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Five Fun 'Pre-Earnings' Facts For The "Buy-The-F$$$ing-Dream"ers

Tyler Durden's picture





 

With the S&P 500 once again testing multi-year highs, forward P/Es over 14 in a real-rate environment which suggests single-digit P/Es, abnormal micro-structure (mega-caps outperforming and high-beta fading in an up-tape), and a buy-the-f$$king-'dream' mentality soaking in everywhere, we take a close-up view of the earnings season reality that is about to come crashing down on multiple-expansion hopes. Following on from the five most ridiculous charts in US equity markets, these five 'facts' will be assuaged by every long-only manager as 'priced-in' - we suspect otherwise.

 

 

  1. Downward EPS revisions have outnumbered upward revisions for 22 weeks
  2. For the S&P 500 companies, there have been 91 negative pre-announcements versus 21 positive
  3. The 4.3x negative-to-positive pre-announcement ratio is the highest since 2001
  4. Of the S&P 500 companies that have reported thus far (25 total), only 52% have exceeded expectations (long-term average is 63% and last four quarters average 67%)
  5. Overall Q3 earnings are expected to fall 2.5%

And as a reminder - Via Citi:

When investors consider the earnings expectations for the next several quarters, it must be noted that a few sectors seem to have an abundance of optimism that may or may not be warranted. For example, the Materials sector is showing a big bounce in 1H13 earnings projections that may require much more clarity on global economic reacceleration, while Financials are expected to rise sharply as well. Hence, these two areas might require some ratcheting down of forecasts and management teams may begin to do so in the next few weeks.

 

We have highlighted some of current measures of complacency, which may not be entirely appropriate in the very near term (next couple of months) given the US elections and the related fiscal cliff, recent European social unrest and the need to curtail some of the profit growth enthusiasm. In the medium term (2013), many of the analytical models we use still argue for overall market gains, and thus we believe weakness should be seen as a buying opportunity.

(h/t @Not_Jim_Cramer)

 


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Sun, 10/07/2012 - 17:39 | Link to Comment Squid Vicious
Squid Vicious's picture

LOL @ the idea that earnings have anything to do with equity prices as long as the Shalom is on the scene...

Sun, 10/07/2012 - 18:26 | Link to Comment Crisismode
Crisismode's picture

Too true.

 

Equity prices are dependant on only one thing and one thing alone: how long Benny holds down the Ctrl-P key.

 

 

Sun, 10/07/2012 - 17:46 | Link to Comment Cdad
Cdad's picture

What time does EVERYTHING go limit down tonight?  Just curious.

Sun, 10/07/2012 - 17:52 | Link to Comment slaughterer
slaughterer's picture

3:52.43 am.  But EVERYTHING will only be "limit down" for a millisecond.  

Sun, 10/07/2012 - 19:41 | Link to Comment max2205
max2205's picture

Tops take years to rollover

Sun, 10/07/2012 - 18:07 | Link to Comment Yen Cross
Yen Cross's picture

 It's coming CDAD! ;-).  +1

Sun, 10/07/2012 - 18:08 | Link to Comment slaughterer
slaughterer's picture

Uh, 5 minutes in on a Sunday 6pm EST and futures are GREEN.  

Sun, 10/07/2012 - 18:12 | Link to Comment Yen Cross
Yen Cross's picture

Dow not ES. Look @ Europe CFDS.  Fuck fair value, China HSBC in 4.5 hours. That's the real bullshit#!

Sun, 10/07/2012 - 19:08 | Link to Comment HD
HD's picture

QE infinity is not bullish, it was capitulation by the Fed. The TBTF banks need volume and volatility to make money, and they are not going to get that with an anemic drip to the upside. As Tyler has pointed out - everyone is all in, including Ben. Whatever catalyst that starts the sell off will have EVERYONE looking to exit the inferno through a very small, crowded door.

Sun, 10/07/2012 - 18:15 | Link to Comment slaughterer
slaughterer's picture

I do not buy the dip.

I buy the short squeeze.

 

Sun, 10/07/2012 - 19:12 | Link to Comment HD
HD's picture

Other than a pop when Spain rolls over and get its "bailout" I don't see what miracle will cause a massive short squeeze. All year its been a QE carrot on a stick, now all they have is a stick.

Sun, 10/07/2012 - 18:30 | Link to Comment Yen Cross
Yen Cross's picture

 The door is about to get slammed shut. Be-warned, A new trend is about to be confirmed. Some substancial levels were broken on Friday. They have"gapped"lower, carried thru in Asia.

 Earnings are starting, half the M/E is ready to explode, and the "Fraud in Chief" was exposed last week! It only get's better from here on!

Sun, 10/07/2012 - 19:09 | Link to Comment HD
HD's picture

From your mouth to Gods ears Yen.

Sun, 10/07/2012 - 18:23 | Link to Comment poor fella
poor fella's picture

Wait.....     Bullish......     right?    I'm so cornfused

 

Isn't more QE expected (demanded) in December? Four years from now these will either be the good 'ole days, or we'll hear the same 'multiple expansion', 'strong corporate sector', 'we're not devalueing the dollar', 'recovery next quarter' b.s. while we slog along the flatline. Meanwhile Rome could literally burn.

Gas is the only semi-believable meltup taking place, "I hear 5.50  5.50  5.50, do I have 5.80  5n80, SIX we have six ladies and gentlemen six six SIX do I hear 7?"

