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Equity Valuations And The Jobless Recovery
Whether its our old friend Binky from Deutsche or Tommy Lee from JPMorgan, the uber-bullish permanence of these well-paid serial extrapolators seems to pivot critically for 2012's forecasts on one thing: multiple expansion. On whatever empirical metric the Bill Millers of the world look at, stocks are cheap - no matter the changing dynamics underlying the entire system that seems so obvious to the rest of us. As JPMorgan notes, even assuming a 15% earnings decline (possible:- in Q4 2011, the percent of negative S&P 500 earnings pre-announcements matched its 2001 and 2008 peak, and another sign: companies reporting before Alcoa beat consensus earnings for the last 9 quarters, while in Q4, they trailed estimates by 2%.) the S&P 500 is priced at the cheap end of history.
The answer to why measures such as Price-to-Book and Price-to-Earnings have adjusted down so considerably is, however, very evident when once considers where the profitability has come. In contrast to prior recovery cycles, current cycle profits have been driven significantly by very low labor compensation.
David Cembalest says it best: "Given the fiscal, social and political issues this creates, it’s hard to pay a very high multiple for this kind of profits boom."
Source: JPMorgan
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So trickle down economics doesn't work then? Who knew....
It trickles down if you sell coke and Ukranian mail order brides. Otherwise, not so much.
L.A. today, looks like Spain under Franco - machine-gun armed bullet-proofe vested cops everywhere.
It trickles down alright - to the elite's imperial henchmen.
The US Constitution - and thus you, the citizen, is being fucked in broad daylight.
US is preparing WWIII - the HomeLand Occupation by cops, Sheriffs, Fed Marshalls, CIA, FBI and National Guard - PLUS regional war to be escalated on a need-be basis - i.e. the Iran-trigger - PLUS the associated nect phase of QE, EU-"bail-out" etc paper & fiat nonsense - PLUS the tactical political "assassination" of Ron Paul and his campaign HAPPENING AS YOU READ....
http://www.infowars.com/ron-pauls-iowa-finish-biggest-fraud-since-kenned...
depressions are the best times to be at the top. Labor is annihilated and the banking system has your back.
Zero Hedgers all all glass half empty guys. Ok, so jobs are hard to come by. But why are you complaining when we have one of the biggest bull markets in stock in history? Just get whatever you can and buy trusted companies, household names: apple, coke, facebook. These things aren't going away, you use them right? We live in tough economic times; the best thing to do is to get everything you have into big compaies like these, sit tight, pray god, and have faith in your leaders...
And the more people follow my advice the more jobs there will be for all...
Was that satire? If not, it doesn't work that way. It's all relative. For every $1 you "make" in stock wealth, the big shops make $100 through front-running with insider info and high frequency trading computers. Retail investors are losing ground at an accelerating pace, and the vast majority of Americans aren't even investors to begin with aside from some bullshit, chronically underperforming mutual fund they are forced to have in their 401k. We live in a financial oligarchy, and paltry returns on paltry savings by the peasantry is not going to result in a healthy middle class, but rather a rapidly disintegrating one. "Hold on and hope" is an economic death sentence.
...like EK, AMR, GM, LEH, and WM.
And don't forget MF. Er I mean, MFGLQ.PK ;)
"But why are you complaining when we have one of the biggest bull markets in stock in history?"
I dunno but getting back to the level the market was 11 years ago doesn't really feel like much of a bull market regardless of the low to the high in the mean time, especially considering inflation during that time....just sayin.
To coin a phrase....To think one could have bought gold in 2000 and gone on vacation for the last 11 years.
price the market in gold and its one of WORST bear markets in history
it doesn't even look so good adjusted for cpi. http://home.earthlink.net/~intelligentbear/com-dj-infl.htm
Guys - he was trying to be sarcastic - obviously - LOL :-)
THIS GUY IS THE POSTER-CHILD FOR 'WHAT IS WRONG IN AMERICA'....NO, THE WORLD! WHAT A SHEEPLE!
"Mark to unicorn" would make my books look good too. Wish I could use it like these banks, Wall Street and the gov. Ask yourself, "what does this data suggest about the coming inflation?"
