Chart Of The Day: Q4 Deja Vu Dead Cat Bounces Again

Tyler Durden's picture


Today's just announced revenue and EPS misses from both megacaps McDonalds and GE (in addition to MSFT, GOOG, INTC, IBM and everyone else) merely adds to what has so far been an abysmal earnings season, and one which is set to continue for far more weakness into Q4 (why? Hint: China, and its unwillingness to ease, and thus provide the much needed demand oomph US corporates need). Yet, the pundits will claim, economic conditions in the US have improved. How does one reconcile this disconnect? Simple: as Bloomberg Brief shows in two simple charts, what we are undergoing is not the first, but second case of annual deja vu, as the economy supposedly picks up in Q3 and Q4, courtesy of the latest and greatest artificial sugar high from the Fed, only to slide promptly back into decline once the initial euphoria fizzles. However, this time there is a major difference: corporate Y/Y revenue (and in many cases EPS) comps have turned negative, which means that unlike before when corporations would be the silver lining in a dreary macro environment once the economic downward trend resumed, this time around there won't be a convenient Deus Ex to provide a last gasp reason to hold on to the myth that things are getting better. This, in turn means, that with "dividend" assets no longer attractive, the investing/trading crowd will rush into hard assets like crude (recall the $125/barrell Brent barrier for economic decline)... and gold. But that is a story for another day.

From Bloomberg Economics Brief by Joseph Brusuelas:

Recent growth data and a number of positive economic surprises are following an eerily familiar pattern that has repeated over the past three years. Inthis pattern, indicators point to possible improvement in the economy in the fourth quarter of each year, only to disappoint when the roughly 2 percent growth trend (2.2 percent since recovery) reasserts itself in subsequent quarters.

Will this year follow the pattern, or represent a breakout?

Some developments in the economy do point to signs that this time may be different, especially if policy makers successfully avoid the fiscal cliff.

The lagged impact of past fiscal and monetary policy may be gaining traction, supporting auto sales that are 50 percent above recession lows and home purchases that are up 9.3 percent on a year-over-year basis. A mid-cycle improvement in auto sales and housing starts, areas that traditionally lead the economy, is a welcome development.

The 35 percent year-over-year increase in housing starts will probably be sustained due to real demand for rentals of multi-family dwellings as new entrants to the workforce start households and homeowners transition to renter status.

Other positive factors appear to be more temporary. Pent-up demand for consumer goods, and the ability of upper income households to access credit to purchase them, can help support temporary bumps in spending in the latter parts of the year when new consumer products such as the iPhone and iPad are released. This support for the economy is likely transitory and insufficient to move the economy back toward its long-term growth trend of 2.5 percent.

Personal income continues to stagnate. Disposable personal income is up 1 percent on a year ago basis, half the 2 percent average posted during the previously cyclical expansion.

And new bookings of capital orders excluding non-defense aircraft are down 5 percent year-over-year, with total manufacturing orders off 2.5 percent and durable goods orders down 7.2 percent.

While the housing story is encouraging, and a recovery in housing is an essential component of a sustained expansion, total residential investment accounts for only 2.3 percent of GDP, down from 6.3 percent at the peak of the housing boom. The U.S. economy is undergoing a structural change from  an overreliance on household consumption to a growth model based on value-added manufacturing, technology and energy.

Those hoping for the old growth model to reassert itself in the wake of the housing collapse, financial shock and ensuing Great Recession may as well be waiting for Godot. 

* * *

With that said we want to reiterate what we said earlier: until and unless China resumes a major monetary easing episode (and it has so far sternly refrained from doing so due to fear of food price shocks and imported inflation), the latest episode of macro optimism will end in tears far sooner than all expect. And this time the Fed will truly be exposed as the naked emperor it is.

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Fri, 10/19/2012 - 08:25 | 2903805 GetZeeGold
GetZeeGold's picture



That cat's a trooper.


Fri, 10/19/2012 - 08:31 | 2903810 Almost Solvent
Almost Solvent's picture

But you can still buy a jug of McJordan bbq sauce from 1992 on eBay so that must be bullish

Fri, 10/19/2012 - 08:45 | 2903835 GetZeeGold
GetZeeGold's picture



So evidently someone hates cats and BBQ sauce around here. OK...we won't bring it up again.



Fri, 10/19/2012 - 09:11 | 2903911 Monedas
Monedas's picture

No more trickle down .... Obama promises growth from the inner city out !

Fri, 10/19/2012 - 08:25 | 2903806 Sheeple Shepard
Sheeple Shepard's picture


Fri, 10/19/2012 - 09:33 | 2903951 Monedas
Monedas's picture

Niger ?

Fri, 10/19/2012 - 08:30 | 2903813 q99x2
q99x2's picture

I've heard they did that at the DejaVu.

