May 18, 2009
– Comments (10)
Go look at this Chart of Day on profit declines.
If you aren't into charts, it sort of looks like this.
The chart can also be found in comment #16 of this post and is topic of this post.
I hope you don't mind me mentioning you in comment #7 here ...
I keep hearing how 60% of companies beat the earnings expecations and this is the reason for the rally. What was the expectation, for 99% decline?
However, is 90% decling vs. 95%-99% decline expected is a reason to celebrate and the sign of the good things to come?
Plus, all the beats were on cost-cutting. There is not going to be much left to cut next quarter.
Bulls would argue that these poor earnings were already priced in. Markets haven't really been rational for a while. At least they do still somewhat follow predictive patterns.
Interesting comments portefeuille. I am actually having a problem with CAPS right now in that I don't see how to add picks. I have not been spending the time on the market as I used to because I am no longer in the market. There have been a few times I go to add a pick and I have not found the link to add it. I don't know what I was thinking, the market cap precluded it, I was looking in the wrong place and I would do it later, etc., but I just realised the add link isn't there and I should be able to add the stocks.
I get charged a bundle for bandwidth so I am constantly screwing up my computer trying to avoid downloading stuff and trying to avoid all the crap that just gets sent. Normal computer use without tweaking costs me about $10/day for bandwidth and with my tweaking I have it down to about $4-5/day, but I seem to have screwed up how to add picks with CAPS.
Oh, I just figured it out... You have to add picks in a differnet way now, found it on my homepage, lol. So maybe I didn't break it...
I have not gone to add many stocks, but every time I have tried I haven't had a lot of time, and never got back to it to look for the problem. It has been so infrequent that I only just realised this was a problem in the past week. It probably has only been 10-20 stocks since the school year started, so very infrequent.
The other thing, before the market was so overvalued it was easy to see grossly overvalued stocks, with the correction I think stocks need to be looked at much closer and I haven't had time, so the few that I did want to add I couldn't figure out how to add and then I haven't put time into doing stock research for picks.
It sounds like my block house picture was not that far off then. $10/day is pretty expensive. Glad to hear it has nothing to do with protecting your "accuracy". Greetings to Canada (from Europe)
I hate to jump in here and ask idiotic questions that may have already been answered and discussed, but what are we looking at here? Is this just the EPS for the SP500 added up, or a weighted average?
Good question, going back and reading the information....
“While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today’s chart helps provide some perspective as to the magnitude of the current economic decline. Today’s chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative.”
It refers to companies that have reported so I am going to suggest that it adds them up for different quarters and compares.
A couple replies from the Bull Peanut Gallery:
First off - remember beats are always against the "anal"ysts who are notoriously behind the curve. they are looking at their models and tea leaves from guidance provided by the companies 3-6 months ago.
Most CEO and CFO's will guide lower so they can beat (even with that wonderful FD rule - yeah what ever happened to that???) so beats should be expected by companies that are performing reasonably well. If you don't beat, you are probably still in the decline.
Russian: "Plus, all the beats were on cost-cutting. There is not going to be much left to cut next quarter."
Unless companies start spending like drunken sailors, those costs aren't going to go back up for a while - in fact, separation, unemployment and bad debt writedowns have overstated expenses for the past couple Qs, so we should see expenses leveling at a lower range. Two ways to make a profit, if topline revenues go up faster than expenses, or if expenses drop faster than revenue. either way, I will invest in companies where Revenue > Expenses any day.
Gemini: "Bulls would argue that these poor earnings were already priced in"
Couldn't have said it better. Doom, gloom and Bad news has beaten this market down for way too long.
I will say it again: the fact that companies are making money (profits) in this environment makes me (and now the market) bullish.