The Three Key Charts Before The Launch Of Earnings Season

Tyler Durden's picture

A total of 22 companies, 4% of the S&P 500 market cap, have reported 4Q12 results. Of these, 64% have topped revenue estimates and 68% topped earnings estimates (considerably lower than average). Aggregate earnings results have exceeded estimates by 1%, revenues have missed by 0.5%, and blended margins are down 12bps y/y. As Barclays' Barry Knapp notes, the last several quarters, earnings seasons have generally been characterized by revenue misses, earnings beats (but by a shrinking amount), and negative guidance; as a result, there has been a negative skew to stock prices. In other words, in the immediate  aftermath of the report, earnings beats are marginally outperforming the market, while misses get hammered, primarily due to weak forward guidance. The sustainability of earnings growth remains key given the weak top-line environment and these three self-explanatory charts should hopefully put some fundamental color around the perspective that earnings season will be a negative for the market overall.

Top-down 'macro' and bottom-up 'micro' ain't believing it...


Expectations beggar belief...


and no matter what you are told, P/Es are not 'low' or due to re-rate anytime soon...


But don't stop believing...



(H/t @Not_Jim_Cramer)

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tawse57's picture

AAPL will do something that gives everyone an orgasm and DOW will shoot up 500 in a week.

I want to see the markets correct but things appear so fixed by the Fed that I am about to join the BTFD crowd - one problem,  there are no longer any dips.

Obchelli's picture

Are you implying iVibrator?

Darksky's picture

I gave you and up arrow cuz you are sooooo Bullish that you finally convinced me:)

CPL's picture

Noun, Verb and Adjectives!!  

Ha HA!  That's Bullish!

q99x2's picture


Today was a dip. You have to take the little ones as well. Although you'll probably end up as food for algos since they have a sweat tooth for retail investors. There aren't many left.


Pareto's picture

If you do (join the BTFD crowd), you will get that knawing feeling in our gut that will be making you think to yourself, "Fuck.  Was I the last one?"  It is at this point that you have to ask yourself "Is this bat shit crazy anxiety worth it?"  I say bat shit crazy because, what you are doing when you are placing long bets on this market this long in the tooth will not reconcile with what you know to be true and right.  In his book Taleb talks about this, in that he laughs when people ask him whether he thinks the market is going up or down.  He argues that people get frustrated when he says he is bearish, but, that he thinks the market is going to probably go up and thats because, according to Taleb, people are asking the wrong question.

Its about expected values, or, magnitude of gain/loss.  For example, probability of the market going up could be 80% (implying Taleb's market call), but the nominal gain is 100 pts.  Therefore, the expected gain is .8x100, or, 80 pts.  The probability of the market going down then is 20%, but that the nominal loss could be 800 points (constituting only a 5.9% correction), or, 160 pts.  In this same vein, therefore, I simply think there is more to lose than there is to gain, all else equal.  "And for that reason, I'm out." (O'Leary).

tawse57's picture

I had that gnawing feeling all through 2012 and so stayed out of shares. Markets did not collapse. Markets rose.

All through 2012 we were told that corporate insiders were selling and that retail investors were out of the markets but still the markets soared. FED pumping no doubt but cash savers are being screwed.

We talk daily on here about a coming crash but we have been talking about it coming for years now. They just keep printing and keep kicking the can down the road.

They will lower profits expectations for the coming results so that the figures will look good and the banks, using 'free' FED or BOE money, will drive up stock prices. Remember the last quarter results - results were coming in below expectations and the stocks were soaring immediately after-hours.






Brokenbroker's picture

If u are a trader u wouldnt be talking like this. U are an outsider so that means u have to keep it very simple. Do not worty about missing anything. Dont chase rallies at keast not with most of your capital. Please. I am in the business. Look at the weekly commentary of john hussman. And he gives u a good sense of why you dont chase near the top. We may pack on another 5, 10, 15% nominal (highly doubt more than 5%). But when it turns it happens so fast and those last 5 or 10% will be gone in a heart beat. Mind u if u do feel the urge to put money to work then do it when things look a little ugly at least or buy some puts but in all reality just sit tight. There will come a time in the next 6-18 minths where things start to get ugly and really ugly. Just wait. Housing was ridiculous in 2005 and people like michael burry could see the system was messed up but he had to sit and watch as markets grinded higher in 06 and 07. I remember thinking pe ratios werent bad in 07 but the charts looked like they had gone up for 6 years. I knew things were overpriced somehow and itnturned out the whole system was pumped up on credit. Earnings were high and so pe's looked reasonable but earnings are cyclical. And not only was it the top of a business cycle but it was the tale end of a 30 yr credit cycle. The thing is. The fed interuppted what should have and would have been a cataclysmic wipeout and reset of the credit cycle in private hands. A great cleansing and waahout of bankruptcies and defaults and mass deleveraging. That would have shown how ridiculous the earnings part of the pe was. Instead the fed has blown the buble up by allowing the government to defecit spend and keep the whole cycle from completeing but believe me it cant be done. Not saying you cant get long here if u really know what you are doing and how to hedge but 2008 isnt over. It was interrupted by a central bank but it will playout in some fashion. Anyway. Like jeff gundlach said recently wait for the big kaboom. 80% of your returns come from 20% ofbthe time. Now is not a great time. Be better off going half long half short. If the market falls rebalance a bit toward your longs. And if it rises rebalance a bit toward your shorts (use a single inverse etf). I think u will be very happy 2 years from now and in the mean time u could ostensibly make 5, 10, 15% and sleep very well. Good luck! Btw i agree with people who are buying physical. I am not saying everything but its not crazy to put close to everything in pms and take delivery. I think we will get thru this but planning for a true reset and disaster is not unwise. I encourage 10%. I also advocate purchaaing farmlnd and have considered creating a limited partnership to do so. But things could get really outta hand. When you look at kyle bass's work or many others who are not to be taken lightly you have to ask yourself how does it all go down once the market turms against these currencies. Scary. And it will happen. But it could be a near deflationary collapse followed by a hyperinflationary push and the currency collapse. Whats weird is hyperinfltion and a deflationary collapse look very similar. Not deflation but a deflationary collapse. They are basically 2 different snapshots of the same phenomenon. And that is what we are looking at in japan and the rest of the west on the horizon. So dont chase stocks cause u think u might miss 10% nominal. Please. Wont mean anything by mid 2014. Think big.

