Posts Tagged ‘analysts’

Market Still Deluding Itself That It Can Escape The Inevitable Dénouement

Market Still Deluding Itself That It Can Escape The Inevitable Dénouement

Courtesy of John Mauldin, Outside the Box 

One of my favorite analysts is Albert Edwards of Societe Generale in London. Acerbic, witty and brilliant. Emphasis on brilliant. The fact that he is a Doppelganger for James Montier (who long time readers are well acquainted with) is a coincidence (or he would say vice versa). I only kind of have permission to forward this note to you, but better to ask forgiveness… So, this week he is our Outside the Box. And a short but good one he is.

High angle view of glasses of red and white wine

I am in Amsterdam and it is late, but deadlines have no time line. Tomorrow more work on the book. It is getting close to the end. Most books are finished when the authors quit in disgust. How many edits can you do? I am close.

I wonder late at night, with maybe a few too many glasses of wine, why I feel like a book is so much more than an e-letter. Really? The last ten years of what I have written are on the archives. Good (ok, sometimes really good) is there. But some are an embarrassment. What was I thinking?

But somehow in my Old World brain, a book is more than a weekly letter. It is somehow more permanent than an “online” letter. Which may be archived forever. The book is “paper” and may be around for a few years. But the online version is here for a long time.

I know that is stupid. Really I do. But what is a 61 year old mind to do? A strange world we live in.

It is really time to hit the send button. More than you know! The conversation tonight has been too deep!

Your trying to figure out the purpose of life analyst,

John Mauldin


Market still deluding itself that it can escape the inevitable dénouement

By Albert Edwards

The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar…
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WHY AREN’T EQUITIES SELLING OFF MORE SIGNIFICANTLY?

WHY AREN’T EQUITIES SELLING OFF MORE SIGNIFICANTLY?

Courtesy of The Pragmatic Capitalist 

The deterioration in the economy has been clear in recent months, but the equity markets have confounded many investors.  Stocks are just 10.6% off their highs and have shown some remarkable resilience, particularly in the last few weeks. There’s a great tug-of-war going on underneath what appears like a potentially frightening macro picture.

A closer look shows that what we’ve primarily seen is deterioration in the macro outlook and not so much in specific corporate outlooks. Despite the persistently weak economy, earnings aren’t falling out of bed.  Without a sharp decline in earnings there is unlikely to be a sharp decline in the equity markets (outside of some exogenous event such as a sovereign default).

The most distinct characteristic I can recall from the the 2007/2008 market downturn was the persistent deterioration in earnings.  Like dominoes we saw the various industries go down one by one: housing, then banks, then consumer discretionary and on down the line.  While the macro picture has deteriorated recently we haven’t seen the same sort of deterioration in earnings that we saw in 2007 and 2008.

In a recent strategy note JP Morgan elaborated on the divergence between the macro outlook and the earnings outlook:

“What matters for equities is earnings and not GDP growth. US GDP growth projections are being cut, but earnings projections have been little affected so far. Investors and analysts are hoping that, to the extent the soft patch in US GDP growth lasts for only a few quarters and does not spillover to the rest of the world, US companies will be able to protect their revenues and profits. Indeed, this is what happened during 2Q, when US companies were able to deliver strong top line and EPS growth even as US GDP grew at only a 1% pace.

It is a prolonged soft patch that poses the greater threat for corporate earnings and equity markets as it raises the specter of deflation and profit margin contraction. Why is deflation bad for corporate profitability? When nominal interest rates are bounded at zero, a fall in expected inflation causes a rise in real interest rates and the cost of capital, hurting corporate profitability. In addition, nominal wage rigidities mean that deflation reduces output prices by more than input prices putting pressure on corporate profitability. Indeed, the


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STOCKS ARE CHEAP, BUT THIS METRIC DOESN’T WORK?

STOCKS ARE CHEAP, BUT THIS METRIC DOESN’T WORK?

Courtesy of The Pragmatic Capitalist 

WHEN PEOPLE THINK OF IMPORTANT JOBS THAT CAN NOT BE LEFT OUT OF OUR LIVES THEY DO NOT NORMALLY THINK OF WASTE COLLECTORS. BUT DURING A HAULERS STRIKE GARBAGE PILES UP AND BEGINS TO SMELL. THERE IS NOWHERE TO PLACE IT ALL AND PESTS RUN RAMPANT AS THEIR AVAILABLE FOOD BECOMES ABUNDANT. DUMPSTERS OVERFILLED TRASH WASTE HAULER STRIKE

I’ll be frank – I have a special place in my heart for the PE ratio and it is the same place where all the things I hate are stored.  This simple to understand metric has, in my opinion, resulted in more misguided Wall Street thinking than just about any metric in existence.  A quick glance at the breakdown of the PE ratio shows serious flaws at work here.  It is basically a moving price target (which is never correct unless you still believe in EMH) divided by the earnings estimates that are created by analysts who have literally no idea where future earnings will be.  In other words, you might as well pick random numbers out of a hat and divide them and then go buy or sell stocks.  Naturally, proponents of the PE ratio will say that you shouldn’t use forward PE’s, but to those people I have to respond: do you always drive through your rear view mirror?  The numerator (or market price in the PE equation) could care less about past earnings so it’s less than helpful in telling us where future prices might go.

