Earnings Decline
By Barry Ritholtz - April 10th, 2009, 8:05AM
Alcoa officially kicked off earnings season Tuesday after the close. Alcoa reported a loss of $497 million in the first quarter. For some perspective into the current earnings environment, today’s chart compares S&P 500 earnings performance during the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1936-2006 (dashed blue line). As today’s chart illustrates, the current decline in earnings is several orders of magnitude greater than the average decline during a recession. The current decline is also more severe than what was the most severe earnings decline on record – the decline that began in 2001 (gold dashed line).
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April 10th, 2009 at 10:59 am
I’m sure Cramer would tell you that it’s already priced in and it’s time to party like it’s 1999.
April 10th, 2009 at 12:08 pm
Companies have earnings? I thought that stocks only had prices, and they are cheap cheap cheap…
Oh yeah, that’s right. P/E ratios generally decline to single digits during deep recessions.
My guess is that the institutional investors focus on earnings this week.
This may not come to pass necessarily, but this week I couldn’t help but remember that we had a happy-clappy rally just like this during the week leading up to Thanksgiving. All week long with a lot of traders out or sitting on the sidelines we had buying on light volume. On the Monday they came in and sold.
I was thinking this week that the mood in New York right now is actually amazingly complacent. People are thinking that sure 2008 was awful, they lost 50% of their money and they couldn’t sell their apartment if they tried, but they still have a job and the market always comes back, look it’s up 25% off the lows, and hey, Manhattan real estate never goes down.
So unemployment, foreclosure, what’s that? It is happening to some schmoes in California, Michigan and Ohio, so that doesn’t matter, right? We dodged the bullet, the big bonuses will come back and we can still have the place in the Hamptons and send the kids to Dalton as well as have the extra marble counter top installed in the maid’s kitchen. The credit card bills are a concern, but hey, next year’s bonus will take care of it, right?
April 10th, 2009 at 12:12 pm
“order of magnitude”
You keep using that phrase.
I do not think it means what you think it means.
April 12th, 2009 at 11:16 am
I bet you haven’t got invited to Buffy’s Dalton grad soiree as of yet have you LB??
All that gloom and doom….pshaww….
Hey!! Have you seen Chip’s new racehorse!! It’s got the most gorgeous eyes!!