Posts Tagged ‘corporate earnings’

Will We Hold It Wednesday – Strong Bounce Edition

What an amazing recovery!  

Just one week ago the World was coming to and end and now everyone has their rally caps back on.  Investors really are sheep – except I think sheep have better memories…  We're still right on plan of dropping 10% and then bouncing 4% (strong bounces) by Wednesday (today) that was initiated on October 6th by our friends at the Fed (see yesterday's post for the summary).  For those of you keeping score, our strong bounce predictions for today were:

  • Dow 16,466 (weak) and 16,632 (strong).
  • S&P 1,878 (weak) and 1,903 (strong).
  • Nasdaq 4,280 (weak) and 4,360 (strong).
  • NYSE 10,360 (weak) and 10,540 (strong).  
  • Russell 1,104 (weak) and 1,128 (strong).

INDU WEEKLYThe Dow is just 17 points away from our goal and we'll just need the NYSE and the Russell to confirm their bounce lines and THEN we can get bullish again.  Meanwhile, we actually got a bit more bearish in our Short-Term Portfolio (also in yesterday's post) as our Long-Term Portfolio popped right back to up 18.1% for the year so we wanted to lock those gains in with the STP, which finished the day up 81.8%, down from 92% in the morning as the markets rocketed.  

If the rally is real, the Dow should have no problem at all popping our 16,632 line – after all, it jumped 234 points yesterday but stopped dead right at our strong bounce line.  The…
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Thrilling Thursday – Dow Hits Record Highs on Lower Earnings!

Why should we worry?

The Dow is at 16,580 so all must be well, right?  The fact that we're up here on low volume and even lower earnings is just one of those nit-picky things that won't matter a year from now, when TA people use the movement to draw new, bullish trend lines.

That's what the Fed is controlling, they are painting charts in broad strokes to keep things moving along – even when they aren't.  

Sure the US economy is only growing at a 0.1% annual pace and sure that's down shockingly from 2.6% last quarter but, hey, we EXPECTED to only grow at 1% – so it's ONLY a 90% miss – what, us worry?

The Fed says it's just bad weather slowing us down and, whether or not you believe that, they also promise to continue to stimulate the economy long after it is necessary.  The Fed is like Santa Claus, only they don't have to put in any effort to make their toys, so Christmas comes 365 days a year for the top 0.01%.  For the bottom 99.99% – well, it's 0.1% growth on the "trickle down" effect.  

4-30-2014 6-22-17 PM Corp CashIn fact, if you take out the Banksters, who are piling up the Fed's free money in their vaults and using it to manipulate the stock and commodity markets (and higher costs for Energy, Food and Health Care were the only reason our GDP wasn't -1% instead of +0.1%), then you can see that those companies not protected by the Fed are in big trouble

Not since 1999 has there been less cash relative to debt in Corporate America.  Yes, money is cheap, so why not borrow some but that money isn't being used to invest in plants, equipment or, God forbid, hiring and training more people – it's being used to buy back stock and pay out dividends to give the ILLUSION that earnings are improving, when it's actually only the share count that's being reduced.  

As you can see from this chart of the S&P, earnings are up just 25% from where they were in 2009, when the market…
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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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An Avoidable Depression

An Avoidable Depression

Great DepressionCourtesy of MIKE WHITNEY at CounterPunch

The economy has gone from bad to worse. On Friday the Commerce Department reported that GDP had slipped from 3.7% to 2.4% in one quarter. Now that depleted stockpiles have been rebuilt and fiscal stimulus is running out, activity will continue to sputter increasing the likelihood of a double dip recession. Consumer credit and spending have taken a sharp downturn and data released on Tuesday show that the personal savings rate has soared to 6.4%. Mushrooming savings indicate that household deleveraging is ongoing which will reduce spending and further exacerbate the second-half slowdown. The jobs situation is equally grim; 8 million jobs have been lost since the beginning of the recession, but policymakers on Capital Hill and at the Fed refuse to initiate government programs or provide funding that will put the country back to work. Long-term "structural" unemployment is here to stay.

