles, but housing is the most important from the macroeconomic article, and deflation is being driven by the record unemployment. The market smacks of desperation, like custer is circling the wagons around the market index in a last effort to hold the line.
I would love to see net cash flows into each index before fees in comparison to the total market value of each index for the last ten years plus dividends and capturing all other fees - Ponzi is most likely the answer. We are in a financial war, but I am not sure which side the US FED central bank is on - they may want a collapse of the US Dollar to bring in their world currency.
I wish I wasn't sure which side they are on.
Judging by the increasing coverage of 'angry mobs' we may get a pop in survival goods (aka hurricane supplies).
Despite all the doom and gloom, Kroger and ilk still seem to be doing pretty good. People are still buying gas and groceries.
A controlled dollar devaluation is my guess on the desired outcome. Deflation will cripple the Treasury's (presumed) ability to pay the interest on the debt. The only path they see is reflation. Let's hope they don't succeed too well.
jimbo...it can happen at any time but agree they run it a little higher to make all the pictures look pretty.
One thing you'll start seeing is crap like HURN get pole axed and the market doesn't even notice as happened today. Then a few more throw pies....then more...then it's over.
This is just like the last two bubbles and it won't go down easy. You'll get rotation, made up stories, single digit dogs running, pauses to "refresh", "profit taking", and "digestion".....the ass hats on the devil channel even have a new slogan to take place of the "new error".....they call this third clusterf**k...the "new normal".......
The carney barkers have pulled out their wall street "bullshit excuse" dictionaries and are working the crowd.
That pretty much sums up it - yupp - nothing much to add to that. The emperor is wearning no clothes and thus far everyone is busy admiring the silver lining.
Ags, are you the progeny of RobotTrader?
Wait til the market retests the lows and maybe goes lower - might happen in a few months or two years, but it will happen. THIS IS a secular bear market.
October 5th
That's an esoteric call, so on that note, I'll say that "risk aversion," the oxymoron, will kick in this Thursday starting with the Asian markets. I'll back that call by shorting the EUR/YEN if/where/when I find a good PnF entry point and document it in my "Good Morning Children" post.
Tyler,
Not sure how to read the Bloomberg above, but how does it jive with S&P's reporting of earnings here:
http://www2.standardandpoors.com/spf/xls/index/iee500_gics.xls
Sure, year over year comparisons suck, and things are actually much worse than portrayed by the comedians on CNBC, but quarter over quarter comparisons, although not as rosy as Kudlow would like us to believe, don't seem to be as bad you're implying above.
Just trying to understand the insanity around me :-)
hypotetically speaking:
EPS down 33% comparing to Q2 2008
SP500 Q2 2008 = 1250 - 1300
1300*0.67=871 fair value for SP500 currently
I would point you to two concepts worth digging into for a deeper understanding. The first is the difference between estimating earnings based on top-down (focusing on revenues) and bottom-up (focusing on "profit") models:
http://macro-man.blogspot.com/2009/07/tell-me-lies-tell-me-sweet-little-lies.html
The other key distinction is with "as reported" and "operating" bottom-line earnings. Basically earnings look great, if you don't count things like writedowns and stock options.
http://ftalphaville.ft.com/blog/2009/04/24/55058/equities-still-a-bubble-and-equity-guys-out-of-this-world-bnp-paribas-says/
Thanks for the links. I understand the distinction between Operating Earnings and Reported Earnings, as well as the difference between Top Down estimates, and Bottom Up estimates.
It's the gaping chasm between the two that is confusing, and if I take Macro Man's meaning, he is a little flummoxed too. His point about which series to believe in is correct, because whether you're a Top Down/macro/bearish sort, fair value is somewhere around 300-600 on the S&P500, or if you're a bottom up/micro/bullish sort, you're betting on 1200-1400.
That's a massive range. Add to that all the shenanigans TD reports on everyday, and it's gotten to the point where any sane person questions their own common sense.
My original question was to how TD's chart compares to the S&P 500's figures? Apples to apples, or apples to oranges?
Tiesto... I mean test. Screwed up my settings and want to be sure I'm back. Apologies to all for a bit of noise.
Tiesto... I mean test. Screwed up my settings and want to be sure I'm back. Apologies to all for a bit of noise.
We have to wait another six months for dream and reality to clash? I don't think so... Wall Street is filled with all kinds of people who can do the math (just like TD)... They are buying because stocks are rallying (not because of green shoots or because they think revs will suddenly ramp higher)... One thing I've learned over the last ten years is that the market doesn't give a damn about reality (until it bites them in the ass, then as soon as the market stops falling they go right back to momentum-based buying!)
800 billion goes a long way. Masterbate, rinse, and repeat.
This all started with INTC decided $1.6 billion in EU fines were not representative of ongoing business and could thus be excluded from earnings report, creating the entire boom and ending 4 consecutive down weeks. What they never addressed is $1.6 billion at just 5% return is 80 million a year in income the shareholder will never see. Ya, fines don't happen each year, but at that magnitude there IS an ongoing ramification.
Nor did INTC disclose the chunk of previously marked down to zero inventory finding its way into the income statement.