What disgusts me even more about this metric is its incessant use in selling buy and hold strategies.  You can’t read a book on value investing or buy and hold without running into the PE ratio.  “The market is cheap – stocks for the long-run!”  You’ve probably seen this slogan on every mutual fund pamphlet you’ve ever read.  Your stock broker no doubt thinks the market is “cheap” right now.  The PE ratio has become the sales pitch of an entire generation of sales people who are just herding small investors into fee based products.  “Did you know Warren Buffet is a value investor?”  “Just buy cheap stocks and hang on.  Your status on the list of the world’s richest is in the making!”  Or so goes the old sales pitch.

So, I wasn’t surprised to open Yahoo Finance this morning to see the following headline arguing that stocks are cheap according to the PE ratio.  But just two articles down is an article from the WSJ arguing that the PE ratio doesn’t work in this environment.  You can’t make this stuff up.  According to the article:

“Not only is the P/E


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ANALYSTS HAVE BEEN WRONG FOR A DECADE

ANALYSTS HAVE BEEN WRONG FOR A DECADE

Courtesy of The Pragmatic Capitalist

Interesting commentary in the latest McKinsey Quarterly on the analyst community.  As we’ve often noted here, the analysts have been impressively wrong year in and year out.  In fact, McKinsey notes that the analyst community has been too optimistic for the majority of the last decade.  And they haven’t just been wrong – they’ve been horribly wrong.  Their estimates have fallen short by almost 50% over this period:

overopt ANALYSTS HAVE BEEN WRONG FOR A DECADE

Source: McKinsey 


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Apple Praise Borders On Hyperbole

Time to invest in, say, Orange. – Ilene

Apple Praise Borders On Hyperbole

Young woman holding a bowl of green apples and smiling

Courtesy of Joshua M Brown, The Reformed Broker 

Every single  living, breathing analyst on Wall Street (and some that are deceased) has come out with a bull call on Apple ($AAPL) this morning on the heels of the company’s blockbuster first quarter earnings announcement.  In over a decade trading this market, I have never seen anything like this analyst lovefest. 

Never.

Don’t believe me?  How ’bout this?

Clyde Montevirgen, Standard & Poor’s: Buy rating; new target $295, up from $270.

Samuel Wilson, JMP Securities: Market Outperform rating; target to $290, from $260.

Peter Misek, Canaccord Adams: Buy rating; target to $325, from $300.

Robert Cihra, Caris & Co.: Buy rating; target to $310, from $300.

Tavis McCourt, Morgan Keegan: Outperform rating; target now $325.

Young woman holding an apple

Keith Bachman, BMO Capital: Outperform rating, target now $290, up from $265.

Doug Reid, Thomas Weisel Partners: Overweight rating; target to $320, from $300.

Andy Hargreaves, Pacific Crest: Outperform; target to $330, from $300.

Jeffrey Fidicaro, Susquehanna: Positive rating; target to $300, from $275.

Shaw Wu, Kaufman Bros.: Buy rating; target to $315, from $305.

Scott Craig, Bank of America/Merrill Lynch: Repeats Buy rating; target to $300 from $260.

Mike Abramsky, RBC Capital: Outperform rating; target to $350, from $275.

Gene Munster, Piper Jaffray: Overweight rating; target to $323, from $299.

Toni Sacconaghi, Bernstein Research: Overweight rating; target to $300, from $275.

Yair Reiner, Oppenheimer: Outperform rating; target to $320, from $285.

Mark Moskowitz, J.P. Morgan: Overweight rating; target to $316m, from $305.

Close-up of a young man tossing an apple in the air

Richard Gardner, Citigroup: Buy rating; target to $320, from $300.

Phil Cusick, Macquarie: Outperform rating; target to $325, from $250.

Bill Shope: Credit Suisse: Outperform rating; target to $315, from $300.

Ben Reitzes, Barclays Capital: Overweight rating; target to $315, from $300.

Katy Huberty, Morgan Stanley: Overweight rating; target to $275, from $250.

Chris Whitmore, Deutsche Bank: Buy rating; target to $350 from $325.

Told ya.