The stock market has continued its highwire act due to corporate earnings reports that surprised to the upside. 75% of S&P companies beat analysts estimates which helped send shares higher on low volume. Corporate profits increased but revenues fell; companies laid off workers and trimmed expenses to fatten the bottom line. Profitability has been maintained even though the overall size of the pie has shrunk. Stocks rallied on what is essentially bad news.

This is from ABC News:

"Consumer confidence matched its low for the year this week, with the ABC News Consumer Comfort Index extending a steep 9-point, six-week drop from what had been its 2010 high….The weekly index, based on Americans’ views of the national economy, the buying climate and their personal finances, stands at -50 on its scale of +100 to -100, just 4 points from its lowest on record in nearly 25 years of weekly polls…It’s in effect the death zone for consumer sentiment."

Consumer confidence has plunged due to persistent high unemployment, flat-lining personal incomes, and falling home prices. Ordinary working people do not care about the budget deficits; that’s a myth propagated by the right wing think tanks. They care about jobs, wages, and providing for their families. Congress’s unwillingness to address the problems that face the middle class has led to an erosion of confidence in government. This is from the Wall Street Journal:

"The lackluster job market continued to weigh on confidence. The share of


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Rosenberg’s View For 2010 “A Return Of Volatility”

Courtesy of Tyler Durden

For those strapped for time, here is a comprehensive 4 minute Bloomberg TV interview with David Rosenberg which recaps some of the recent trends the Gluskin Sheff Strategist has been discussing, including the sovereign debt crisis, corporate earnings, and small business performance.

 

For those wishing to dig deeper into the observations, below is the key take home from today’s Breakfast with Dave (full piece here).

In several of my recent musings, I put forward the idea that economic, political and market trends are likely to continue the pattern of alternating direction from one year to the next. In other words, what worked in 2010 is not likely going to work in 2009 any more than what worked in 2008 did not work in 2009; in a nutshell, we are still on this post-bubble roller-coaster ride. If you go back to the initial bounce off the depressed bottom in the early 1930s, what we had for a decade off the bungee-jump was intense volatility. The same holds true for Japan in the early 1990s, and ever since. Considering the volatile, alternating character of the financial markets over the last three years there should be no need to back away from an overall cautious investment strategy that involves capital preservation and income generation, notwithstanding the sharp but inevitably fleeting market rallies that are typical in a post-bubble credit collapse.

From my lens, it now looks like the global economy is going to weaken after a few quarters of bounce-back that was caused principally by massive government intervention and stimulus. For illustrative purposes, we ran some simulations and found that absent the massive amount of monetary, fiscal and bailout stimulus last year, real GDP in the U.S. would have likely contracted as much as 4% in 2009 instead of the posted 2.4% decline; the third quarter would have contracted 1% (not gained 2.2%) and Q4 would have been down 1.5% (not the ripping 5.7% jump that is destined to be revised in any event).

The stimulus we experienced in 2009 is unlikely to be repeated in 2010 for a number of practical and political reasons. Scott Brown’s recent victory in the U.S. Senate race was a message for the government to go easy on the public purse, among other things like socialized health care. In addition, economic growth will be increasingly burdened by…
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The Great Disconnect Between Stocks and Jobs

Robert Reich presents his view of the economy, stock market run-up, job losses, and corporate earnings, which reflect cutting employees rather than growth in production. Given that we have a consumer-driven economy, with consumers being the ones losing jobs, and perhaps their houses, logically, it makes sense that the stock market is at risk for another meeting with value based-pricing some time in the future. Being long now is a bet on liquidity driven gains continuing, regardless of the actual state of the economy.  - Ilene

The Great Disconnect Between Stocks and Jobs

Robert ReichCourtesy of Robert Reich at Robert Reich’s Blog

How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.