Fri, 10/19/2012 - 09:04 | 2903891 crusty curmudgeon
crusty curmudgeon's picture

Haven't I seen this comment before?

Fri, 10/19/2012 - 08:30 | 2903814 ArkansasAngie
ArkansasAngie's picture

They have been running into rental properties, too.  The only problem is sellers have not been forced to sell at a property's economic value. 

Fri, 10/19/2012 - 08:31 | 2903815 HelluvaEngineer
HelluvaEngineer's picture

Don't worry.  The Great Bearded One has a plan.

Fri, 10/19/2012 - 08:31 | 2903819 insanelysane
insanelysane's picture

What we are seeing is that corporations have squeezed out all of the inefficiencies that could be squeezed out.  The result is that profitability becomes directly proportional to the economy.  Previously, even though the economy was terrible, corporations were generating additional profits making things look better (to some).

Fri, 10/19/2012 - 08:42 | 2903831 HD
HD's picture

It's worse than that now - all those unemployed folks who were getting 99 weeks of unemployment while living rent free while defaulting on their mortgage ran out of time and money. They won't be buying a new Chevy Volt or iThing this Christmas...

Fri, 10/19/2012 - 08:33 | 2903820 Haager
Haager's picture

So, the herd will rush into "hard" assets? Still waiting...

Oh, for the oilers we have SPR, for the precious-nerds whe have the paper-market.

Fri, 10/19/2012 - 08:39 | 2903827 fonzannoon
fonzannoon's picture

Every single major company hammered and the indexes are flat. say it loud.....BULLSHIT!!!

Fri, 10/19/2012 - 08:35 | 2903826 ZeroAvatar
ZeroAvatar's picture

In other words, you can't make a Silver Purse out of a Sow's Ear.

Fri, 10/19/2012 - 08:37 | 2903828 HD
HD's picture

Fund managers tying themselves in knots - they need to chase but their are exactly zero catalysts to take the market higher.

What to do, what to do? The dilemma of sell side whores.

Fri, 10/19/2012 - 08:45 | 2903838 LawsofPhysics
LawsofPhysics's picture

Could not have said it better myself.  Quick!  everybody run to the other side of the boat! (please)

Fri, 10/19/2012 - 09:01 | 2903889 HD
HD's picture

They can't buy, afraid to sell and goal seeking algos will take them out if they short.  Ben will not be happy until the market is completely dead. Zero volatility, zero volume, zero profitability.

Fri, 10/19/2012 - 09:26 | 2903935 RazvanM
RazvanM's picture

We are witnessing the creation of the very long term investors class!

Fri, 10/19/2012 - 09:44 | 2903972 HD
HD's picture

Agreed. Roach motel...check in, but you can never check out.

Fri, 10/19/2012 - 08:45 | 2903839 The Axe
The Axe's picture

This all may be TRUE    But The FED  has got the SP   too new mult-year highs         the market is broken!!

Fri, 10/19/2012 - 08:47 | 2903843 Mark Wilson
Mark Wilson's picture

Might rain. Might not.

Fri, 10/19/2012 - 08:47 | 2903850 EyesWise Shut
EyesWise Shut's picture

As usual, Germany first balks then falters. The club med countries have now learned how deal with ze Germans. Take not for future events (Eurobonds someone?)

Fri, 10/19/2012 - 08:49 | 2903857 NewWorldOrange
NewWorldOrange's picture

"recall the $125 Brent barrier for economic decline"

Seriously? Harping on that absurd historicism thingy again?

Fucking pathetic, Tylers. Is all your talk about Austrian Economics mere talk after all? Is Alex Jones on your staff now?

Fri, 10/19/2012 - 08:51 | 2903861 JPM Hater001
JPM Hater001's picture

If you bottle up that dumb you can get 4.99 a gallon.  You can afford to sell a few gallons.

Fri, 10/19/2012 - 09:53 | 2903992 Poetic injustice
Poetic injustice's picture

Lately IQ of board has dropped considerably, and I do not mean you JMP Hater001.
That's the price of ever increasing popularity I guess, a bitter price.

Fri, 10/19/2012 - 12:30 | 2904486 paulbain
paulbain's picture




Poetic Injustice wrote:

Lately IQ of board has dropped considerably, and I do not mean you JMP Hater001.
That's the price of ever increasing popularity I guess, a bitter price.

I am compelled to agree. The quality of ZH comments is significantly lower today than it was just 15 months ago, in mid-2011. I find myself spending less and less time here on ZH. Alas, there are no better sites devoted to economics & finance, and few alternatives.

-- Paul D. Bain





Fri, 10/19/2012 - 13:21 | 2904711 NewWorldOrange
NewWorldOrange's picture

Inevitable as long as the green/red arrow thing is functional. Too many ijits not even reading the articles and just striving to post something "popular" at the top in search of their Daily Affirmation.

