S&P500 Profit Margins Tumble To Q1 2010 Levels

Tyler Durden's picture

The S&P 500 gained 12% in 2012 and has almost reached that level of return in 2013 YTD , delayed only by the apparent non-event in Cyprus, led, if one is to believe the talking heads and asset gatherers, not by a Fed-driven liquidity flush but by the mother's milk of stocks - earnings. A major driver of these earnings has been corporations ability to squeeze more blood out of their stones (read - layoff and automate as much as possible) and margin expansion is often cited as the catalyst for the next leg higher in stocks. The trouble with that 'anecdotal' meme, trotted out again and again, is it appears to have hit its unemployment/consumerism-driven limiting point. As JPMorgan notes, in light of the robust cost cutting experienced during the recovery, additional margin expansion remains unlikely going forward, leaving future earnings growth dependent on stronger revenues - recoupling expectations to GDP growth and we know what that means. Critically, in reality, S&P 500 profit margins have dropped rather notably in the last two quarters - now at their lowest since Q1 2010 - not exactly the 'expansion' the advisers told us would happen.



Why is this a (laughable) issue? Because this is what the hockeystick consensus looks like:

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Thomas's picture

Quickest way to tank stocks is to cause p/e ratios to soar. Quickest way to spike p/e ratios is not to tank the economy but rather shrink record high profit margins. Duck and cover under your desks like in elementary school could be in order. This four-year rally was getting long in the tooth anyway. The BTFD crowd could be given some serious opportunities each and every day.

fonzannoon's picture

I see green by lunch, same as it ever was.

slaughterer's picture

Who needs profit when you got the Bernanker?  Profit is for pussies when the entire planet goes the AMZN way.  

slaughterer's picture

MOAR rate cuts

MOAR money printing


Wha MOAR can the world ask for?

Cognitive Dissonance's picture

Time to tighten up my horse blinders and BTFD.


booboo's picture

I see blow up fuck dolls taped to robotic skate boards delivering piss warm ale, Pony Bites and watered down dipping sauce to over weight college geeks with boners as a possible business venture. Long Horse Farms and water.

Dr. Engali's picture



I think you've been hear long enough to ditch the sarc tag...If people can't recognize sarcasm then screw em.

Jason T's picture

we've not been in a stock market bubble but a profit bubble ..

the fed created a profit bubble.  

q99x2's picture

I mentioned this before, the IRS and States are going to legalize full ENRON accounting this year. The globalists are going for broke now. The TBTFs are beyond all hope at this point and everyone knows the ponzi is coming up to collapse. BTFD

Bernanke and other Central Banks have infinite access to cash and zero transparency. What do you think they will do--until they can't.

The accounts at Chase going to zero right after JPM is hauled before the banking committee wasn't a coincidence it was a F'n acausal connecting principle.

firstdivision's picture

I for one am following Jim Cramer's advice and shorting bonds while piling in on equities with very high PE ratios. 

SheepDog-One's picture

'Robust cost cutting'...well hell just fire EVERYONE and the S&P can REALLY get some upside!

Apostate2's picture

OK at least once I have to say it. Here goes.......

Gold Bitchezs !

LawsofPhysics's picture

Rally on then.  The world is at war folks.  On one side, worthless fucks in stuffed shirts trying to maintain power and control through counterfeiting and other fraudulent activities.  On the other side is everyone else who's labor results in something of real fucking value.  Money is a distraction this is about power and control, period.

madcows's picture

"Must... Maintain... Status... Quo.... At... All... Costs....", and if not, well, they'll just take your money from you, a la, Cyprus, New Zealand, Italy, Spain.... and those yet to come.  I'm drawing down my accounts.   Only leave the checking account to pay the bills with.  FU Central Bankers and Corrupticrats.

asteroids's picture

"The stock market is NOT the economy". "The stock market is NOT the stock market". As long as the FED levitates this fantasy market, nothing will change. BUT, there's a price to pay.... there always is.

otto skorzeny's picture

I wonder how the underpants gnomes' profit is holding up?

adr's picture

Remember, they still haven't figured out step two. Most people don't know what step two is. Step two is FRAUD. Fraud leads to profit, but not off sales.

They also failed to realize profit does not matter, only revenue. By stealing underpants they have very little expense in procurement. They can spend more money opening Underpants Gnome retail locations. They can then channel stuff the retail locations with the stolen underpants booking each pair as sold and recording revenue for every shippd unit.

The massive increase in revenue bodes well for the Underpants Gnome IPO. That is where the real profit is made. Each Gnome holds at least 5% of Underpants Gnome enterprises. Going out at a $1.5 billion dollar valuation makes each Gnome a millionaire even though they have sold very few actual underpants to consumers and incured massive debt opening UG retail stores.

The Gnomes can try to keep channel stuffing to pump the stock even more, or they can cash out and retire to the Gnome beach to party with all the shrooms and bikini clad lawn ornaments they desire. Depends on how greedy they are, or whether or not the IPO underwriters have made their percent return threshold yet.

