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S&P Profit Margins Have Now Peaked

Tyler Durden's picture




 

Well, technically they peaked some time ago (contrary to mainstream media propaganda), but we were waiting for another quarter to confirm our findings. For the sake of recreating our results, courtesy of CapitalIQ, we ran an analysis for all S&P 500 companies excluding companies that belong to the S&P Financials Sector Index, ending up with a universe of 418 companies. Then we looked at the last 3 years of gross profit margins on a quarterly basis (13 data points), and did a simple average, simple median, and trimmed mean (excluding top and bottom 15%), and got the following result.

As is obvious, the trimmed mean (probably the best data indicator) has now declined for 4 quarters in a row, the simple average has been in a steady decline for 6 quarters after peaking at 43% in Q4 2009, and the median is practically in free fall and is now back to the summer of 2009 levels.

The take home observation is that regardless of how they are observed, corporate margins have now peaked, and any additional headcuts at the corporate level will be cutting straight into the muscle, leading to even further profitability deterioration. That the margin drop started well before the current quarter confirms that this is far more than just a commodity price inflation phenomenon (although it certainly does not help). The only possibility for bottom line corporate growth going forward is therefore revenue growth in order to grow absolute profitability (as margins are flat or drop), which will come from either economic growth or capex spending: the first of which has been purely artificial courtesy of limited monetary and fiscal stimulus, and the second has barely budged from multi-decade lows.

 

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Mon, 06/20/2011 - 17:01 | 1386391 WilliamShatner
WilliamShatner's picture

Peak S&P, bitchez!

Mon, 06/20/2011 - 17:09 | 1386409 Manthong
Manthong's picture

Take it down to quarter impulse, Mr Sulu.

Mon, 06/20/2011 - 17:08 | 1386419 So Close
So Close's picture

low volume algo induced market levitation +1

fundamentals 0

Mon, 06/20/2011 - 18:22 | 1386665 Captain Queeg
Captain Queeg's picture

Klingon bastards killed my capex.

Mon, 06/20/2011 - 19:29 | 1386834 Cognitive Dissonance
Cognitive Dissonance's picture

The Federal Reserve dingo ate my baby........fiat.

Mon, 06/20/2011 - 17:07 | 1386400 LawsofPhysics
LawsofPhysics's picture

Tell me something I don't know.

Mon, 06/20/2011 - 17:24 | 1386472 Franken_Stein
Franken_Stein's picture

 

Google was funded by the NSA to create a dual use product, a trojan horse,

a global trend analysis and trend localization tool and global resistance assessment tool,

disguised as a search engine.

 

Did you know this already ?

 

Mon, 06/20/2011 - 17:45 | 1386553 LawsofPhysics
LawsofPhysics's picture

Yes.  More to my original comment.  I can cut no further without firing people or significantly raising prices.  I hope google is getting the fucking message.

Mon, 06/20/2011 - 19:28 | 1386831 Cheesy Bastard
Cheesy Bastard's picture

This was obvious in 2009 when Larry Summers said that it was proof the stimulus was working and that the crisis was over, because of the downtrend in people googling "economic depression"

http://www.politico.com/news/stories/0709/25083.html

Mon, 06/20/2011 - 17:42 | 1386527 Al Gorerhythm
Al Gorerhythm's picture

Was that knowing of yours absolute?  

Oh yeah, I knew it was all artificially levitated but these confirmations can't just be brushed off.

Mon, 06/20/2011 - 17:09 | 1386405 PaperBear
PaperBear's picture

All downhill from here.

Mon, 06/20/2011 - 17:10 | 1386416 kito
kito's picture

tyler, to put it simply, many of the s&p companies derive a growing portion of revenue from overseas, where real organic economic growth continues. so how do you factor this into your analysis?

Mon, 06/20/2011 - 17:17 | 1386437 css1971
css1971's picture

Europe?

China?

 

Mon, 06/20/2011 - 17:13 | 1386438 GeneMarchbanks
GeneMarchbanks's picture

'real organic economic growth'  

Where is this place you speak of?

Mon, 06/20/2011 - 17:21 | 1386452 kito
kito's picture

yes china, india, korea, brazil.

Mon, 06/20/2011 - 17:43 | 1386531 GeneMarchbanks
GeneMarchbanks's picture

OK, now, kindly explain what you mean by organic?

Mon, 06/20/2011 - 18:12 | 1386628 dugorama
dugorama's picture

germany

Tue, 06/21/2011 - 05:12 | 1388225 dvsteenk
dvsteenk's picture

a place with a birth:death ratio higher than one?