OT, but interesting;
Surely, this will cause a drop in rental prices, leading to a further drop in house prices. It's almost as if they WANT everyone to go broke. OH WAIT A MI
Fourth Reich NO! Sorry fourth mandate I meant mandate...
Mein Führer! I can walk...from my mortgage!
go broke, AND work for chinese wages. This is the end game.
if you rent, on foodstamps, can't afford medicare, the globalists have you exactly where they want you! oh yeah, one more thing, don't forget to pay taxes on everything, for these globalists hold all the world's debt, and demand repayment!
Yes. It is a Jobless AND Homeless AND Foodless AND Educationless "recovery".
The only "De-Coupling" is between reality and the script read by the Elite's Henchmen in MSM.
Just wait til the IRS comes to collect your rent and the SWAT team busts in when you dont make your student loan bill cuz your degree is worthless in the states as all good jobs went abroad (thank you al "nafta is good for the middle class" gore) maybe you will even have to get microchipped to live in one of these houses.
certainly you will have to pass a pee test. http://www.huffingtonpost.com/2011/12/16/unemployment-drug-test-republic...
I will keep pointing this out until I'm either dead in my grave or every individual who uses this quote:
hey, E_K!
i think it might also "encourage" underwater owners to become tenants and give the title to the banksters, [w/ our subsidy for the 'losses'?]
let's stop w/ the bankster-sponsored "federally-subsidized programs" to "help" people, already!
we've seen enuf! everytime anybody tries something, they (re-) write the rules and politicize the funding, and then freaking loot it!
half the world's finances now consists of "insuring" the mistakes and frauds of banks and sovereigns while "bailing out" the same asswipes theu "printing" to insure thier jobs, income, and assets will continue to grow, forever, as their zombie (also underwater) corporate and political structures are kept alive to feed off the living
they can make it "economic" or "uneconomic" to keep your home, just as they can make recycling "economic" or plastic bags this-or-that, or carbon credits...
...until it isn't, anymore...
A jobless recovery is not a recovery for those who are jobless.
Here's a man who knows what he's talking about! You're hired, son!
Again...very nice set of charts. Simple and clean. Now...bring the moron chatter box criminal syndicate Wall Street bankers to spew their complicated explanations for why profits will rise again this year...even as Average Joe is tapped out.
Burrito anyone? Hello...Beuller...Beuller...
Who needs a job when we've got section 8 and SNAP cards?
People on section 8 and SNAP cards.
Then the people who administer the section 8 and snap cards would be out of a job......requiring them to get section 8 and snap cards. You see, it's a vicious cycle :)
Good for long term stability.
With an underpaid, underemployed, struggling work force, consumer discretionary profits are solely located in a depressed "flexible accumulation" pocket which encompasses cheap cosmetics (ULTA), cheap burgers (MCD), cheap laughs/tears (DIS), cheap made-in-china junk (DG, WMT) ... cheap everything. But pretty soon nobody can afford cheap anymore.
Any chance of getting a link and a snarky commentary on the Hatzius CNBS appearance today?
My favorite quote, " I can't eat an Ipad"......Phoney money, phoney profits, phoney stats, phoney leaders......I wonder if there is a connection?
Look at all the leaders and look at all the indicies, Stocastics becoming very overbought caution up here. Lots of resis 1276, watch for reversal. Trail up long stops
fuck this fuckin market. I own vxx and am short financials. I have no idea why. These mega cap stocks are just staring at me saying "come on stupid, what are you waiting for?"
Folks like you are precisely what they are waiting for.
You are 100% correct. My eyes are open.
They have driven FAZ/TZA die-hards into the loving hands of FAS/TNA once again.
Nah...but MCD, KMP, VZ, etc. etc. ect....
It's hard not to just make money....I gotta tell you....
summa summarum: french and spanish bitches are the cheapest.
you work for tips?
Zero Hedge at its best:
"...serial extrapolators..." 5 stars!!
BTW...if you right Tyler...You should buy French and Sell US equity.... ;-)
http://www.latimes.com/business/la-fi-credit-cutoff-20120103,0,3538902.story
Somewhere, somehow, at sometime, the money runs out.