Dr. Engali's picture

Looks like they need to find another third world country to exploit.....The U.S should be pretty ripe soon.

NoDebt's picture

You say that like we're about to run out of 3rd world countries to exploit.  Never understimate the regime.  They will build more 3rd world countries.  I offer for your exploitation pleasure.... all of southern Europe.  Yes, yes, they used to be 1st world countries (well, sort of) but now they're 3rd world, and so ripe for new and inventive forms of exploitation.

Remember that Greece was recently (and officially) downgraded to a "developing economy".

Yen Cross's picture

    The Dow and ES should be off much more than current levels. All of the news this morning has been crappy.


      Ding-Ding, back up the POMO truck right here, next to the ' Big bronze Bull'.

fonzannoon's picture

Yes but it's only temporary Yen. The economy is just about to stand up on it's own two feet. Almost there....

Yen Cross's picture

     Listening to CNBS try to spin the housing miss Fonz. They are saying more inventory on the market is good, and how condo sales were strong, yet only make up 12% of the market.

      It's BS like that that is responsible for CNBSs bad ratings. CNBC ratings down as markets rise - NYPOST.com

  In the article they attribute the bad ratings to the markets being so good, that people don't want to watch. People don't want to watch because they are a bunch of criminal shills.

ArkansasAngie's picture

Cyprus is the test case ... confiscating peon's money leaving sharholders and bond holders in tact.  The elites are trying to position the coming theft as legitmate.  The greater good?  Horse shat.  

We are all Cypriots now.

LawsofPhysics's picture

Indeed.  It's about power and control, period.  A world-wide monopoly game and history is very clear on how it all ends, hedge accordingly.

madcows's picture

Earnings don't matter when the FED can pump.  BTFD to infinity and beyond.  It may be farcicle, but it's the new normal.  "stocks will not go down.  I, Benjamin Bernanke, will fucking liquidate any who oppose me!"

Abraxas's picture

"Everybody knows the deal is rotten
Old Black Joe's still pickin' cotton
For your ribbons and bows" Leonard Cohen

adr's picture

The revenue and profit most of the S&P reports is complete fantasy anyway, so why can't they just report more margin?

Do the CEOs and CFOs think someone will call them out on their bullshit? Nobody has so far.

I've been calling for an investigation and full audit of Lulu Lemon for years. The company is 100% BS and actually sells about 10% of what they claim. It is impossible to generate the revenue they claim out of the space they have, unless they use very questionable accounting. Over $2000 per sq ft of yearly retail in apparel is impossible.

It doesn't matter how much Christine Day cooks the books. Too many high powered individuals own stock in Lulu. They are running the stock scam, and it will run until they have no use for the company anymore. Then like a flash Lulu will be gone.

Not that it matters, the entire thing is a fraud. Calling one company out is pointless.

ekm's picture

Ok, let me use a metaphor.

Imagine there is a village with 1000 houses. Average house price is $1000/house.


Then a powerful gang comes in and invades the village. The gang produces money out of nothing and they buy all 1000 houses at $2000/house. Hence, the market no longer exist.

Gangsters are selling houses to each other only at $5k, or $1million. It makes no difference, because they can create any amount of money.


Question: What is the price of houses.

Answer: Since at $1000 was the supply/demand price, that is the price if the market exists.

If the all houses are owned by a group of gangs then the price is whatever the gang decides to be since they're not buying or selling any. It can be $5000 or $1 million, it makes no difference.


That is the case with the stock market.

At DOW 11k, Fed + Primary dealers purchased everything with money out of nothing are simply putting a tag on the DOW, 12k, 13k, 15k, 20k, 30k by selling the same stocks to each other over and over. It makes absolutely no difference.

buzzsaw99's picture

Earnings don't matter, only the bernank matters.

orangegeek's picture

Social mood drives this insanity.  Fundamentals are way off and most know this.




Some divergence in the index - possible top - today is down, but we've seen this so many times - drops 15 points and then spends the next 3 months climbing 20 points.


Earnings on the investment houses are key - they can't make much playing this game (many are losing) - it's only a matter of time.

Floodmaster's picture

Nothing can go wrong with the Public Insured Stocks Market. Billionaires Need More of Your Money.

NoWayJose's picture

The beauty of three years of cost cutting is that your corporate costs do go down, mostly because you layed off a bunch of your workers and no longer have to pay their salary or medical costs.  The problem is that all the other guys did the same thing - and as a result - there are now fewer workers out there to actually BUY your products!  

hooligan2009's picture

the way around obamab care is "job splitting" - two part time jobs in the same two companies, just you work at both places rather than just one...OR..if you earn too much you have three part time jobs..

getting round the stupidity of obama is easy, because, well, all legislation passed in congress over the last twenty years is DUMB, DUMB, DUMB..

can anyone name one piece of smart legislation passed by congress in the last 20 years?

if a company tried to live off twenty years of being dumb, they would go the way of the airlines, or the car companies, or freddie and fanny or any company that gets alongside dumb polticians.