Mon, 06/20/2011 - 17:32 | 1386466 Contra_Man
Contra_Man's picture

+1 on "Where is this place you speak of?" 

 ...  Bricks eventually crumble too - if you kick them down the road long enough.

Mon, 06/20/2011 - 17:49 | 1386550 Cdad
Cdad's picture

Bricks eventually crumble too - if you kick them down the road long enough.

Oh no.  No no no.  You apparently have not heard of "decoupling," another criminal syndicate Wall Street idea that the US can fall apart and the EMs can run...which was pumped for weeks as the US fell in 2008.  

Just wait for the magic phrase to be uttered + ________ = profit!

Mon, 06/20/2011 - 19:32 | 1386842 nmewn
nmewn's picture

Mmm...one of my past favorite phrases was "synergy"...it meant a buyout of another company with the attendant layoffs soon to follow on the bought out side of the company's personnel.

You don't hear it much anymore, but I'm sure the hosts who hold the WS business conferences are brainstorming on yet another innocuous way to say, misery index...its their job ;-)

Mon, 06/20/2011 - 17:16 | 1386449 HpDeskjet
HpDeskjet's picture

It is in the analysis. It's not like this revenue from overseas suddenly appeared this year... Even with growing revenues from overseas, margins are dropping, its not that hard.

Mon, 06/20/2011 - 17:20 | 1386460 kito
kito's picture

many analysts, as per the post below, feel stocks are the cheapest theyve been in years. only you and all the other zh marxist groupthinkers are correct? so far, dow still above 12000. no qe3. gasp, the market might have its own legs!! oh the horror for capitalism!!!

Mon, 06/20/2011 - 17:49 | 1386495 HpDeskjet
HpDeskjet's picture

double post

Mon, 06/20/2011 - 17:35 | 1386496 Tyler Durden
Tyler Durden's picture

Marxists? Ironically Zero Hedge is the place that is most in favor of free markets without artificial props, true price discovery, and, gulp, the risk of actually failing. It is apologists for centrally planned economies such as yourself that are probably more deserving of the generic marxist brand (whose usage also provides sufficient and necessary insight into the user's intellectual capacity to make any further commentary moot in the first place) no?

Mon, 06/20/2011 - 17:44 | 1386547 Noah Vail
Noah Vail's picture

They always give themselves away with the name calling.

Mon, 06/20/2011 - 17:52 | 1386561 LawsofPhysics
LawsofPhysics's picture

yes, because they have nothing else and would just hate for that expensive ivy league education to be less than useless.

Mon, 06/20/2011 - 18:50 | 1386729 Ricky Bobby
Ricky Bobby's picture

+10

True Price Discovery no no we can't have that.

Mon, 06/20/2011 - 19:40 | 1386894 nmewn
nmewn's picture

"Marxists? Ironically Zero Hedge is the place that is most in favor of free markets without artificial props, true price discovery, and, gulp, the risk of actually failing."

Sic em Ty ;-)

Mon, 06/20/2011 - 19:44 | 1386915 Cheesy Bastard
Cheesy Bastard's picture

+1.  These guys have more projection than a multiplex cinema.

Mon, 06/20/2011 - 19:58 | 1386975 nmewn
nmewn's picture

It gets weird around here sometimes, I thought the stock pump & dump boiler room thingy went out years ago.

Maybe he's a Retro-Troll ;-)

Mon, 06/20/2011 - 20:34 | 1387137 Cheesy Bastard
Cheesy Bastard's picture

Same shit, different name.

Mon, 06/20/2011 - 21:04 | 1387236 nmewn
nmewn's picture

No doubt.

Here's one that came to my attention today...seems the tenth amendment is making a comeback, fortunately...

“Federalism secures the freedom of the individual. It allows States to respond, through the enactment of positive law, to the initiative of those who seek a voice in shaping the destiny of their own times without having to rely solely upon the political processes that control a remote central power.”

Everyone has standing.

"(1) Federalism has more than one dynamic. In allocating powersbetween the States and National Government, federalism " ‘secures to citizens the liberties that derive from the diffusion of sovereign power,’ "

 

New York v. United States

, 505 U. S. 144, 181. It enables States to enact positive law in response to the initiative of those whoseek a voice in shaping the destiny of their own times, and it protects the liberty of all persons within a State by ensuring that law enacted in excess of delegated governmental power cannot direct or control their actions."

http://www.supremecourt.gov/opinions/10pdf/09-1227.pdf

Its starting to get interesting, what this means is, IMHO, is ObamaCare is dead ;-)

Mon, 06/20/2011 - 21:25 | 1387320 ceilidh_trail
ceilidh_trail's picture

Is KITO really Harry Wanger?

