Posts filed under “Earnings”

Time to Reduce Equity Exposure . . .

All this week, I have been discussing why I thought we may be coming to an end of the cyclical bull market that began in March 2009: Listen to Ritholtz Sees “Major Cyclical Correction” from Tuesday morning, and watch this and this from Thursday.

I have cut back on some major holdings, and raised our cash levels to 25% in the asset allocation model I manage. I removed half of our energy positions, eliminated our emerging markets exposure. The biggest move was cutting S&P500 exposure by 50%. A handful of clients who had outsized Apple exposure saw those positions reduced by a third. We maintain a heavy bias in long portfolios in health care and in consumer staples. I have no desire to reduce treasuries or munis, which will become a safe harbor if and when things get choppy. (I have NOT added inverse ETFs, but that is something I may consider in the future).

Note that these portfolio moves have nothing to do with the upcoming elections or the fiscal cliff. I agree with what Michael Belkin said at the Big Picture conference: “People should forget the Fiscal Cliff, this market is all about the Earnings cliff.”

In terms of future recession probabilities, I now place us at 60% over the next 18 months. In other words, we are more likely to see a normal cyclical recession before Spring 2014 than not.

I don’t imagine we go straight down from here; There will be sell offs and rallies, pre and post elections. There will be some data points that suggest things aren’t so bad, and then some that are awful. It is not a black and white situation. I do believe the low volatility we have seen may very well become a thing of the past, and the VIX is becoming a definitive Buy.

One last point: This is NOT a batten down the hatches, go-to-100%-cash, looking for a 50-60% crash type of expectation. (We, um, already had that one). Instead, this is looking like a regular earnings and revenue shortfall driven recession, with equity markets at risk for a 20-30% correction.

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Investing is an art form that requires probabalistic decision-making using imperfect information about an inherently unknowable future. We work with less than a century of price action, when ideally we should have 1,000 years of market data to analyze. We never know the ideal time to enter and exit positions, but we can at least strive for an objective process using known metrics (earnings growth, valuation, price trends, etc.).

Hence, why we make gradual and infrequent moves, highly cognizant of the possibility we will be wrong.

 

 

Category: Earnings, Economy, Investing

The Earnings Minefield

Sica Wealth Management President Jeff Sica, Beacon Economics Founding Principal Christopher Thornberg, and Bianco Research President Jim Bianco discuss the earnings season slaughter. They speak with Cory Johnson and Trish Regan on Bloomberg Television’s “Street Smart.”

The Earnings Minefield: How to Protect & Profit

Source: Bloomberg, Oct. 23 2012

Category: Earnings, Video

Here Comes Earning Season !

Source: Bianco Research   Don’t look now, but a hotly anticipated — and in some quarters, feared — earnings season is upon us. Of the first 25 “real” companies reporting, things have actually been pretty decent. The counter is that these are banks (JPM, WFC), who are much freer in the leeway in their returns,…Read More

Category: Corporate Management, Earnings

Michael Belkin Predicts 40% Stock Market Drop

Hedge Fund Consultant Michael Belkin spoke at The Big Picture conference, predicting a 40% stock market drop in the coming 12-15 months. Belkin joins Sam Mamudi to discuss his case for a market drop.


10/15/2012 1:43:26 PM4:14

Category: Cycles, Earnings, Video

GE’s Jack Welch Knows About Cooking the Books

  Of all the people who have something to say about the BLS, none is more unintentionally ironic than former GE CEO Jack Welch. I have long stated that Jack welch was one of the luckier, more wildly over-compensated CEOs around. He became CEO of General Electric in 1981, just before an 18 year bull market…Read More

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

Earnings Recession?

Click to enlarge: Source: Bloomberg     Markets are screaming higher today on the prospects of ECB/FOMC action. The concern whent hat wears off is what ahppens with Q3 & Q4 profit. UBS chief U.S. equity strategist is concerned about an “Earnings Recession” coming to the US, as illustrated in the chart above. The Standard…Read More

Category: Earnings

Merrill: Downward Revisions Slow

Two nice looks at the long — and even longer — term Earnings Revision Ratios from Merrill Lynch:     Click to enlarge:   Source: BofA / Merrill Lynch Revision Ratios September 09, 2012

Category: Corporate Management, Earnings

Meb Faber: Buy Cheap Cyclically Adjusted P/E (CAPE)

Cyclically Adjusted P/E Click to enlarge:     Meb Faber of Cambria Investment Management looks at 10 years of earnings. Based on a methodology developed by Yale University Professor Robert J. Shiller, Faber concluded from an analysis of cyclically adjusted price-earnings ratios, designed to minimize the effect of economic swings on profits. Cyclically adjusted P/E, also known as CAPE,…Read More

Category: Earnings, Quantitative, Technical Analysis, Valuation

Stocks Near 5-Year Highs Despite Worst Earnings Season Since 2009

Source: Yahoo

Category: Earnings, Video

The Dismal Earnings Season

The Wall Street Journal – U.S. Profit Streak Hit by Global Weakness Bid adieu to growing profits. Slowing economies from the U.S. to China, increasingly wary shoppers, recession in much of Europe and a stronger dollar could bring to an end at least 10 continuous quarters of profit growth for America’s biggest companies. Until Friday,…Read More

Category: Earnings, Think Tank