Very nice chart showing the peak-to-trough recovery duration of SPX earnings:
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Hat tip: Chad Starliper
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
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April 20th, 2009 at 11:44 am
You are quite the chart junkie . . .
April 20th, 2009 at 12:07 pm
the slope and depth of that plunge are amazing.
went down further and faster than any other recession on record.
Reminds me that some say this is not going to be called a ‘recession.’
From the graph, the D word seems that it should be applied at the 85% horizontal.
Standard/Severe/Depressing
shorter:
Wow!
April 20th, 2009 at 12:08 pm
boy- that black line straight down sure looks grim- this will be an interesting week with earnings from many sectors- also interesting to see the forecasts- negative or no guidance given versus positive guidance- could be ugly
April 20th, 2009 at 12:12 pm
‘29-47 IS included on the graph.
further, faster than the GD?
Admittedly, corporate profits is only part of the picture, but housing, employment, etc are all plunging too.
See CR for lots of pretty graphs on the subject// a monthly series to give you gloom.
April 20th, 2009 at 12:17 pm
I think the chart emphasizes the point that this isn’t your father’s or grandfather’s recession.
April 20th, 2009 at 12:26 pm
So, the whole second derivative argument…how does that does one jibe that with the terminal velocity being suggested by the earnings plummet. Here’s what scares me, that dark black line does not have to stop at -100%. That is a reference to a point that Mr. Steve Barry tried to get across.
See, this is what I meant by urging y’all to ask yourselves what they did to the parachute before packing it.
MH- read the stuff on 2,4,D. Ugh. The worst thing was the issue on the Quebec case- the ‘manufacftured’ ambiguity is the worst.
Transor Z- hey that thing in Bolivia- achunté, chibolo. Eso se llama– puntería.
April 20th, 2009 at 12:26 pm
So big deal, the solid black line looks a little steep. They still beat expectations a lot. It also speaks well of our collective efficiency. We’re number 1.
April 20th, 2009 at 12:28 pm
I think this chart is bullshit. Take a careful look at his dates. According to the chartist, America has been in recession for 61 out of the past 100 years. This includes the entire period from 1916-1947. Furthermore, if we’re to believe the chartist, the 1982 Volcker Recession never occurred. Bullshit.
~~~
BR: You are misreading the chart.
It shows “Cumulative earnings declines from peak.” Those entire periods are not economic recessions.
April 20th, 2009 at 12:32 pm
F411-
Maybe I am wrong but I think that the chart is tracking S&P earnings. I will try and find out how the chart was put together and share what I find.
April 20th, 2009 at 12:36 pm
dead hobo:
If you set your expectations low enough, you’re never disappointed.
franklin:
It’s not a chart of recessions. It’s a chart of corporate earnings.
April 20th, 2009 at 12:37 pm
Earnings? We don’t need no stinking earnings!
April 20th, 2009 at 12:40 pm
Here is something. Rather and Kittrell. Starliper perhaps works for them.
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/194697/earnings-recovery-could-take-20-years
Interesting thing I noted was that on the hedgehog site, the 2007 earnings line is tracked to 69.2 and here it is at 82.5. Smarter people than I, I mean me, can ponder that one.
April 20th, 2009 at 12:40 pm
It’s definitely unclear what the chart’s terms are. All the text and captions indicate that the years are years of recession, but the numbers don’t line up with known periods of recession/growth.
~~~
BR: No, its pretty clear
The different colored lines represent different economic contractions. They are not measuring recessions, but refer to different recessionary periods.
They represent corporate earnings recessions.
April 20th, 2009 at 12:42 pm
So this earnings recession is much more severe than that one with the maroon line whichever one that may be?
April 20th, 2009 at 12:44 pm
Green shoots? Must be the daisies being pushed up. There is no happy, smiling “second derivative” inflection to be seen on that chart; it is dropping like a rock.
April 20th, 2009 at 12:45 pm
I don’t see the mustard seeds, or the green shoots. Or the parachute…
April 20th, 2009 at 12:45 pm
re: Franklin
I thought it was pretty clear that it was a chart of earnings and how long it took for earnings to recover.