Mon, 06/20/2011 - 17:36 | 1386499 HpDeskjet
HpDeskjet's picture

Then analysts are stupid (or are paid to pretend to be). Stocks are not cheap by measures that are much more relevant than "forecasted" earnings that assume ever rising margins/sales.  Take a look at Shiller's PE, Tobin's Q, Dividend Yields, all will say the same => At index levels stocks are expensive to very expensive. Of course you can find several companies that are doing very well and will continue to do so, but for the majority this is not the case

Mon, 06/20/2011 - 18:19 | 1386643 Caviar Emptor
Caviar Emptor's picture

Yes and by Total Market Cap to GDP (Buffet's favorite metric) it's already at 2006 and 1998 levels. Note: GDP "growth" this cycle has largely been inflation from record stimulus. The organic level would push the ratio over the 2000 peak

Mon, 06/20/2011 - 17:39 | 1386513 css1971
css1971's picture

Marxist? QE2 ain't done yet. Dow is down 7%. What has the stock market got to do with capitalism?

p.s. Stop feeling and start thinking.

Mon, 06/20/2011 - 17:38 | 1386523 kito
kito's picture

7 percent? how many times in the history of the market has it been down 7 percent? thats your ominous sign?

Mon, 06/20/2011 - 18:00 | 1386595 Pool Shark
Pool Shark's picture

 

The DOW may only be down 7% priced in FRN clownbucks, but measured against real assets, it's in freefall.

Zimbabwe anyone?

 

Mon, 06/20/2011 - 18:10 | 1386603 Pool Shark
Pool Shark's picture

btw,

What good does it do to gain nominal dollars in the silly stock market and pay taxes on cap gains that are just phantoms based soley on the depreciation of the US$?

Better to just get out of the US$ and US markets altogether.

 

Mon, 06/20/2011 - 19:47 | 1386912 nmewn
nmewn's picture

"What good does it do to gain nominal dollars in the silly stock market and pay taxes on cap gains that are just phantoms based soley on the depreciation of the US$?"

I'm glad someone else gets it...well stated.

Mon, 06/20/2011 - 18:24 | 1386656 unununium
unununium's picture

Are you Bob Brinker, or luscious lips Ken Fisher?

Mon, 06/20/2011 - 18:44 | 1386722 Ricky Bobby
Ricky Bobby's picture

Steve Lies-man is that you?

Mon, 06/20/2011 - 17:40 | 1386519 buzzsaw99
buzzsaw99's picture

The market "might" have legs of its own? breeheehee! the market is a bunch of bloated corpses floating in a putrid sea of qe-zirp. what a pathetic troll you are. bring back hamy!

Mon, 06/20/2011 - 17:43 | 1386533 kito
kito's picture

yes buzzsaw, because you espouse it in such eloquent terms, it must be the truth.

Mon, 06/20/2011 - 17:57 | 1386576 buzzsaw99
buzzsaw99's picture

I am fluent in 36 dialects of grifterese and well versed in troll lingo too. The foul stench coming off of butt sniffing booger eating flamebait such as yourself is not unique to my olds factory palate. Did you find that scent in a barnyard while humping a goat?

Mon, 06/20/2011 - 17:51 | 1386559 Noah Vail
Noah Vail's picture

I thought you guys knew better than to respond to trolls.

 

Its like feeding the pigeons.

Mon, 06/20/2011 - 17:58 | 1386592 buzzsaw99
buzzsaw99's picture

you can't fling a dead cat around in here without hitting a troll. ;)

Mon, 06/20/2011 - 19:30 | 1386839 The Fonz
The Fonz's picture

Well trolls eat cats.... lol 

Mon, 06/20/2011 - 19:10 | 1386785 The Fonz
The Fonz's picture

Do you watch these stocks tick by tick every day? I do. For instance this morning every euro index was down, the dollar was up and I was prepping to make some dough on my shorts.  Then the market goes black. They shut it off for a "glitch". No premarket but the dollar is still trading. Gold gets whacked in less than 3 mins by someone who obviously doesn't care how bad their fill price is. Then The dollar burns off 1/2% and plows right through resistance at 76 on the USDX.  Market opens .25% down from the dollar hit job, and market makers not having a premarket to force them not to game the system.  Then in comes a wall of green ticks that drives the market for 1.5 hours until the double pomo kicks in.  Even with this there was weakness all day.  There are is no market with legs, this is manipulation straight up. That is why the volume is low. Even a bull seeing this will be very very scared to continue.  When the volume comes back the dam will break and it will be a doozy.