With 45 million on Food Stamps and increasing: http://www.zerohedge.com/news/us-food-stamp-usage-hits-new-record
The idea, that there is an endless supply of money, is true only if you ignore this: http://www.usdebtclock.org/
Oh yeah, you have to also ignore over $60 Trillion in unfunded SS, Medicare, and other obligations:
http://www.heritage.org/budgetchartbook/entitlements-historical-tax-levels
No more home equity loan ATM's.
Decaying infrastructure, global competition, health care costs out of control.
But hey, ad "Debtopia" to "Hopium" and mix in some booze, Zoloft, LSD, and massive bong hits - and equity valuations are at all time lows and it is time to "BUY, BUY, BUY".
Remeber, the money has to come from somewhere.
;-)
Wrong, the fiat (especially electronic) will never run out. The actual supply lines will break and then we will have massive "unforseen" tragedies unfold before our very eyes. All the while TPTB will use every opportunity they can to rally the sheeple behind one "cause" or another. Same as it ever was, know your history and hedge accordingly.
I volunteer to join the red cross. Eat lobster and fly over tragedies in a fucking helicopter that sucks 100 gallons of gas an hour while filiming the tragedy and speaking in a cracking choking sally struthers voice if she'll teach it to me as long as you give me a giant fucking hollywood mansion as a reward so I can say I'm giving back to the cummunity.
Oh I forgot the graphics of the central bank you can phone and have your donation automatically billed to your phone without telling you that administation fees of it all takes all the money.
Hence, the reason why I recommend: http://www.worldvision.org
One of the most efficient charity organizations in the world.
Chart xc56 could be highly misleading if the data used to determine "LT average" uses only the last 10-20 years or so, when P/E's were skewed way above the average level over the last 50 years, or so.
Using much longer look-backs, the cheapness would most likely disappear.
If you look at a log scale chart of the Dow going back 100 odd years, it becomes clear-the Market 'could' fall 50pct and stlill not break any trend channel.
Not what I use for trade set ups, but .........
From Hussman this week & hits the nail on the head IMO:
With 10-year Treasury yields below 2%, 30-year yields below 3%, corporate bond yields below 4%, and S&P 500 projected 10-year total returns below 5%, we presently have one of the worst menus of prospective return that long-term investors have ever faced.
If you take the financial/banking out of the model does is still look the same? or worse?
Financial/banking IS the market.
And computers. Can't forget computers.
Oh, and Unicorns. They got a horn like bulls do, and shit out delicious skittles.
How the fuck can you have sales magnitudes below profits??? Don't you need to sell something in order to generate profit???? Sum total of profits is greater than the sum total of sales???
Seriously, from the chart it looks like corporations have just been handed billions of dollars and weren't required to sell anything or pay anything out in salaries. FREE MONEY FOR ALL THAT CAN AFFORD TO BRIBE A POLITICIAN TO GET IT!!!! What is fucked up is that is exactly what happened.
I guess when my buyer told me his department sold more than they actually bought on the year end report he wasn't kidding. What a fucking joke, we have now entered the realm where corporate profits can be greater than the total of corporate sales. Ha, ha, ha profit out of thin air and that drive the market up.
The stimulus element is definitely there... but the chart represents changes from a baseline. Increasing profit is certainly possible even if your sales are tanking. You just become more efficient, use cheaper materials, or cut wages and/or fire workers. I'm not advocating any of that, just what I see in those charts...
+1 I thought I needed a new eyeglass prescription when I read that chart...
Growth through hypothefication. Peace through War. Ignorance is Strength. Arbeit macht Frei.
Low P/Es can be explained by poor earnings quality, and declining labor costs are a poor form of earnings quality indeed, but low P/Bs are better explained as overly optimistic book markings.
For members of the working class age 20-50 the greatest asset is their future earnings. Not their house, 401(k), or credit score, but their future earning power. The value of future hours worked that will be sold for wages and benefits.
The value of those future work-hours has been deflating for a couple decades now. The deflation has accellerated rapidly during the Great Recession. The good Dr. Bernanke isn't concerned about the deflation of this asset at all, and neither is Washington DC.
It's only going to get worse as the U.S. population ages and the majority of voters try to hang on to what they already have vs. pushing for opportunities to get ahead through work. Labor has zero bargaining power.
every which way but loose
LOL at that graph. Really says it all.