DCFusor's picture

Obviously, someone knows Bayes.

adr's picture

Apple could make a 3D printer and call it the iDidItMyself. Maybe run their own crowdfunding platform for iApps called iScamU.

Remember according to the media, it's not a product until Apple makes it.

yogibear's picture

Every trader is orgasmic about Apple.

CPL's picture



That's exactly how any source of information is rated now.  

ball-and-chain's picture

I'm in complete agreement.

Bernanke's man-tits are shooting so much milk in the form of QE that the DOW will eventually hit 30,000.

It's wealth re-distribution.

The rich are robbing the poor.

CPL's picture

Ha HA!  Robbery.


That's Bullish too.

Rainman's picture

The only question is how far out on a limb will the Big 4 accounting firms go. All else is irrelevant.

Getting Old Sucks's picture

Who makes these earning estimates?  Would like to know from those who really know what they really should be.  I have a feeling that even this is being fudged to support the stock price.

Gypsyducks's picture

The guys making the estimates usually find out that their paycheck disappears if they designate many as sale not to mention strong sale; especially at several of the more "prestigious" institutions.

Racer's picture

Earnings againsts estimates

Let me see... if you want to make sure companies beat estimates what do you do... um, um...

ah, I know.... let's lower the bar....


Should it not be, did you make a profit, if so did you make more than the last time? If you made a loss, are you going out of business?

Obchelli's picture

Estimates are so low that we'll get perpetual daily rallies on massive beats... Eventhough Y/Y comparisons will be horrible but you will get no mention of that in media - instead constant gloating how this is clear sign of the improving economy... And do not forget Thangsgiving and Christmass falls into Q4

JPM Hater001's picture

Thank you for the Journey clip... bout sums it up...dont stop...believing.

adr's picture

Daddy, can the stock market go up even if nobody buys anything?

Of course it can Charlotte.

But how Daddy?

Because there is a really nice Jewish man that can keep giving companies money even if they don't sell anything. There are even nicer Jewish men that let the companies write whatever they want in their books and say they sold stuff they really did not.

So kind of like Santa and his elves?

Well Jews don't believe in Santa hunny, but yeah pretty much.

Joe moneybags's picture

Who believes in Santa?.................Christians?

yogibear's picture

Bernanke and the Federal Reserve bankster members have a couple trillion of slush dollars to buy the crap out of it on any pullback. 

Owned by Bernanke and the Fed. 

Bernanke said he will save everything including buying US debt. Print Benny print. 

Benny Bernanke and the Fed cannot stop buying US debt. They are stuck.

Smuckers's picture

Fuck the helicopters....

B-B-B Benny and the jets.....


smiler03's picture

Update: The 29th ZH technial analysis suggesting the S&P will be 800 very soon.


Still waiting.

Lord Of Finance's picture

There are very few Elliot-wavers here, which has accurately predicted 8 of the last 3 recessions. I have never read anyone here saying we will be there "very soon". If you have read a couple posts like that then understand they are a minority.

Don't wait. Buy the dip. A new bubble caused by low rates has flowed into bonds and emerging markets. It will be some time before interests rates rise, thus popping the bubble. That is what always does it. Rates won't stay zero forever and those who think they will are historical ignoramuses. We have been at zero rate for 4 years now. Bubbles typically have a shelf life of 5 years. There is plenty of time historically speaking, but volitility speaking, you have to be on your toes.

Cheshire's picture

Any minute now....

Lord Of Finance's picture

Those seeds that sprout those green shoots were sewn on rocky soil.

MFLTucson's picture

"A total of 22 companies, 4% of the S&P 500 market cap, have reported 4Q12 results. Of these, 64% have topped revenue estimates and 68% topped earnings estimates"


...and if we lower the expectations. we can have the con masters top estimates in all 100% of the reports.  Sound good to the Jewish cartel that is running the casino?  Sure it does!!