Too many "yes men" brown-nosers as well, and too many "no men" pitbulls as well. It doesn't help when articles full of Keynesian fallacy are posted either.

Most troubling is the "quality" of the information contained in a helluva lot of the links being posted in the articles lately. Increasingly they are full of all kinds of prima facie absurdities. Once ZH and started trading links and material, perhaps it was inevitable...

Pretty much done with this site. It's becoming very clear that it's about the money. Whatever. It's their site. Sad they can't find a way to preserve integrity and make a living too.

Fri, 10/19/2012 - 08:49 | 2903858 JPM Hater001
JPM Hater001's picture

This was a beautifully written piece.  Exactly what I come to ZH for.


Fri, 10/19/2012 - 11:28 | 2904282 NewWorldOrange
NewWorldOrange's picture

" beautifully written piece"

Brown-nose much?

Yeah, it's "beautifully written" -- if you're a Keynesian ijit who thinks that historicism has a proper place in economic analysis. The only proper methodology in economic analysis is the a priori approach, as Mises and many other (mostly "Austrian") economists have argued. Tylers know better, or so I thought. How this one slipped thru the cracks is beyond me.

There can only be one reason: They hired a new writer gullible or stupid enough to think the a posteriori approach to praxeology is appropriate, or Tylers are in this for the money now, integrity be damned. I'll assume it's the former, though the recently-added full-page pop-up ads that virtually lock a PC down make me wonder.

I defend zh against idiotic criticism probably more than any poster on this site. On the rare occasion that I engage in criticism, I stick to specifics and am usually right. If zh only wants "yes men", all they need do is tell me or block my account and I'm done. Just sayin'


Fri, 10/19/2012 - 08:52 | 2903867 Haager
Haager's picture

I've heard $GOOG is starting to rent out ad-click space on mobiles to competitors. 

Fri, 10/19/2012 - 08:54 | 2903873 Waterfallsparkles
Waterfallsparkles's picture

Before Earnings were up because they cut so many People from their work force.  Which improved the bottom line.  Now there are no more Employees to cut to improve earnings.

Fri, 10/19/2012 - 08:56 | 2903879 crusty curmudgeon
crusty curmudgeon's picture

This ship is unsinkable.  This ship is unsinkable.  This ship is unsinkable...

"Make the lie big, make it simple, keep saying it, and eventually they will believe it." —Adolf Hitler


Fri, 10/19/2012 - 08:58 | 2903881 GetZeeGold
GetZeeGold's picture



Had it not been for Bush.......Adolf could have pulled it off.

Fri, 10/19/2012 - 09:09 | 2903906 Winston Churchill
Winston Churchill's picture

Anybody catch Bidens supposed gaffe last night.

Gaffe or slip.Whats he been told abot an attack on Iran?

Fri, 10/19/2012 - 09:18 | 2903921 Monedas
Monedas's picture

We know all about liberal theatrix .... open mike moments are staged events !

Fri, 10/19/2012 - 09:14 | 2903912 SheepDog-One
SheepDog-One's picture

MCDONALDS missed even when they accept freaking EBT cards?? And GE basically a wing of the govt itself?  Reality check bitchez!

Fri, 10/19/2012 - 09:25 | 2903928 Monedas
Monedas's picture

Why can't anyone out there hack the EBT card system .... and shut it down .... imagine the chaos ?    Me happy just thinking about it !   Clinton gave defense secrets to Chicoms .... but EBT is really secure .... know them by their priorities !

Fri, 10/19/2012 - 09:37 | 2903957 ekm
ekm's picture

Don't even bother.

Each time Brent stays above $90 for longer than 6 months, recession is guaranteed.


Fri, 10/19/2012 - 09:55 | 2903997 Poetic injustice
Poetic injustice's picture

90$ of today or 90$ of 5 years ago?

Fri, 10/19/2012 - 09:57 | 2904005 ekm
ekm's picture

It doesn't matter. 5 years ago people were spending because they thought they were all rich living in perpetual debt.


Now they don't.


Fri, 10/19/2012 - 09:41 | 2903964 Spastica Rex
Spastica Rex's picture

Why does Obama hate McDonald's?

Fri, 10/19/2012 - 09:58 | 2904007 Grand Supercycle
Grand Supercycle's picture


As mentioned Oct 15 - days before the premature earnings sell off - GOOGLE daily / weekly / monthly charts are overextended & significant correction expected.

Fri, 10/19/2012 - 11:21 | 2904285 DavidC
DavidC's picture

"And this time the Fed will truly be exposed as the naked emperor it is".

One can only hope, after 100 years of debasing the dollar.


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