Mon, 06/20/2011 - 19:22 | 1386806 Greeny
Greeny's picture

Indeed that "Corps profit Margin topped in 2009" is complete BS. CAT in 2009 average 0.60-0.64 per Q in 2011 $1.40 (double) AAPL 1.33-1.35 per Q in 2009 in 2011 $6.40 per Q 4 times that and more.. I know this might be wrong examples, but saying that 2009 was TOP? Common.. Profit Margins only started to rise in 2009 and they "maybe" topped about 2 month ago, if we see weaker profits, or maybe we not going to see that at all.. There is some good quarters and bad ones, but in general Profit Margins are fine especially if you take a look at export companies like BA, check Boeing - it's smoking hot.. "Fly like an eagle", we still going to be higher by 2011 year end.. Printing presses are standing by hot, in case wee see some slow down.. Let's wait and see what Bernank has to say tomorrow..

Mon, 06/20/2011 - 19:47 | 1386914 Bicycle Repairman
Bicycle Repairman's picture

Marxist?  Groupthink?

Kito, you have not made productive use of your 12 weeks here.

Mon, 06/20/2011 - 20:14 | 1387052 kito
kito's picture

sorry, i went a little overboard on the junkers

Mon, 06/20/2011 - 22:50 | 1387609 Jack Napier
Jack Napier's picture

You must not be familiar with the DOW/GOLD ratio, the correlation between the size of a monetary system and it's purchasing power, or the difference between market and marxist.

Tue, 06/21/2011 - 09:05 | 1388517 11b40
11b40's picture

We need more "flag" choices.  Yo, Tyler.  Could you add one for STUPID?

When was the last time this market had "it's own legs"?

Mon, 06/20/2011 - 17:50 | 1386565 LawsofPhysics
LawsofPhysics's picture

Means nothing if it is not employing people in the U.S., and not simply a few financial fucknuts.

Mon, 06/20/2011 - 17:09 | 1386417 max2205
max2205's picture

Blummie just posted that stocks are the cheapest in 24 years. Gulp, get your story straight.