In the old-fashioned kind of recession decades ago, big companies laid off people with the expectation of rehiring them when the economy turned up. Then a few recessions back, companies started laying off people for good, never rehiring them even when the economy recovered.

In the Great Recession of 2008-2009, companies are going a step further. They’re using this sharp downturn to cut payrolls even below where they were when times were good. Outsourcing abroad, setting up shop in China and elsewhere, contracting out, replacing people with software and automated machines – they’re doing whatever it takes to get payrolls down so earnings bounce up.

Caterpillar earned $404 million in the third quarter, or 64 cents a share. Analysts had expected only 5 cents. Caterpillar’s stock is up 165 percent since March. How did Caterpillar do it? Not by selling more bulldozers. It did it by cutting over 37,000 jobs.

The result, overall, is an asset-based recovery, not a Main Street recovery. Yes, the economy is growing again, but the surge in productivity is a mirage. Worker output per hour is skyrocketing because companies are generating almost as much output with fewer workers and fewer hours.

The Fed, meanwhile, has become an enabler to all this, making it as cheap as possible for companies to axe their employees. Money costs so little these days it’s easy


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Zero Hedge

Facebook, Twitter Deactivate Hezbollah Accounts After Kidnapping Video Published

Courtesy of ZeroHedge. View original post here.

Hezbollah's television and news network Al Manar has confirmed that on Friday the Lebanese paramilitary group's "War Media" accounts on Twitter and Facebook were closed without notice. Hezbollah is now accusing the social media giants of taking part in an American "anti-media campaign" against the group which has already long been designated a terror organization by the US government. 

...

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Phil's Favorites

Will Disney's Epic Buyout Of Fox Mark The End Of The Everything-Bubble?

Courtesy of John Rubino, DollarCollapse.com

As bubbles expand and hot money starts burning holes in corporate pockets, merger and acquisition deal terms begin to leave reality behind. Often one deal of such breathtaking size, scope and hubris is struck that - in retrospect – it heralds the end of the era.

The junk bond bubble of the 1980s, for instance, hit its apex with the December 1988 leveraged buyout of processed food conglomerate RJR Nabisco, which featured a prolonged bidding war by a Who’s Who of the corporate raider/LBO community. At $25 billion, it was seen as “staggering” at t...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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Digital Currencies

Crypto-Collapse Resumes After Japan's Largest Exchange Halts Account Creation

Courtesy of ZeroHedge. View original post here.

What started off as a hopeful week of broadening user adoption is ending on a sour note as Japan's chief regulator launched a probe of crypto-exchanges, prompting the largest to halt account creation sending the entire crypto space lower...

As CNBC reports, the order...



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Insider Scoop

Booking Holdings Is Playing Catch-Up In Online Travel Growth Areas, Analyst Says In Downgrade

Courtesy of Benzinga.

Related Benzinga's Top Upgrades, Downgrades For June 22, 2018 Booking Holdings CEO Has Some Winning Travel Tips For ...

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Chart School

Large Caps Feel the Heat as Semiconductors Struggle

Courtesy of Declan.

Yesterday, Small Caps led the rally as Large Caps lost ground. Today, those same weak Large Caps took another hit and dragged Tech indices with them.  Small Caps also suffered but they have plenty of wiggle room before they hit trouble.

The Dow sell-off didn't stop at its 50-day MA and is now on course to test its 200-day MA. Technicals, aside from Stochastics, are bearish.


Of greater concern was the hit to the Semiconductor Index. The attempt to hold 1,393 support was swiftly ...

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Biotech

Opioids don't have to be addictive - the new versions will treat pain without triggering pleasure

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Opioids don't have to be addictive – the new versions will treat pain without triggering pleasure

shutterstock.

Courtesy of Tao Che, University of North Carolina – Chapel Hill

The problem with opioids is that they kill pain – and people. In the past three years, more than 125,000 persons died from an opioid overdose – an average of 115 people per day – exceeding the number killed in ...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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