Thus, on the uptrend, the recession would be declared to be over.
But, the time required for earnings to return to *where they were*, would take a longer period of time.
Post-recession…..
—-
I would hazard a guess that the shorter durations post ww2 were considered proof that we had control of the business cycle.
I would guess that others on this blog see that kicking the can down the road makes the final comeuppance that much worse.
April 20th, 2009 at 12:47 pm
@franklin411: Not it isn’t. It’s very clear, at least to those who have eyesight and can read.
April 20th, 2009 at 12:50 pm
Hey Franklin…I said I appreciate your views if you can back up your opinions with hard data…like the following for the future of tech for 2009…
http://www.semi.org/en/MarketInfo/Book-to-Bill/index.htm?id=highlights
April 16, 2009– North America-based manufacturers of semiconductor equipment posted $278.9 million in orders in March 2009 (three-month average basis) and a book-to-bill ratio of 0.61 according to the March 2009 Book-to-Bill Report published today by SEMI. A book-to-bill of 0.61 means that $61 worth of orders were received for every $100 of product billed for the month.
Franklin…I have followed the SEMI numbers for more than a decade…, .61 means nobody is upgrading in the chip sector…NOBODY…
“Big hat, no cattle”…..
April 20th, 2009 at 12:52 pm
XLF can gap right down to the 9 – 9.5 ratio. Likewise IYR 26-27.
Low volume rallies crack easily, eh??
April 20th, 2009 at 12:54 pm
Current EPS of 14.88? Is that just what’s been announced so far? So we might not be #1?
April 20th, 2009 at 12:57 pm
Marcus Aurelius Says:
“If you set your expectations low enough, you’re never disappointed”
exactly- who is everyone kidding
franklin-
what’s wrong- hate seeing those longs go south
April 20th, 2009 at 1:01 pm
Mregan -
“Smarter people than I, I mean me, can ponder that one.”
People smarter than I am smart…..
April 20th, 2009 at 1:02 pm
Ahab:
I knew you knew.
April 20th, 2009 at 1:07 pm
!. Financials take over a bigger chunk of the GDP than ever.
2. Financial’s profits soar, based on bullshit, bubbles, lies and carnival tricks.
3. The whole shitpile collapses causing gigantic loses from these same financial companies, many only surviving by a massive government bailout.
4. QED; The biggest drop in corporate earnings in history.
Seems simple enough.
April 20th, 2009 at 1:10 pm
“Financial’s profits soar, based on bullshit, bubbles, lies and carnival tricks.”
Are you saying bankers have small hands and smell like cabbage?
April 20th, 2009 at 1:17 pm
Actually, I think it’s fascinating the race to the bottom started today. BoA reported weak but comparatively honest earnings. I can’t help wonder if their report was as deceptive as C and GS, would we be looking at 900 today? Did an attempt at a little honesty burst the bubble? Did investors get jumpy out of fear that more honesty could get into the system and really bust things up?
April 20th, 2009 at 1:21 pm
batmando-
perhaps I structured my syntax to enhance my point.
April 20th, 2009 at 1:21 pm
leftback Says:
April 20th, 2009 at 1:10 pm
Are you saying bankers have small hands and smell like cabbage?
comment:
—————-
No, they don’t smell like cabbage. They’re about as smart as cabbage a lot of the time, but only when it comes to money.
April 20th, 2009 at 1:23 pm
MRegan
It was lost on me. Now I see. Sorry.
April 20th, 2009 at 1:33 pm
Nonsense and meaningless…not surprised to see Shiller’s name attached to it…you can’t look at composite earnings where large losses wipe out other company profits – stupid, idiotic data analysis.
April 20th, 2009 at 1:39 pm
cttfinder-
what source would be better for tracking an index which is often used as a proxy for describing economic performance? I guess the emotional charge in your description leads me to think that your reaction may be less about the analytics and more about the implications of the chart. I would be interested in seeing a fuller counter to the premises which set up the boundaries for that chart.