Sun, 10/07/2012 - 20:14 | Link to Comment disabledvet
disabledvet's picture

as a fellow "poor fella" all i have to say is "i believe in the business cycle and think the economists have it right." this is easily the worst post war recovery in history...and it is being made worse by the insane policies...and POLITICS...of our time. but the POLITY is intact...the instincts of those during the crisis (Paulson, Geithner, Bernanke) have been proven MORE than correct and so the business cycle now cycles upward...with the totality of the War on Terror pushing it forward i might add. with interest rates this low...and having plunged throughout...i'm simply at a loss to discover the bearish thesis outside of "the market goes up, the market goes down." throw in the macro's (as i have propounded) of Fukushima, the collapse of the EU and the Arab Revolt...and sure, fine "the collapse of communism in China"...and i'm suppose to be bearish because?....

Sun, 10/07/2012 - 21:30 | Link to Comment poor fella
poor fella's picture

Haha! I'm not even sure if I'm missing the /sarc!    =O

Regardless, with what you say, one thing iI AM sure about! REBUILDING IS GDP POSITIVE.

Bernank's Biggest Plan yet - let shit utterly collapse and rebuild it (in the same image most likely).

Nothing new under the sun. Krug'ster is da man!

Sun, 10/07/2012 - 18:31 | Link to Comment Racer
Racer's picture

They will just revise 'expectations' downwards even more so the bar is so low and sunk and smoothed over that an insect can crawl over it without noticing it, so they can handily 'beat' and way to go ..... soar away on even more fumes

Sun, 10/07/2012 - 18:28 | Link to Comment chump666
chump666's picture

China is going to wake up grumpy Monday.  Every trader knows that earnings is going to be awful, stocks will be blown to hell...

but maybe not oil, if war breaks out.

Brace for volatility.

Sun, 10/07/2012 - 18:35 | Link to Comment Yen Cross
Yen Cross's picture

High oil won't prop high "commodity Fiat", that correlation has been breaking down for 2 months. I always love a smart fellow trader!

The list would be long on Z/H, but there are a few that I have deep regard for.

Sun, 10/07/2012 - 19:15 | Link to Comment chump666
chump666's picture

Your AUD proxy looks ready to slam through parity. 

No one believes the job numbers, as earnings will be the real writing on the wall.  So it's like, companies are hiring and their profit margins are collapsing??? Yeah right.

Bears should start to have control of this market, long time coming.  But...still, tight stops and ranges.

Sun, 10/07/2012 - 19:22 | Link to Comment Yen Cross
Yen Cross's picture

I discussed the reversal in aud/usd 4hour chart early Friday. I called for 97-98 handle Tuesday. I

stated that it was chopping around and looked to fall further. I also said the $ was overbought, a needs to correct, looking for a high (94 dxy handle). bernanke is going to bail Europe out with "short term"financing! it won't work!

Sun, 10/07/2012 - 18:40 | Link to Comment SIOP
SIOP's picture

Tell me what's wrong with my logic, I'm a"buy the f$$ing dreamer-er" person in that,

I've been in the market with my tiny little scottrade account and enjoying the QE induced ride up for the past few years, I cover my ass by simply putting an average 7% trailing stop loss on everything. So, if ...er...when the the -40% correction finally comes, I will be somewhat safe, correct? (oh and yes I am aware I can lose more than 7% if the market falls extremely fast)

Why cant I enjoy the ride doing this?

Sun, 10/07/2012 - 19:22 | Link to Comment overbet
overbet's picture

Because like the flash crash or the mini crashes everyday when u get triggered at 7% the next bid is down 50%. Nice trade.

Sun, 10/07/2012 - 23:11 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

You're all good till you're not. When the market moves opposite to your trades and any of your trades in profit are reversed like in the last Flash Crash with no appeal possible, you may regret it. Of course having done due dilligence you already know this so have a nice trade.

Sun, 10/07/2012 - 19:23 | Link to Comment q99x2
q99x2's picture

I like the face that goes BTFD.

Sun, 10/07/2012 - 19:08 | Link to Comment Dexter for President
Dexter for President's picture

Why does everyone think QE is over? Now we wait for Ben to come to the rescue by raising the amount of QEinfinity that will be printed each month - that's all.

Sun, 10/07/2012 - 20:21 | Link to Comment disabledvet
disabledvet's picture

his job is in GRAAAAVE danger...and his panic attack on QEternity is a tell in my book. An odd rejoinder...if true...given his truly spectacular performance during the Collapse and the market's performance thereafter. While i don't believe QE has DIRECTLY contributed to the equity "kicker"...i think by providing confidence that his theory was indeed functional and necessary certainly INDIRECTLY provided a kicker. Even the last 'bout cause the treasury complex to go hog wild and front run his actions! at a certain level i imagine the market appears stupid to him! but that would be the TREASURY complex...not equities. his record on the economy on the other hand....

Sun, 10/07/2012 - 20:17 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The entire world is now "all in". Add infinite ZIRP (free money for all banks and sovereigns) and we might actually start seeing some real inflation. Interesting times indeed.

Sun, 10/07/2012 - 23:09 | Link to Comment MeelionDollerBogus
Mon, 10/08/2012 - 08:22 | Link to Comment Grand Supercycle
Grand Supercycle's picture

WILE E.COYOTE overdue sell off...

Has taken longer than expected but SPX & GOLD etc daily chart
bearish topping process strengthens further.

http://www.zerohedge.com/news/2012-12-24/market-analysis

http://trader618.com

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