The Most Ridiculous Forecast You Will See In A While

Tyler Durden's picture

With Apple apparently building a lower-cost iPoor model and now accepting iLayaway payments, the question of margins is once again front-and-center. However, the market as a whole is in a world of its own in its consensus view of what US companies are capable of producing next year. As Morgan Stanley notes, 58% of firms are expected to raise their margins YoY through 2012, and then consensus sees a stunning (record-breaking) 76% of firms will raise margins in 2013. If that eye-watering buffoonery is not enough to raise some doubts at the market's implied ebullience, then a reminder that we have seen this divergence from GDP growth and margin growth before - as, simply put, the squeezing of costs to improve margins inevitably plays out down the chain (aggregate supply and demand lags) and increases the load on government as safety net living-standard-provider-of-last-resort. The bottom line is simple - margin expectations must fall and given the dour outlook for top-line growth in a stagnating global economy, that will expectations correction will drop straight to the bottom-line. Of course, prices will be nominally defended by a herd of talking heads expecting moar multiple expansion.


The incredible consensus view of margin-expanding companies in 2013...


Excluding energy and financials, incremental margins are expected to expand to 15.9% in 2013 after contracting to 5.8% in 2012


and we have seen this kind of wild (one-sided - demand vs supply) divergence before... the solid green arrow shows the consensus expectations surging while GDP consensus is sideways to lower...


Charts: Morgan Stanley

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Pairadimes's picture

Can I short that top chart?

Mr Pink's picture

This clinches it....We must be living in Bizarro World

This is not happening....this is not happening...this is not happening...this is not happening...

NotApplicable's picture

Ridiculous??? Just wait until Benron starts buying whole warehouses and cargo ships, only to destroy them in an effort to "sop up liquidity."

Ham-bone's picture

only if you believe the dollar will maintain or strengthen as we decide to decide to do nothing about deficits and decide to put off that decision about cuts in spending for another generations decision...I see a long way dollar could fall and that based on 2/3rds of earnings abroad for s&p500 would fall niclely to the profit statement...not good but actually conceivable.

Take a peak at the DJT's and seems possible the Fed is about to get it's wish of RUT, S&P, DOW all blasting off to new highs...shouldn't be suprising w/ QEverything poured into equities, bonds, MBS's. 

Panafrican Funktron Robot's picture

Yeah, while I see record corporate profits on a sum total basis, I also see continued margin compression.  It's the only possible path.  

ACP's picture

Here's this for ridiculous - now the White House is requiring 100,000 signatures for an official response.

Bunch of spoiled brats.

Too much work for government employees, huh?

So just reduce your workload arbitrarily.

I wish I could do that, but I'm not a fucking government employee.

max2205's picture

That whole thing is a joke

NotApplicable's picture

No doubt. After all, just how hard is it to put these little up/down arrows next to any posted legislation?

lolmao500's picture

Maybe Amazon will get a 20 000 P/E in 2013...

ZeroPower's picture

Repeat after me: PE doesn't mean anything. Anything.

AccreditedEYE's picture

It's true.... really, really true. Fundamental analysis is dead. Just BTFD and let Ben take you home.

poor fella's picture

Know this, you will never walk right again if Ben takes you home.  

michiganmaven's picture

As was said in Europe last year... when thing sare really bad lie ! basically that is what they are doing... anyone with half a brain (or less) can see margins peaked... 

max2205's picture

Free I phone s with your EBT cards!

August's picture

Every now and then, someone on the apparent A Team fucks up, and gives the public a "fact".

"When things get serious, you have to lie"... cherish the inadvertant truth!  This is the only time you'll ever hear it spoken, at least from the likes of Jean-Claude Juncker.

DaveyJones's picture

"the most ridiculous forecast you will see in a while"

I'll give it a week

Fox-Scully's picture

or until the POTUS speaks again.

Catflappo's picture

"I'll give it a week"

Was that a forecast?

CPL's picture

Well it's only weds, anything could happen between now and then.

Motorhead's picture

Charts, bitchez!

SheepDog-One's picture

It's gonna be the BEST damn year since the start of the Great Depression by krackey!

busted by the bailout's picture

Fantasy trumps reality.

adr's picture

So my company is supposed to see better margins with every single retailer asking for 80 points now, to make up for the fact they can't move any inventory unless it is 50% off?


Well maybe if the Yen truly does go to the shitter and dumps to 120 Yen per dollar again. Then I might see some margin return. Fuck if that happens I'm moving to Japan because every single Japanese citizen would need to be handed a trillion yen+ for that to happen. Who knows Abe might make it rain coins from Mt. Fuji.

q99x2's picture

How many times did you read "That will" sentence before giving up? I did 3. Just in from a 10 mile jog. It might be me.

hairball48's picture

Down the rabbit hole.....

More Lint than Coin's picture

PPI and CPI have tracked considerable closer over the past year, a small increase in prices across the board seems reasonable.

orangegeek's picture

Well if AAPL is going to climb, it will likely do it against the direction of the NASAQ100.


ebay fell 3% on poor earnings outlook.  But the BS keeps flying in the hope that euphoria will kick in and everyone will run out and buy AAPL.


mmmmm.....hopium.....feels good....thanks Barry.

espirit's picture

Almost as funny as Jamie (the pig) Dimon taking a pay cut.


Yen Cross's picture

 Short QCOM. Gap needs to  be filled. This is only the 5 day chart!

ebworthen's picture

Can't wait to see those fucking crony capitalist's in bed with the socialists BURN.

SKY85hawk's picture

"In 2011, when the debt limit was increased by $2.1 trillion in return for $2.1 trillion in spending cuts over ten years." see above.

So, THEY promised us $210 billion spending cuts in 2012 and 013.  Anyone seen that?

Response: AGUY, While there are no budget cuts for 2013, you'll be happy to know that Washington did take action. They have chosen to raise your taxes for 2013. while this will not decrease the Budget deficit it will avoid the deficit from getting larger as out lays for Social Security,Medicare and Wealthfare. are rising. You should also be happy that your health insurance premiums will be increasing by about 20% in 2013 and another 40% by 2016 for ACA (O'bamacare). While this will not do anything to stem rising Medicare costs, it will help decrease the number of people able to afford Health Insurance.