April 20th, 2009 at 1:49 pm
ctt – Like Shiller was wrong about the housing market?
I was out in Fraudfield County this weekend and the higher end housing bubble is most definitely bursting…. spec homes everywhere listed at $1,5M and they are not selling. Inventory is rising, prices are going to come down and pretty soon, real people with real jobs might be able to buy homes again.
April 20th, 2009 at 1:58 pm
Slightly off topic:
Large chunk of Q1 profits for GS/JPM/C came from trading. Wonder who is on the other side of these trades.
April 20th, 2009 at 2:07 pm
@leftback: Here’s one in Cali on CR, coming to a town near you in Fraudfield County, CT:
http://www.calculatedriskblog.com/2009/04/foreclosures-movin-on-up.html
April 20th, 2009 at 2:39 pm
Mannwich: That is definitely what I’m talking about!
I like the Real Homes of Genius on the Dr housing bubble site. Lately I have been collecting some True Homes of Genius in Greenrich and its environs. They are not as ludicrous as in SoCal but there are a fair sprinkling of half million dollar hovels that you would think twice about using as a bus shelter. I will be sharing on the site when trading gets dull. Once the Manhattan Meltdown begins, I will naturally be all over it.
April 20th, 2009 at 2:44 pm
@leftback: B, bu, but, I thought that the higher end homes in “desirable locations” such as NYC and Cali were insulated from any market declines and prices never, ever, EVER go down? Another stupid myth to be busted in wild fashion. Once it is busted, the mid to lower end priced homes will also decline in value AGAIN and will crush even more people (maybe even myself, included). Ho hum. It’s not like anyone has ever pointed out this would happen. Price declines have to happen everywhere for us to resume any sense of “normalcy”, whatever that means now. It can happen quickly or over a long period of time. Which is better? We will find out. Looks like it’s going to be a long, drawn out affair.
April 20th, 2009 at 3:04 pm
It was all green shoots and realtor’s balloons yesterday. But today, it’s raining stocks….
April 20th, 2009 at 3:25 pm
MRegan – It’s like I always say: Never send a chibolo to do an hombre’s trabajo.
April 20th, 2009 at 3:39 pm
TZ-
ain’t that the truth, that poor family in Ballinderry was blindsided, just awful in so many ways. But that wasn’t the point, was it?
As for doing el trabajo de un hombre, the scumbag cambas in lowlands Bolivia are the progeny of croat nazis. Marinkovic may be one of them. Logia de Torobochi y Los Caballeros de Oriente. Not nice. COTAS.
Where was P. Goldberg posted in the 1990’s?
April 20th, 2009 at 3:42 pm
http://www.economist.com/finance/displayStory.cfm?story_id=13491933
Shelter, or burden?
Apr 16th 2009
From The Economist print edition
The social benefits of home ownership look more modest than they did and the economic costs much higher
…uh oh..
April 20th, 2009 at 3:50 pm
BR,
Hogwash. If that’s what he meant, then he should have titled his data ranges. Is that too much to ask?
Bruce,
I don’t play in the tech space. Just not my thing. I can tell you, as an avid gamer, that people aren’t upgrading because the industry is between upgrade cycles right now. Core2duo has topped out and there are no further performance gains to be had by upgrading along the C2Duo product family line. I7 is out (quad core) but it’s too expensive to justify the upgrade yet. Plus Windows 7 hasn’t come out yet. I’d wager that there’s pent up demand (I’m overdue for an upgrade!) but only a fool would upgrade until I7 becomes affordable and Win 7 is a known quantity.
April 20th, 2009 at 4:00 pm
The advice my broker – I refuse to call him my banker – always gives me is “Diversify.”
Obviously, we have not practised that as an economy, as this graph well demonstrates. We have concentrated too much of our commerce among fewer yet bigger entities. These too-big-to-fail behomeths concentrate the risk. This is not as much the case in prior periods. What’s true for Citi and B of A is true for Wall Mart and McDonalds. Too big to fail is too big. Otherwise, you get that really sharply falling black line.
