Posts Tagged ‘stimulus programs’

Is Earnings Optimism for the S&P 500 Justified?

Is Earnings Optimism for the S&P 500 Justified? 

Courtesy of Doug Short

Regular visitors to dshort.com know I follow Howard Silverblatt’s earnings spreadsheet on the Standard & Poor’s website. Free registration is required to access this data. I’ve received several requests for more specific details on where to find the spreadsheet. It is fairly well hidden. Here are two links to help frustrated seekers: step one and step two.

I follow the "As-Reported" earnings and top-down estimates for future earnings (see column D in the spreadsheet). The chart below shows the higher estimates of future earnings from the most recent spreadsheet, dated August 24th, and three earlier spreadsheets (February 17th, April 28th, and July 15th).

The latest earnings estimate for 2Q 2010 is 67.20. Friday’s close gives us a P/E ratio of 15.84, which is close to the average trailing 12-month P/E of 15.48. Beyond the 2Q, the chart illustrates increasing optimism about next year’s earnings. The August 24th estimate of $80.20 for 4Q 2011 at today’s P/E would put the S&P 500 at 1,270 at the end of 2011. That’s a gain of 19.3% from the latest close.

But will as-reported earnings really live up to these estimates? Last month Howard Silverblatt pinpointed the problem for earnings in a Bloomberg article No Sales Means No Jobs Means No Recovery. His concluding remarks are worth repeating here:

I look to sales as a future indicator. On this basis, earnings are running ahead of Q1 2010, but sales are flat, and that’s the problem. It’s great that companies have improving earnings, but those improvements are due to high margins, which were the product of cost cuts — specifically job reductions, the very thing that we need to improve now. Until companies and consumers start to spend more, the job front will not get better, but they won’t spend more until they believe things are getting better. The stimulus programs were supposed to jump start the economy and break the downward cycle by convincing both groups that better times were here. But so far we’re not seeing the sales or the jobs; but earnings are good, at least for now.

Companies in the S&P 500 sell across the world. But consumption in the US, which remains critical for sustained earnings growth, has been undergoing a sustained contraction —, a fact that…
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Outsourcing Unemployment To China

Outsourcing Unemployment To China

Courtesy of Mish

As goes the US consumer so goes Chinese manufacturing. Here is a long but educational video produced by Vanguard on several Chinese manufacturing cities and what the economic downturn has meant for them. It’s well worth a play.

 

That video is more confirmation of the Chinese manufacturing and unemployment woes outlined in How Will China Handle The Yuan? and over a year ago in Is China’s Growth Story Coming Unglued?

Yet the myth of Chinese decoupling still persists.

Some day China will be far less dependent on the US but that day is not in the immediate foreseeable future. The videos are proof enough. Moreover, a strong case can be made that Obama Risks Global Trade War With Misguided Tariffs.

For now, stock are rising along with the biggest global reflation in the history of the world, by central bankers in nearly every country in the world, including China.

However, such stimulus is not infinite and is not without cost. Nor can temporary increases in demand caused by massive give-away programs be cause for permanent celebration. At best, stimulus programs shift demand forward stretching out the recovery period.

At worst, such programs add to malinvestments in housing, commercial real estate, and other areas. Government programs seldom, if ever, allocate resources effectively. The wildly popular cash-for-clunkers program actually destroyed productive assets, a repeat on a small scale of misguided efforts by FDR in the great depression to drive up prices of goods.

Yet for all these efforts unemployment is still rising, and even Fed officials admit the outlook for employment and consumer spending is far from rosy. Please see The Problem with Janet Yellen’s Recovery Outlook for details.

Mike "Mish" Shedlock

 


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Government Bailouts and the Stock Market – The Seen and the Unseen

Government Bailouts and the Stock Market – The Seen and the Unseen

Courtesy of Mish

Inquiring minds are reading Cash for Clunkers Is Just a Broken Windshield by Caroline Baum. It’s the best trashing to date of the "cash for clunkers" program.

Transferring money from taxpayers to car buyers is a transfer. The money taken from taxpayers can’t be used for something else.