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STAT OF THE DAY: 93% OF ANALYSTS EXPECT S&P TO RALLY HIGHER

STAT OF THE DAY: 93% OF ANALYSTS EXPECT S&P TO RALLY HIGHER

Courtesy of The Pragmatic Capitalist

As if sentiment wasn’t already starting to get a bit too bullish!  The latest compilation of analyst estimates and year-end targets is now calling for substantially higher earnings and equity prices.  Of the 13 major banks, JUST ONE (Andrew Garthwaite of Credit Suisse) is calling for the S&P 500 to finish the year below the current level.  We’ve covered Garthwaite’s full year outlook and it’s very much in-line with our own – a relatively robust first half and a dicey second half.  On the other end of the spectrum is Binky Chadha whose price target sits at 1325.

Firm                 Strategist           2010 Close   2010 EPS
===============================================================
Bank of America      David Bianco           1,275       $75.00
Bank of Montreal     Ben Joyce              1,225       $74.50
Barclays             Barry Knapp            1,210       $71.00
Citigroup            Tobias Levkovich       1,175       $76.50
Credit Suisse        Andrew Garthwaite      1,125       $77.00
Deutsche Bank        Binky Chadha           1,325       $80.80
Goldman Sachs        David Kostin           1,250       $76.00
HSBC                 Garry Evans            1,300
JPMorgan             Thomas Lee             1,300       $81.00
Morgan Stanley       Jason Todd             1,200       $77.00
Oppenheimer          Brian Belski           1,300       $76.00
RBC                  Myles Zyblock          1,225       $76.00
UBS                  Thomas Doerflinger     1,250       $81.00
---------------------------------------------------------------
Mean                                        1,243       $76.82
Median                                      1,250       $76.25
High                                        1,325       $81.00
Low                                         1,125       $71.00
 

Source: Bloomberg 


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THE 5 BIGGEST RISKS OF 2010

THE 5 BIGGEST RISKS OF 2010

Courtesy of The Pragmatic Capitalist

Rock Climber on Steep Granite Face

As we enter the new year investors will be wise to focus on the risks of 2009.  Although the crisis appears long behind us it’s important to keep an eye on the bigger picture.  Little has changed in terms of the structure of our global economy therefore the risks remain largely the same.  Let’s take a moment to highlight some of these risks as we begin to prepare for a new year:

1)  Those darned analysts

It would be comforting to think that Wall Street’s analysts were in fact doing us all a great big favor with their expert analysis, but the truth is, more often than not, they aren’t.  As we have seen with my proprietary expectation ratio, the analysts have been behind the curve at every twist and turn of the crisis.  They remained too bullish heading into 2007 & 2008 and then were behind the curve as operating earnings tanked and they turned very bearish in Q408 and Q109.  Like clockwork, the ER bottomed and the market soon followed.  The greatest risk heading into 2010 is an analyst community that becomes wildly bullish and sets the expectation bar too high for corporate America to hurdle itself over.  Early readings show this is not a great risk at this point, but it continues to tick higher.

2)  Stimulus, stimulus, stimulus.

There is little doubt that the greatest mean reversion in modern economic times has been largely due to government stimulus.  The bank bailouts, housing bailouts/stimulus and auto bailouts all helped stop the bleeding during a time when the economy appeared to be on its deathbed.  Unfortunately, government spending isn’t the path to prosperity and the private sector will be forced to pick up the slack sooner rather than later.  2010 is likely to largely hinge on this transition.  The government will begin to sap the economy of its massive stimulus as the year drags on and with that comes increased risks that the equity markets will struggle on without big brother’s aid.

3)  Anything China

China has grown to become the hope of the global economy.  With their booming growth, growing consumerism, and fiscal prudence, China is the envy of the economic world.  The rally…
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Telling Big Earnings Lies is Easy

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Telling Big Earnings Lies is Easy

earnings liesCourtesy of Ben Bittrolff, The Financial Ninja

FN: The full article is mind boggling.

Wall Street Analysts Keep Telling Big Earnings Lie: David Pauly:

At a time when the financial industry’s credibility is at an all-time low, you would think Wall Street’s finest would break their necks providing transparency.

Not so. Stock analysts continue to promote corporate earnings lies, insisting that net income isn’t really what investors need to know.

Instead, their earnings estimates ignore often huge expenditures that can’t help but affect a company’s health.

In analystspeak, Intel Corp. wasn’t hit with a $1.45 billion fine from the European Union in the second quarter for anticompetitive practices.

After setting aside funds to cover the fine, which Intel is appealing, the semiconductor-maker had a quarterly loss of $398 million, or 7 cents a share. Disregarding the fine altogether, analysts maintain the company earned 18 cents a share, beating their average estimate of 8 cents.