The manipulation, if any, has converged into the "Perfect Storm."
First we have:
1) A bloated stock market that has been running a slow stoch overbought reading worse that ever
2)4x sales by Corp. Insiders(the rats leave first)
3) Very low volume on the indices
4) Bottomline earnings improvements via firing and cost cutting
Next up Oct.
1) Typical "sell off " in Oct. It's self-fulfilling
2) Q3 earning that have to beat q2 on topline-not cost cutting
3) A bloated stock market looking for an excuse to dump
4) Absolute and utter retardation of PE ratios. A good buy may be 8x-not 200x
So, Bernanke and the PPT could have made a long,slow,soft landing. Instead they bubble pump equities on helium earnings and fake GDP numbers. So when everyone disappoints, man, this one is GONNA BRUISE. This will set back the manipulation efforts by some order of magnitude because now everyone will know we are in this crap for a decade or more. But who cares? Goldman will recapitalize!
What's being done is being done at all levels. States can't bear to cut. They will do anything not to cut. They will maneuver in any way they can to keep spending and keep pretending all will be well. "If we can just keep going until all fixes itself then we won't have hurt anyone who depends on us." It's a genuinely noble attitude. It derives entirely from the perspective that IT'S NOT DIFFERENT THIS TIME AND EVERYTHING HAS ALWAYS WORKED OUT OKAY BEFORE. They're wrong. They aren't evil. They're just wrong. They are making it far worse.
Birmingham is really digging in...
"County workers placed on administrative leave under the cuts will be entitled to unemployment and some health-care benefits and will be called back after 45 days, according to a senior county official."
Ouch, the pain. That will surely bring expenses right in line with revenue (lackthereof).
Don't forget that all markets are RSI Overbought for the first time, along with Base Metal commodities. And DXY is just about to hit Oversold.
Exactly. A significant reversal is about to happen right now while people wonder how many weeks to go. The dollar is bottoming (without confimation by treasuries, take note) and oil, PM, copper are topping. No way stocks don't drop if this plays out. Question is whether they recover to a new high within a few weeks. I suspect not, but who knows?
The economy doesn't have anything to do with the stock market. Given enough liquidty we could have 50% unemployment, canibalism in the streets and DOW 36,000. In fact that's my forecast. Bon Appetit.
No, it won't unfold that way. Computers can create a bias, but that bias can't overwhelm CALPERS and TIAA/CREF and all other huge institutions that decide to flee. The scenario of numbers departed from fundamentals can happen, has happened before but indeed, this time is far far worse a departure than ever before, but at some point asset allocation committees will look at earnings and flee. That will take a while because those committees can stay delusional for a while. That's the problem. They still live in a world of $15 oil with no one at all even mentioning that it is finite. That's what has changed and it will never go back to what it was.
This whole thing stinks like hot garbage, but you gotta give it to 'em. If they know how to do one thing and do it well, it's creating a bubble and getting people to buy into it. You can count on this dirty diaper to stink it's way up another 10 or 20% before the dog eats it.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aR8Q0068KCaw
that is some bad weed
You do not "have" to be in this market, well, unless you have to be. I have a few metals longs, but I am out by pure principle. Sure buying BAC at $2 was an easy call, no way they fail, but I refuse to support such a scam. If you are of the "have to make money in the market" bent, fiing go long until S&P 1250 already, that is he next train stop.
Capitulation by perma bears is a very good sign. Uncertainty by uber bulls is even better! Let's stop paying attention to the noise and look at the history. Has a recession that was caused by a credit collapse ever lasted less than two years? If you are long, avoid the junk. If you are short, don't jump the train. Patience does pay off. If you can't enjoy the ride, maybe the investing is not for you, stick to the modern portfolio unless over 50 and have a cap of green tea. (greens are actually good for yo.)
I would like to add that these are the GOOD numbers. Remember all those accounting rules that bankers did not like? They are still cooking the books and this is the best they could do?
There is another tidal wave sitting just off the near future as well: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aF7xhCfMRWAI
The spectacled calculator crunching crowd will fold under the pressure. The announcement was not definitive and stated they would submit their recommendation for consideration.
They will be told that they will be labeled as the cause of the GD2 if they flip-flop. I would like to see the FASB & IASB puff out their chest on principle as we are out of principal. This is the ultimate test of a mans character, a test of situational ethics.
As for balance sheets under the current state of hyperbole, there is little left on the left side, and the right isn't right.
What bears are left ? I don't know many but those I do know who are bearish want no part of this short and are scalping long. Until this breaks...bear markets will be 3 hours long.
Also, many long time bears have gone long and have been long for quite a while or are respectfully out of the way or renting POS's until the trend changes and the "F you pay me", no pullback rally ends. Rogers covered everything and is long, Fleck is long and closed down his short only fund. Matter of fact Fleck and Faber are thinking Oscar Meyer Wiemar is coming for a visit which I disagree with. How, with people out of work are they going to support hyperinflation and the prices they think are coming ? Below is their sole thesis....Ask someone in a tent city what they think.
http://incogman.files.wordpress.com/2008/09/wheelbarrow-mutilated-728910...