For the second time since the bull market began, profits are surging and stocks are falling.
Standard & Poor’s 500 Index companies will earn 18 percent more this year than in 2010, according to the average estimate of more than 9,000 analysts compiled by Bloomberg. Higher profits haven’t stopped the gauge from falling 6.8 percent since April 29, pushing valuations to the cheapest levels in 26 years. Even if companies posted no growth, price-earnings ratios would be lower than on 96 percent of days in the past two decades.
The combination of China raising interest rates, concerns about a Greek default and the end of the Federal Reserve’s $600 billion stimulus program have almost wiped out this year’s gains. The divergence between profit forecasts and economic indicators shows the challenge to investors after the S&P 500 gained 88 percent from a 12-year low in March 2009.
“The market is not willing to pay for future growth,” said Nigel Holland, who helps oversee $516 billion at Legal & General Group Plc in London. “Provided there is better data, it will stabilize,” he said. “The market probably has room to rise 10 percent by year-end.”
The S&P 500 climbed less than 0.1 percent to 1,271.50 last week, snapping its longest retreat since 2008, after reports on jobless claims, retail sales and Chinese industrial production exceeded economists’ forecasts and German Chancellor Angela Merkel retreated from demands that bondholders be forced to swallow losses in a Greek rescue.
The S&P 500 advanced 0.5 percent to 1,278.36 at 4 p.m. in New York today.
Longest Streaks
Equities also got a boost as retailers Best Buy Co. and Kroger Co. (KR) said they would match or exceed predictions for 2011 income. The advance pared the S&P 500’s loss from its 2011 peak of 1,363.61 on April 29 to 92.11 points.
At 34 days, the decrease is the second longest since the bull market began. The 16 percent tumble from April to July 2010 lasted 49 days, Bloomberg data show. This year’s retreat has coincided with a decline in predictions for 2011 gross domestic product growth to 2.6 percent from 3.2 percent, according to the median estimate of 83 economists surveyed by Bloomberg.
Losses since April have pushed the price of the S&P 500 to 14.5 times the past year’s earnings, compared with the average of 20.5 since June 1991, according to Bloomberg data. The gauge is valued at 8.7 times cash flow, cheaper than in 81 percent of occasions since 1998. The gauge is priced at 2.1 times book value, or assets minus liabilities, lower than it has traded 90 percent of the time since 1995.
Not Excessive
“Even in the assumption that earnings growth is zero, valuations would not be excessively high,” said Patrick Moonen, who helps manage $537 billion at ING Investment Management in The Hague, Netherlands. “We are below consensus in the estimated earnings growth, and still think the corporate momentum is very strong.”
Disappointing reports since May on housing, employment and manufacturing have heightened concerns that $600 billion in Treasury purchases by the Fed have failed to bolster growth. The S&P 500 posted its biggest weekly decline since August in the period that ended June 3 after the U.S. jobless rate unexpectedly climbed to 9.1 percent and payrolls expanded at the slowest pace in eight months. A report from the Institute for Supply Management on June 1 showed that manufacturing expanded at the lowest rate in more than a year.
Greek Swaps Soar
The cost of insuring against defaults on Greek, Irish and Portuguese government debt surged to records last week on concern governments will fail to impose spending cuts needed for a European Union debt restructuring.
Credit-default swaps on Greece soared as much as 459 basis points to 2,237 on June 16, according to CMA prices, meaning it cost more than 2 million euros ($2.9 million) a year to insure 10 million euros worth of the nation’s debt.
They traded at 1,932.75 basis points as of 4:30 p.m. in London on June 17 as Merkel backed down from her demands and said she’d work with the European Central Bank to avoid market disruptions.
Investors are concerned about slowing growth in the U.S. and Europe’s sovereign debt crisis at the same time policy makers in China, the world’s second-largest economy, are trying to cool expansion. The country’s central bank has raised the reserve-requirement ratio for lenders 11 times and boosted interest rates four times since the start of 2010 to keep inflation in check.
Lehman, 1980s
Analysts are boosting profit forecasts even with the global economy showing signs of weakness. S&P 500 earnings may rise to $99.61 a share in 2011 from $84.58 last year and $61.52 in 2009, according to data compiled by Bloomberg. That’s an increase from the forecast of $95.37 on Jan. 3 and $98.70 on April 29, the data show.
Should stocks stay at current prices and the analyst prediction come true, the S&P 500 would trade at 12.8 times income on Dec. 31, the lowest level since 1985 except for the six months after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008 and nine months in the late 1980s, according to Bloomberg data. Companies in the S&P 500 are forecast to earn $24.31 this quarter, up from $24.16 at the start of April.
Concern the slowdown will lead to another recession will weigh on stocks even as companies report higher income, said Doug Cliggott, Boston-based equity strategist at Credit Suisse Group AG. He said the S&P 500 will be little changed through year-end.
Not Extreme
“We wouldn’t put the market now as extremely rich or in a sense extremely attractively valued,” Cliggott said in an interview on Bloomberg Television’s “InsideTrack” with Deirdre Bolton on June 13. “Price-earnings multiples will be at or below their historical averages because of all the uncertainties on future growth.”
Stocks may also have to do without more stimulus from the Fed, which will complete its second round of Treasury purchases this month. While Fed Chairman Ben S. Bernanke said during a June 7 speech in Atlanta that record monetary stimulus is still needed to boost the “frustratingly slow” U.S. economic recovery, he gave no indication that the central bank will start a third round of so-called quantitative easing.
Retreats in the S&P 500 that exceed 5 percent are common during bull markets, according to data from Birinyi Associates Inc., the Westport, Connecticut-based money manager and research firm. During the nine rallies between 1962 and 2007, the S&P 500 fell that much an average of seven times, the data show. The index has posted nine such retreats during the current advance.
‘Strong Backbone’
Global investors increased their cash holdings to the highest level in a year this month as hedge funds slashed the amount of borrowed money invested in stocks, a survey from Bank of America Corp. (BAC)’s Merrill Lynch unit showed on June 14.
“Valuation is a strong backbone,” ABN Amro Private Banking Chief Investment Officer Didier Duret, who manages about $200 billion in Geneva, said in a telephone interview. “It’s more or less a reflection of how reluctant investors have been to get back into the equity market.”
Kroger in Cincinnati rose 4.5 percent, the most since October 2009, to $23.99 on June 16. The largest U.S. grocery chain increased its fiscal 2012 earnings forecast to as much as $1.95 a share from $1.92. Analysts, on average, estimated $1.90.
Best Buy, the world’s biggest consumer-electronics retailer, rallied 4.6 percent two days earlier after reporting profit that exceeded analysts’ forecasts, helped by rising demand for smartphones. The Richfield, Minnesota-based company reiterated its full-year projection for earnings per share of $3.30 to $3.55, excluding restructuring costs. Analysts predicted $3.47.
To Alison Porter at Ignis Asset Management, stocks have priced in prospects for a Greek default and the end of the Fed’s bond-buying program.
“We are seeing stable growth, but it is not a strong cyclical recovery,” said Porter, who as U.S. equities fund manager in Glasgow helps oversee $123 billion. Still, “valuations in the market should provide some support,” she said. “Equities are reasonably well positioned from here.”
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net
To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Andrew Rummer at arummer@bloomberg.net

