Posts filed under “Earnings”

Rising Revenue + Increased Profits = Bull Rally

click for larger chart



I am off to Maine today for a few days of fishing and economic debate and drinking. Before I go, I wanted to share a chart we pulled together in the office yesterday from the BBRG terminal. It was in response to the usual statement “This rally is driven by Fed printing and nothing else.”

Sorry, but I beg to differ. The chart shows that the rally has been driven — and in very large part — by a huge recovery in revenues and profits in corporate America following the financial crisis of 2007-09.

The white line shows the price of the S&P500 index from December 2007 to today. Red line is revenues, blue line is earnings. As you can see, earnings have led the rally off of the lows, multiple expansion took over in the middle, and most recently, earnings have accelerated. Higher revenues have paced higher stock prices as well.

I would be remiss if I did not acknowledge the role that lower borrowing costs lower companies’ expenses. That is a legitimate observation as to the impact of the Fed. For a variety of reasons, companies have chosen to engage in large buybacks as well, and that too plays a role.

However, the storytellers would have you ignore the enormous improvement in sales and profits in order to stick to the story that the market gains are ALL FED PRINTING ALL THE TIME.

Sorry, but that narrative fails.


Category: Earnings, Federal Reserve, Valuation

Graphic Language: The Curse of the CEO

I love this article: F-Bombs Tolerated in Recession Cause CEOs Trouble Later It turns out that public profanity among top executives is sensitive to economic conditions, according to a Bloomberg News review of thousands of CEO calls with investors and analysts from 2004 to last month. It spiked in the aftermath of the recession in…Read More

Category: Corporate Management, Earnings, Really, really bad calls

Do You See the Positives or Negatives?

The Standard & Poor’s 500 Index hit an all-time high yesterday, closing at 1,897.45. The Dow Jones Industrial Average also hit a record, ending at 16,715.44. This should be tempered by noting that the Dow is up less than 1 percent so far this year, while the S&P 500 has gained about 2.7 percent. One…Read More

Category: Data Analysis, Earnings, Psychology, Sentiment, Valuation

Why ‘Peak-Earnings Models’ Are Nonsense

Lately, there has been a spate of research, analysis and commentary telling us that earnings are at a cyclical high and must revert. Stock valuations, therefore, are elevated and earnings will soon begin to fall, bringing stocks down with them. This is neither a credible analysis nor a method of valuing equities. Rather, it is…Read More

Category: Earnings, Investing, Really, really bad calls, Valuation

Forecast 2014: “Mark Twain!”

Forecast 2014: “Mark Twain!”
By John Mauldin
January 18, 2014



It’s All About the Earnings
The Trouble with Earnings
What Would Yellen Do?
Forecast 2014: “Mark Twain!”
Argentina, Vancouver, Edmonton, Regina, and Home


Piloting on the Mississippi River was not work to me; it was play — delightful play, vigorous play, adventurous play – and I loved it…

– Mark Twain


In the 1850s, flat-bottom paddlewheel steamboats coursed up and down the mighty Mississippi, opening up the Midwest to trade and travel. But it was treacherous travel. The current was constantly shifting the sandbars underneath the placid, smoothly rolling surface of the river. What was sufficient depth one week on a stretch of the river might become a treacherous sandbar the next, upon which a steamboat could run aground, perhaps even breaching the hull and sinking the ship. To prevent such a catastrophe, a crewman would throw a long rope with a lead weight at the end as far in front of the boat as possible (and thus the crewman was called the leadman). The rope was usually twenty-five fathoms long and was marked at increments of two, three, five, seven, ten, fifteen, seventeen and twenty fathoms. A fathom was originally the distance between a man’s outstretched hands, but since this could be quite imprecise, it evolved to be six feet.

The leadsman would usually stand on a platform, called “the chains,” which projected from the ship over the water, and “sound” from there. A typical sound would be expressed as “By the mark 7,” or whatever the depth was. In modern English language, it is interesting to note that the expression “deep six,” refers to this old method of measuring water. On the Mississippi River in the 1850s, the leadsmen also used old-fashioned words for some of the numbers; for example instead of “two” they would say “twain”. Thus when the depth was two fathoms, they would call “by the mark twain!” (

And thus a young Samuel Clemens, apprentice Mississippi riverboat pilot, would take the “soundings” and from time to time would sing out the depth of two fathoms as “By the mark twain!” We think that is how he found his pen name. In Life on the Mississippi, Mark Twain describes sounding: “Often there is a deal of fun and excitement about sounding, especially if it is a glorious summer day, or a blustering night. But in winter the cold and the peril take most of the fun out of it.”

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Category: Earnings, Think Tank

Always Low Wages? Wal-Mart’s Other Choices

Yesterday, we looked at the benefit to McDonald’s of having its workers subsidized by state and federal aid. Today, its Wal-Mart’s turn. Recall our discussion last month on the related subject of “How McDonald’s and Wal-Mart Became Welfare Queens.” We learned that employees of these two companies are often the largest recipients of aid in…Read More

Category: Earnings, Retail, Wages & Income

Profitibility at the World’s Biggest Tech Firms

  click for ginormous graphic via Pando Daily  

Category: Digital Media, Earnings, Technology, Valuation

Corporate Profits After Tax

Billions of dollars, seasonally adjusted, after tax without inventory valuation (IVA) and capital consumption adjustments (CCAdj). Source: FRED   I have been trying to explain to some of my more Fed obsessed friends there are factors outside the central bank that matter also. One such factor is corporate profits. As the chart from the Federal Reserve…Read More

Category: Data Analysis, Earnings, Federal Reserve

Apple’s Rebound Q in One Giant Chart

click for larger graphic Source: TechCrunch

Category: Digital Media, Earnings, Valuation

Lagged P/E Ratios: Shiller Cape vs NIPA

click for ginormous charts Source: JP Morgan   JP Morgan observes: “Shiller P/E shows the market to be overvalued, but not as extreme if you use the NIPA data.” I’ve never used the NIPA data, so I have no real opinion on it.  The two charts look directionally similar, but different in terms of magnitude….Read More

Category: Data Analysis, Earnings, Valuation