Denninger was long from the low until 875 though he remains firmly grounded. Of all people, Harry 40000 Dow Dent is the most bearish person I've seen lately but tonight agreed with his fellow clowns this is going higher to suck in the general public so they can lose their ass again. Whitney, Roubini, Fred Hickey, Jim Stack, and Krugman....all bullish or leaning up. I think Richard Russell threw in the towel...
Yes, there are those who remain bearish in principal but the two bubbles prior to this spanking new "cash for clunker" "Green shits" bubble are embedded in everyone's memory. This looks, feels, acts, and trades the same way as the last two bubbles. No one's fighting this and bears are smart enough to walk away because of the last two mania's.
The most important "words" that I heard recently came out of the Humpty Dumpty meeting when Helo Ben was asked by some brain dead undereducated congressman,,,will you be raising short term rates any time soon Mr. Fed man ???...."Nope....not for the foreseeable future"....that was it...whoa daddy.....
As disgusting and destructive as this dose of moral hazard is, it will end the same way and sooner then the last two engineered romps. Everyone who learned form history is now guessing "when" this ends and is in the process of preparing themselves for the end game again. It's coming. We foulked up again. The math won't work. So much for Obamas no more bubble economy spin. This one's another doozy.
This is not a new bubble, just a big market rally like Nov '29 - April '30. A bubble takes credit and broad participation. Even in a bubble, volume and participation ramps up as the masses lever up and buy in. They've been burned by stocks twice in a decade, and are up to their asses in debt. This is just trader vs. trader (and computer vs computer), and it will roll over soon.
Can't you just throw in the towel already TD and proclaim your bullishness so the market can get back to running on something akin to fundamentals?! The market can't fall until the last buyer has bought.
What are these people(wall street, Fed, Treasury, Media) doing? They're are killing every last bit of credibility they have. Regular people still - believe it or not - give these people the benefit of the doubt.
Tyler has nothing to do with this. I think what ZH does is a public service uncovering the rot that's infected the market. It always cracks me up when cnbs asks someone "what's an "investor" to do????..........Does anyone actually think they are "investing' ? Heck no...I want my farking number and symbol to go "up" or "down" and could give a rats ass about what the company does cause I'm renting not owning. We are flat out gambling. Two monstrous back to back bubbles so close together are unheard of and now we are staring down the barrel at number three ???
I spent 17 years watching the market turn into a rat infested abandoned condo located in foreclosure USA. Now I'm free tro speak my mind as of last Friday. Super Bowl Sunday 2003 my dad passed away. I will never forget his words that Friday before he died when it was just me and him and my sister and out of the blue he said to me.."there is no stock market"....I asked what he meant by that, I thought it was the meds as his body was failing, but he said again..'there is no stock market". Took me six years to figure out what he meant.
amen
If they can reflate from the abyss of S&P 666, then I see no reason why they cannot take it from 1000 to 1500. Everywhere in emerg mkt we are already higher than 12 months ago - emphasis, it's higher than 12 months ago, not higher than the March of November lows. As for October earnings, well all we need are the usual creeping down analysts' estimates weeks before earnings season, then we need more mark-to-make belief from Intel and GS, and last for the MSM to cheerlead - "wow that beat estimates, this beats forecast blah blah...". I am away until 1500, when the GDP hits Greenspan's 2.5% growth and manufactured inflation hits 2%. Then we'll see.
First the emerging markets are on a cocaine high now and the globe is joined at the hip....
1500 ...how and when .? Another 50 % ....we don't make or create shit other than debt ...We are real good at that...if this turns into another all out mania which I'll never rule out with ass hats we have running the ship......the next time down our country will look like the set of Thunderdome.
I may be way off and wrong but if you trust what Uncle Al says and think we are headed to 1500 good luck.
FEB!?!? I have to wait that long for the rest of the million dollar minds to catch up... So I need to go long untill then.... what a fiasco...
Stop complaining and get SHORT if you're so certain.
"Oh wait", you say, "this market will never go down. I am right and the market is wrong..."
Tyler,Coming to my obsession with market manipulation. Sometime back I wrote on this forum that if the Exchanges are willing to open up the trading books for a study, I think there will be enough evidence of market manipulation in the rallies that we saw before the plunge. The current rally is purely liquidty driven. the hyenas have cornered the market with the hope that the greenshoots will ensure buying by the parties left with the last dime and nickels.I just have a feeling that GS and the rest will agian come out with a great result,BUT,this time in a falling market.
On a personal note - I had applied for a login. drrascal is the user name I chose. Any luck for me on that front.
drrascal
Low interest rate gambling with high leverage with sneak pre-view of the results
On Bloomberg they were talking about another 25% up on the S&P
Well, Gary Shilling is still still short and says we will hit 600 by year end!
Remember everyone:
The markets can remain irrational longer than you can remain solvent.
the problem with this site is that the author will take his views to the grave, sofar he is wrong 45% into this rally
managing money is a very different discipline to researching markets, be aware of research providers with dogmatic views such as this one
Quite. ZH's view has been quite a FAIL thus far. I'm sure they'll be proved right eventually though lol