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Mon, 06/20/2011 - 17:34 | 1386488 css1971
css1971's picture

Absolute profits are up, margins are falling. Either costs are increasing and/or prices are falling.

 

Next, absolute profits go down. (ok that may take a while).

 

Fits with stagflation. HTH.

 

p.s. Fancy trimming your post and putting a link in instead?

Mon, 06/20/2011 - 18:23 | 1386666 slewie the pi-rat
slewie the pi-rat's picture

+ p.s.+ 

take off 15% top and bottom, like tyler's graph, and one can still fail to grasp that earnings may stumble slightly here.  jeeeez!  mr toad's wild fuking ride, then, huh?

Tue, 06/21/2011 - 01:50 | 1388017 jeff montanye
jeff montanye's picture

also using data since the '90's keeps one in the period of greatest stock overvaluation ever (with the exceptions of the 2002 and 2009 bottoms which were hardly comparable to 1950, 1974 or 1982).  the late '90's is a very dangerous benchmark for reasonable equity valuation.

Mon, 06/20/2011 - 17:51 | 1386556 XRAYD
XRAYD's picture

Bloomberg is now also BusinessWeek.

 

Maybe they will put this on the cover this week and provide proof that the market has peaked.

Mon, 06/20/2011 - 17:52 | 1386572 LawsofPhysics
LawsofPhysics's picture

If it is all good, END ALL QE.

Mon, 06/20/2011 - 19:25 | 1386835 Greeny
Greeny's picture

Monkey-Analysts on the Wall street wants to see double in growth

in every quarter, that's simply not possible, but Corporate

earnings are solid. Period.

Mon, 06/20/2011 - 17:13 | 1386425 buzzsaw99
buzzsaw99's picture

Nice work but fundamentals have little to do with the stock market.

Mon, 06/20/2011 - 17:15 | 1386444 css1971
css1971's picture

nopomo

Mon, 06/20/2011 - 17:14 | 1386427 css1971
css1971's picture

You guys aren't paid enough. I'll donate a few pennies.

 

1st order derivative & see if it's accelerating.

 

Mon, 06/20/2011 - 17:14 | 1386429 rsnoble
rsnoble's picture

Does this mean that in the real world that stock prices have peaked also??  Or are we still headed for DOW 36k lol. 

Mon, 06/20/2011 - 22:50 | 1387635 Jack Napier
Jack Napier's picture

The DOW/GOLD ratio is on it's way back down to 1 or less. I don't have a clue where the DOW is going, but expect gold to match it.

http://www.youtube.com/watch?v=UE7QcVN5tC8

Mon, 06/20/2011 - 17:21 | 1386455 Contra_Man
Contra_Man's picture

We now can just take "extraordinary" lump-sum special accounting charge-off's against Retained Earnings - and boost current EPS with more share buy-backs (ZIRP & QE3 funded) from here IMHO.  To the paper moon, Lucy! 

With make-believe international accounting standards..., unfortunately all Fundamentalists are fundamentally ill informed.

Mon, 06/20/2011 - 17:20 | 1386459 John Law Lives
John Law Lives's picture

Corporate profits and all macroeconomic data seem to have no bearing on what brainless algos do these days.  What a Bizarro world we live in.

100% Ponzi FUBAR market.

Mon, 06/20/2011 - 18:08 | 1386611 buzzsaw99
buzzsaw99's picture

they don't need earnings, what they do need is the right size market cap, properly sized stock price per share and a smallish float. after that there's nothing left to do but count their bonus based on paper profit.

Mon, 06/20/2011 - 18:38 | 1386700 baserunr
baserunr's picture

I think I met Ponzi Fubar once.  He is rumored to be the next in line to take over when Blankfein retires.

Mon, 06/20/2011 - 17:24 | 1386461 Barb Dwire
Barb Dwire's picture

Translation for the algo-bots: BUY!!!!