As Wall Street tells it, the employee stock options Google Inc. granted in the second quarter didn’t cost its shareholders $293 million.

Google, according to generally accepted accounting principles, earned $1.48 billion, or $4.66 a share, in the period. Not enough for Wall Street, which prefers to say the company earned $5.36 a share, leaving out the cost of stock options.

Continue reading Bloomberg article here.  

 

 


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ValueWalk

Musk: Tesla stock will be crushed if we don't control costs

By Michelle Jones. Originally published at ValueWalk.

Tesla CEO Elon Musk warned employees in an email that if they don’t start controlling costs, their stock will plunge. Shares of Tesla stock fell by about 4% after the email was reported.

Q3 2020 hedge fund letters, conferences and more

Tesla CEO calls for cost control to support stock

CNBC and Electrek obtained the...



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Kimble Charting Solutions

Are Commodity Prices About To Let The Good Times Roll?

Courtesy of Chris Kimble

Commodities have traded “heavy” for the past decade, as bond yields remain low and inflationary forces remain under wraps. But this trend could be up-ended as we head into 2021.

Today’s chart 2-pack looks at long-term “monthly” charts of the Thomson Reuters Equal Weight Commodity Index and the 10-Year US Treasury Bond Yield.

Over the past decades, Commodities and Yields have shown weakness. The Commodity Index has managed ...



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Zero Hedge

China Lands Spacecraft On Moon To Collect Lunar Rocks 

Courtesy of ZeroHedge View original post here.

According to the Chinese state-run CGTN news channel, China's National Space Administration declared on Tuesday morning that it's "Chang'e-5 successfully landed on the near side of moon." 

Chang'e 5, China's first-ever attempt to collect lunar rocks and conduct a return mission back to Earth, apparently touched down this morning. Not much on the landing was conveyed by CGTN, who only offered a single-sentence statement. 

Over the next few days, th...



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Phil's Favorites

Salesforce Confirms Deal To Buy Slack

Courtesy of ZeroHedge

It's official. After reportedly entering high-level, late-stage talks, Salesforce, one of the newest members of the Dow 30, has agreed to buy Slack, a former Silicon Valley "unicorn" that IPO'd last year.

Shares of the Slack have surged in after-hours trade on the news, as if the massive surge seen following the initial reports that the two companies were in talks wasn't enough.

Here are the juicy details: $27.7 billion in cash and stock, giving the corporate software giant a popular workplace-communications platform in one of the biggest technology deals...



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Biotech/COVID-19

Rapid COVID-19 tests can be useful - but there are far too few to put a dent in the pandemic

 

Rapid COVID-19 tests can be useful – but there are far too few to put a dent in the pandemic

Rapid tests for COVID-19 are easy to administer and give fast results. AP Photo/Julio Cortez, File

Courtesy of Bonnie LaFleur, University of Arizona and Katherine Ellingson, University of Ari...



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Digital Currencies

Five Reasons Why Bitcoin is Going Up

 

Five Reasons Why Bitcoin is Going Up

Courtesy of 

Call it the “Respectability Rally”…

A few reasons for Bitcoin’s return to the record highs. It’s about $18,500 as of this writing, matching the previous highs from 2017’s original explosion.

Reason one: It’s going up because it’s going up. Don’t scoff, this is the reason most things in the markets happen and then the explanations are called for afterwards. I’m in financial television, I have literally watched this process occur in real-time. The more something moves in a given direction, the more peop...



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Politics

Mythmakers: The Men Who Created Donald J. Trump

 

Mythmakers: The Men Who Created Donald J. Trump

Mark Burnett, Jeff Zucker, and the Trustwashing of a Fake President

Courtesy of Greg Olear, Prevail, author of Dirty Rubles: An Introduction to Trump/Russia 

...

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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Friday, 12 June 2020, 08:06:43 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: Interesting (2)



Date Found: Saturday, 13 June 2020, 12:27:02 AM

Click for popup. Clear your browser cache if image is not showing.


Comment: Recession Forecasts Time Frame



Date Found: Monday, 15 June 2020, 11:07:52 PM

...

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Mapping The Market

COVID-19 Forces More Than Half of Asset Management Firms to Accelerate Adoption of Digital Marketing Technology

By Jacob Wolinsky. Originally published at ValueWalk.

There is no doubt that the use of technology to support client engagement initiatives brings both opportunities and threats but this has been brought into sharp focus this year with the COVID-19 pandemic.

The crisis has brought to the fore the need for firms to enable flexibility in client engagement – the expectation that providers will communicate to clients on their terms, at their speed and frequency and on their preferred channels, is now a given. This is even more critical when clients are experiencing unparalleled anxiety from both market conditions and their own personal circumstances.

...

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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.