Picturing The Gap Between Hope And Reality In Stocks

Tyler Durden's picture


Companies will have to increase profit margins to all-time records in order to meet estimates, is the message of utter hope embedded in the forward expectations for earnings and sales growth. As Bloomberg reports, Oppenheimer's Andrew Burkly warns this is "a scenario we view with ongoing skepticism." As the chart below shows, the gap between growth in sales (top-line) and earnings (bottom-line) is set to explode in the next few quarters as even the most exuberant analsyst struggle to upgrade their GDP-riddled sales forecasts and are thus forced to make up whatever margins they need to reflect extrapolated buy-and-hold targets for their stocks. The margin for US companies during Q4 was the highest since 1950 and finding ways to reduce costs and make workers more productive will be an "increasing challenge...earnings growth will have to be pared."



Chart: Bloomberg

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Thu, 04/10/2014 - 09:18 | 4642778 LawsofPhysics
LawsofPhysics's picture

Again with the "growth" bullshit.  Growth in what exactly?  Financial "products" of mass destruction?  No thanks.

Thu, 04/10/2014 - 09:34 | 4642819 Toolshed
Toolshed's picture

Growth in bankster compensation obviously.

Thu, 04/10/2014 - 09:37 | 4642821 insanelysane
insanelysane's picture

Stagnation is growth in a world of Central Bank printing.  As the currency loses value, the amount of revenue seems to increase even though the number of units sold remains flat.

I buy 1 pound of beef this year at $5 and Beef Inc reports revenue of $5.

I buy 1 pound of beef next year at $7.50 and Beef Inc reports revenue of $7.50.  Is Beef Inc. growing?

Thu, 04/10/2014 - 10:14 | 4642969 LawsofPhysics
LawsofPhysics's picture

The obvious problem being that all those SNAP recipients are "buying" that same beef too.  Hence the SNAP budget must get larger to cover the additional cost. 

Where do those funds come from?  Exponential equations are a bitch and eventually the actual beef producer shuts down because it simply isn't worth working that hard to provide the beef in exchange for the useless paper-promises that they are being given in exchange.


Thu, 04/10/2014 - 09:22 | 4642795 Shizzmoney
Shizzmoney's picture


Growth in what exactly?


Thu, 04/10/2014 - 09:23 | 4642796 Seasmoke
Seasmoke's picture

C'mon there has never been a better time in history, to make up numbers, than right now !!

Thu, 04/10/2014 - 09:39 | 4642828 astoriajoe
astoriajoe's picture

What, is the train leaving the station?

Thu, 04/10/2014 - 09:24 | 4642800 MFLTucson
MFLTucson's picture

Mathematical growth in a depression to fool those dumb enough to invest in the US ponzi schemes.

Thu, 04/10/2014 - 09:26 | 4642804 bnbdnb
bnbdnb's picture

Automation. Everything.

Thu, 04/10/2014 - 09:30 | 4642810 order66
order66's picture

Simple algonomics really.

Thu, 04/10/2014 - 09:33 | 4642818 Toolshed
Toolshed's picture

That is too funny!! Did you come up with the term "algonomics"? It should be added to the dictionary immeditely!!

Thu, 04/10/2014 - 09:30 | 4642811 Whoa Dammit
Whoa Dammit's picture

OT: A DC missile defense contractor kidnapped from his Wake Forest home was rescued by FBI in Atlanta slums.An odd story that supposedly had nothing to do with his line of work.


Thu, 04/10/2014 - 09:42 | 4642835 Two-bits
Two-bits's picture

I see your kidnapped contractor, and raise you missing weapon drawings:

"Classified design drawings used in the manufacture of nuclear weapons have not been properly and reliably maintained by nuclear weapons labs managed by the National Nuclear Security Administration (NNSA), the Department of Energy Inspector General said in a report last week."


Thu, 04/10/2014 - 09:32 | 4642817 pound the vix
pound the vix's picture

Hey, people get paid millions to come up with these numbers.

Thu, 04/10/2014 - 09:42 | 4642825 HRamos_3
HRamos_3's picture

Who cares, just buy buy buy the darn thing.


Thu, 04/10/2014 - 09:39 | 4642827 Rising Sun
Rising Sun's picture

Fuck right off Barry!!!!!!!!!!!

Thu, 04/10/2014 - 09:44 | 4642840 medium giraffe
medium giraffe's picture

92.7% of statistics are made up on the spot.

Thu, 04/10/2014 - 10:24 | 4643003 Uchtdorf
Uchtdorf's picture

Dude, everyone knows it's 47%. Winning at Statistics!

Thu, 04/10/2014 - 09:45 | 4642843 put_peter
put_peter's picture

It is very much possible that SP500 has peaked this cycle. At least our model suggests that there has been less irrational buyer momentum since last December. Usually this is a good sign of a market change. However addition of liquidity might change the picture...

Thu, 04/10/2014 - 09:49 | 4642852 medium giraffe
medium giraffe's picture

As long as the Fed is pushing people out of bonds, that cash has to go somewhere.  I wouldn't be comfortable making that call just yet.

Thu, 04/10/2014 - 09:52 | 4642861 put_peter
put_peter's picture

I totally agree with you. There is so much hot money circulating that it is hard to believe it. FED and the other CB:s can of course inject more at their will.

Thu, 04/10/2014 - 09:50 | 4642858 put_peter
put_peter's picture

Yet the trend is to be confirmed within 1-1.5 months.

Thu, 04/10/2014 - 09:46 | 4642845 Flying Spaniard
Flying Spaniard's picture

The only way to reduce costs even further is if they emply slave labour (aka unpaid internships, outsourcing to third world countires)... Oops they already do that... ok then brainwash the consumer (aka agressive marketing)... Oops they already do that... I am actually running out of ideas!!

Thu, 04/10/2014 - 10:11 | 4642958 Notsobadwlad
Notsobadwlad's picture

Increase illegal immigation to increase market size and reduce costs ... oops they are in the process of doing that too.

Thu, 04/10/2014 - 11:08 | 4643238 Armed Resistance
Armed Resistance's picture

Force you to buy a commodity that is overpriced and underperforms or pay a fine. Whoops....

Thu, 04/10/2014 - 09:48 | 4642851 HRamos_3
HRamos_3's picture

Don't you guys ever get tired of being wrong?

Thu, 04/10/2014 - 10:02 | 4642909 Colonel Klink
Colonel Klink's picture

Hearing the lie gets old yes, but when the truth finally comes to light it's going to be EPIC!

Thu, 04/10/2014 - 10:18 | 4642955 HRamos_3
HRamos_3's picture

How many times will they do the same thing?

How did they get programmed to, your following?

Everyone's locked up in their suffering

The only way you can tell is reconsider everything


What if the truth is that there is no truth

The only thing I can prove is there is no proof

Don't be so sure that your source is correct

People believed it before, before they had checked


How many times can they tell you

Til you just give them their way

How many times can sell you

Til you let them have their say

Every time you will ignore your

Heart it will come back twice more

Never deny your own instinct

Reconsider Everything 


Everybody want something they control

Some just want grass some they want gold

Either way does it feel good or feel low

Taking you down not fast but real slow


Rebellion done for it's own sake

Does not a true free thinker make

To go against for it's own sake

You're still controlled by the course that the other man takes


So you're sure on who's lying, eh?

Thu, 04/10/2014 - 10:14 | 4642970 yogibear
yogibear's picture

We don't need growth we have fantasy statisticians in the government and fantasy money from the Federal Reserve. 

Get those dancing unicorns queued for trading time!

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