Mon, 06/20/2011 - 17:31 | 1386479 vegas
vegas's picture

who the hell needs profits when you got the squid and HFT's?

bad news = good news; good news = good news;

Excrement sandwich Bernank, along with all the money honeys from CNBC say buy!!

Why worry about margins or profits? All is good in the HFT universe.

The major indices can never be allowed to go lower. Now even the Japanese are in cahoots with the Bernank. Buy all 1% breaks, get rich in the afternoon.

What's not to like?

Mon, 06/20/2011 - 17:39 | 1386522 walküre
walküre's picture

Bloomberg tends to disagree ... BUY BUY BUY "stocks on sale" LOL

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

Stocks Cheapest in 26 Years as Profits Rise
Mon, 06/20/2011 - 17:50 | 1386563 John Law Lives
John Law Lives's picture

<<<  Bloomberg tends to disagree ... BUY BUY BUY "stocks on sale" LOL  >>>

Translation: Wall Street needs more retail suckers as insiders continue to dump their stawkes...

Every credible Wall Street analyst knows that the market (and the economy) has been artificially pumped by massive Fed intervention and massive stimulus via rampant deficit spending.  No chance that this combination will yield good long-term results.  Brainless algos don't seem to care about the longer term.  They are in and out for a buck and they don't take prisoners. 

 

Mon, 06/20/2011 - 17:50 | 1386566 Justin Credible
Justin Credible's picture

Haha, profit margins don't matter silly rabbit!

....  James Altucher told me Dow 20,000 is just around the corner.

Back up the truck beaatch!

 

Mon, 06/20/2011 - 17:55 | 1386582 d00daa
d00daa's picture

lolwut???

So, you're "fully invested," right kito??  Cheapest in a quarter century, what are your positions??  Loading up on TNA are we??

I'm sorry, I can't stop laughing.

Mon, 06/20/2011 - 18:04 | 1386598 buzzsaw99
buzzsaw99's picture

kito benito burrito mussolini

Mon, 06/20/2011 - 20:55 | 1387209 kito
kito's picture

my position is simply that there will be no imminent market crash, that the market will bonce a bit up and down for quite a long time, reflective of the long term stagnant economy we are facing.

Mon, 06/20/2011 - 23:15 | 1387698 StychoKiller
StychoKiller's picture

How does that square with the mathematical requirements of continuing economic "Growth?"

Mon, 06/20/2011 - 18:01 | 1386588 Cynthia
Cynthia's picture

The medical-industrial complex still has plenty of fat to lose. The same thing can be said about the military-industrial complex. But I'm afraid that Obama-care and Obama's love for war will only increase the fat content of both of them.

Mon, 06/20/2011 - 18:53 | 1386738 Ricky Bobby
Ricky Bobby's picture

+10

You just knocked it out of the park! Well said.

Mon, 06/20/2011 - 19:19 | 1386812 BORT
BORT's picture
Dr. Obomba or: How I Learned to Stop Worrying and Love the Bomb
Mon, 06/20/2011 - 18:03 | 1386594 Lmo Mutton
Lmo Mutton's picture

Give the recovery a chance to work.

Mon, 06/20/2011 - 18:22 | 1386651 Shell Game
Shell Game's picture

Excellent use of sarcasm..

Mon, 06/20/2011 - 18:03 | 1386596 slewie the pi-rat
slewie the pi-rat's picture

if we add a zero, we shall get spectacular revenue growth, profits, taxes, and goldie will be on with cramer ever single day. 

put the printers right in the helicopters!

Mon, 06/20/2011 - 18:19 | 1386650 Caviar Emptor
Caviar Emptor's picture

The stock market has simply been a measure of Fed anxiety. They decided in 2009 to prop it up. Else it would be floundering for 25 years. Stocks were supposedly cheap in March, 2000 according to now famous analysts and gurus

Mon, 06/20/2011 - 18:30 | 1386675 Caviar Emptor
Caviar Emptor's picture

Cramer's Picks for February 29th, 2000 (3 weeks before it all blew up):

 

The Winners of The New World

 

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.

OK. Here goes. Write them down -- no handouts here!: 724Solutions (SVNX) Ariba (ARBA) Digital Isalnd (ISLD) Exodus (EXDS) Infospace (INSP), Inktomi (INKT), Mercury Interactive (MERQ), SOnera (SNRA), Verisign (VRSN), Veritas Software (VRTS)

 

We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come.