April 20th, 2009 at 4:14 pm
F411 –
After reading the sub-title (Peak-Trough-Recovery Duration), reading x and y axes labels wasn’t even necessary to grasp this chart’s implications.
April 20th, 2009 at 4:18 pm
Franklin..ok…but please don’t tell me you are an avid gamer…now I feel like I’m trying to discuss rainfall with my dog..you have hurt my feelings…
April 20th, 2009 at 4:18 pm
@MRegan: Somehow I don’t see him as the type to buddy up to nazis. But I could be wrong.
I think the jury is still out on Morales. I think it’s very unlikely Dwyer was an assassin. We’ll have to see what the Irish minister can find out I guess.
April 20th, 2009 at 4:20 pm
All this time I was taking you more seriously than I should have been…
April 20th, 2009 at 4:29 pm
@ Bruce: I think you’re being too hard on your dog.
April 20th, 2009 at 4:40 pm
The fallacy of this chart is that it is demonstrating how far we are below fake earnings now that those fake earnings are being removed with losses. As a simplified example: when bank X wrote an interest only mortgage it booked profits on a bunch of non-cash revenue that in reality it would never see. Now the banks are using write downs to remove those fake earnings. Lever that X30 or X40 and it is big money. The write-downs will not last forever though so even if financials don’t have any earnings from here on out that black line will spike back up. If the price peak from which you are measuring was meaningless does the rest of the chart have any value?
Given that I think the chart is fairly meaningless as a historical comparison I can’t blame the creators too much. There isn’t exactly a way to normalize earnings for a credit bubble, commodity bubble, and housing bubble all occuring in close proximity.
April 20th, 2009 at 4:47 pm
@Transor Z…that made me grin….pretty good comment
April 20th, 2009 at 5:14 pm
TZ-
Re Morales, yes. However, the lowlands separatists are really, really bad people. Regarding Duayer, in over his head, but the guys he was with- former mercs from the Balkans wars. Here is something to ponder, why would someone posting on a storm front bulletin (white supremacist site) know about Duayer and what is the link to a private bodyguards company (which operates in Ireland and Croatia)? I don’t know anything about the kid other than what was on a bloggers site and in the news sites out of Ireland. The stuff out of Bolivia in Spanish is challenging, so to speak. But what went down, it is a very big deal. The armed opposition is being routed. As for the Irish Minister, he’s already been told what he is going to find out (IMHO). In the report below they leave out that he went to the US before arriving in Bolivia.
From an Irish report: http://www.irishtimes.com/newspaper/breaking/2009/0420/breaking22.htm
“The Irishman graduated from Galway-Mayo Institute of Technology last summer. He had worked as a security guard for a Galway firm while in college and began working for them full-time after graduation. He went to Bolivia on a three-month training course last November.
It appears he met Mr Flores in January and was offered work by him. Mr Dwyer’s family are said to be keen to find out the nature of Mr Flores’s firm’s work and what Mr Dwyer knew about it. A family spokesman said they had many unanswered questions.
Mr Flores was a journalist born in Bolivia with Croatian nationality who had fought in the Balkan wars.
Zoltan Brady, editor of a magazine for which Mr Flores wrote in Hungary, said he had gone to Bolivia last spring “to fight against its communist government” and for the independence of the province of Santa Cruz. He dismissed suggestions Mr Flores was a hired assassin.”
April 20th, 2009 at 6:03 pm
maybe the reason earnings had such trouble was the length of recovery the job market and the length of time before incomes grew?
April 20th, 2009 at 9:03 pm
Well butter my biscuit and call me Sally…..
What do we have here??
Debt in one hand and bullshit in the other.
PS….since we never got a Friday night music thread.
May I humbly present Mr. Skip James.
“Devil Got My Woman”
Newport 1966
http://www.youtube.com/watch?v=JB2POWSnStU
May 15th, 2009 at 5:53 am
[...] Publié par julien le April – 20 – 2009 Un graphique fort intéressant récupéré sur le blog de riholtz qui nous montre et compare la chute des bénéfices des entreprises à travers les différentes [...]