This is the lesson of Frederic Bastiat’s essay, “That Which is Seen, and That Which is Unseen.” Bastiat, a 19th century French political economist, tells the story of a shopkeeper who has to hire a glazier to repair a broken window, providing work and income for him in the process. That’s what is seen.

What is unseen is what the shopkeeper would have done if he didn’t have to pay the glazier. He might have bought shoes for his children, providing income for the shoemaker, who in turn could buy leather to produce more shoes. The glazier’s gain is the shoemaker’s loss. There is no net gain, no job or income creation, from this transaction.

Broken Window Fallacy

The “broken window fallacy,” as it is known, can be applied to all government spending. The $787 billion fiscal stimulus enacted in February transfers money from taxpayers to the government to allocate as it sees fit. The effect of the government’s expenditures shows up as growth in gross domestic product. Auto manufacturers produce more cars to meet the juiced demand, adding to GDP. This is what’s seen.

What is unseen is what would have been produced by the private sector had the government not confiscated future revenue via taxation.

Cash for clunkers requires that trade-ins be scrapped, whether they are fully depreciated or not. How is destroying something good for the nation?

James Hamilton, professor of economics at University of California, San Diego, says cash for clunkers adopts the worst of the New Deal policies and adapts it to today’s circumstances.

The Agricultural Adjustment Act of 1933 “paid farmers to slaughter livestock and plow up good crops, as if destroying useful goods could somehow make the nation wealthier,” Hamilton writes on his blog. “And yet, here we are again, with the cash for clunkers program insisting that working vehicles must be junked to qualify for the subsidy.”

Caroline touched on several key issues. The first is is money taken from taxpayers can’t


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Chart School

Gann Angles on Dow and Gold

Courtesy of Read the Ticker.

Gann Angles measure price moves relative to time.

The Dow is moving up the red Gann 1x1 line, so far the recent trend challenge has been over come. As price is near upper green dotted channel Gann angle from Oct 2007 price is now over bought. We can also see the very obvious Elliot 5 wave count from March 2009 lows, and a new Dow high would complete the 5 waves up.

The red line indicator below the Dow price chart is readtheticker.com RTT Flow Index.


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Gold (GLD) could not get over $130, so a reaction back to minor support at $115 was to be expected.  Support should be found here, an...

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Zero Hedge

This Is What Happens Behind Closed Doors When U.S. Presidents Meet With Fed Chairs

Courtesy of ZeroHedge. View original post here.

Last week, Donald Trump ventured into what until recently was uncharted, for US presidents, territory.

First, during a CNBC interview, the president went so far as to say that the strong dollar "puts us at a disadvantage" then went on to do what so many consider anathema, and said he is "not thrilled" about the Fed rising rates "because we go up and every time you go up they want to raise rates again."

One day later, Trump doubled down, ...



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Phil's Favorites

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

Theory Time

Thom Hartmann suggests that the Manchurian Candidate theory is the least likely explanation for Trump's pro-Russia behavior in ...



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Insider Scoop

BofA Points To Yum China's Earnings Downside Risk In Downgrade

Courtesy of Benzinga.

Related 31 Stocks Moving In Friday's Mid-Day Session Benzinga's Top Upgrades, Downgrades For July 20, 2018 ...

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Digital Currencies

Citadel CEO Says Bitcoin Still A "Head Scratcher" But Billionaire Lasry Sees $40,000 Soon

Courtesy of ZeroHedge. View original post here.

Ken Griffin, the CEO and founder of the Citadel hedge fund, has reiterated his negative stance on Bitcoin (BTC) in an interview with CNBC this morning.

Speaking at the Delivering Alpha Conference in New York, ...



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Biotech

How summer and diet damage your DNA, and what you can do

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

 

How summer and diet damage your DNA, and what you can do

Bright sun and fatty foods are a bad recipe for your DNA. By Tish1/shutterstock.com

Courtesy of Adam Barsouk, University of Pittsburgh

Today, your body will accumulate quadrillions of new injuries in your DNA. The constant onslaught of many forms of damage, some of which permanently...



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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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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.

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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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