LINK

 

Mon, 06/20/2011 - 22:30 | 1387548 alex_g
alex_g's picture

Nice, bashing the companies that he's pushing now...only 2 or 3 of his 10 ten in feb 2000 are still around, and at mere fractions of their previous worth.  Cramer is a MoMo tool.

Mon, 06/20/2011 - 18:31 | 1386677 lunaticfringe
lunaticfringe's picture

Wow. Trolls in today with their grade school version of markets. This is not the place for you fucktards.

Mon, 06/20/2011 - 18:34 | 1386687 bugs_
bugs_'s picture

Bill Gross was alluding to this the other day on CNBC (yes one of those rare moments when it was unmuted).

His thesis for profits was the easy growth due to outsourcing and layoffs was over and from now on corporates would have to make it by making it.  Given the entrenched management that is in place in these firms....fuhgetabootit.

Mon, 06/20/2011 - 19:21 | 1386822 The Fonz
The Fonz's picture

I saw the mgnmt at Starbucks and if they didn't have a contractor underclass to fire and hire at whim to keep margins they would be toast. The managment there when asked for feedback about quality of work would say "No news is good news!" They did this with a straight face too! Other decisions were scathingly incompetent as well. If SBUX is any example the management won't be able to make money once they don't have any monkeys to kill for blood profits.

Mon, 06/20/2011 - 18:35 | 1386698 Comrade de Chaos
Comrade de Chaos's picture

I ve been collecting the similar data (operating margins) on roughly 3000 firms my graph looks somewhat the same ) 

The graph that reflects the % growth in sales Q/Q doesn't look too promising as well. 

Mon, 06/20/2011 - 19:30 | 1386846 Greeny
Greeny's picture

Short then, if you so sure.. Since bulls are manipulators

and you all the smart ones are shorting, well keep doing it..

Mon, 06/20/2011 - 19:55 | 1386959 Greeny
Greeny's picture

Real Estate in trouble?

Check this guy out IYR ( ISHARES DJ US REAL ESTATE)

YTD Return (Mkt)²: 13.17%

Yield (ttm)²: 3.17

Look at the chart,

it's hot, Not even small dent.

Mon, 06/20/2011 - 21:50 | 1387403 qussl3
qussl3's picture

It has a yield no?

Good luck outrunning the algos when the time comes.

Mon, 06/20/2011 - 19:56 | 1386963 Goldtoothchimp09
Goldtoothchimp09's picture

It's amazing to me that in our screwed up society -- the stock market is supposed to pay for everything.  Pay for our retirements, pay for pension obligations.  Pretty much pay for everything long term.  Yet, common stock has very little real value.  Most stocks pay a pittance in dividends.  So what does stock ownership "get you".  Not any real voting rights.  Not much for dividend payments to compensate you for your ownership.  Basically, a stock certificate shows you've got some "honorary" ownership.  Doesn't matter how profitable a company is...common stockholders get nothing.  AAPL at $320 "gets you" the same as AAPL at $220, $120, or $20 per share.  A certificate showing honorary ownership.  Why anyone pays any real money for an honorary certificate stupifies.  It's just a cultural thing.  Invest in stocks, it's what people do.  I have a feeling it's going to end up just like investments in beanie babies.  People will ask "What was i thinking".  They weren't thinking.  Just herding a cultural trend.

Mon, 06/20/2011 - 20:08 | 1387030 Greeny
Greeny's picture

Yes, As investment (buy and hold) perhaps stocks very risky, but

invest

a bit in education and find out how you can protect yourself

when stock either goes up or down, while collecting Div. You buy

stock (LONG)(invest capital) you gotta buy Insurance protection a.k.a

Put options in case stock drops, I think less than 5% actually

do that, but everyone buying insurance, to even protect $500 TV

and nobody care about one while investing tens of thousands of

dollars.

If you have a deep pockets, then you might be OK without one,

if you know what your are buying.. Stocks do have value, Dollar

value, but since for you guys, dollar worth nothing, then I

don't even sure why you are working then if it's for Free?

Mon, 06/20/2011 - 20:17 | 1387050 Goldtoothchimp09
Goldtoothchimp09's picture

Here's $50 and some used socks for your daughter.

Mon, 06/20/2011 - 22:53 | 1387634 Bindar Dundat
Bindar Dundat's picture

Basic rule of business-- only make money for what you do-- not just what you know.  Business is a VERB!

How are you adding value?

 

Tue, 06/21/2011 - 05:11 | 1388223 dvsteenk
dvsteenk's picture

.

Do NOT follow this link or you will be banned from the site!