Posts filed under “Markets”

An Unprecedented Mass of Buybacks

I’m working on the third and final part of the Cult of the Bear, and I was looking for research I thought I posted some time ago. Turns out not.

This is a fascinating discussion of where about a third of the SPX earnings growth is actually coming from: 

"ONE OF THE BIG arguing points of the bulls is the extraordinary strength in corporate earnings. And, no question, we’ve had a spectacular boom in profits. In the third quarter of 2005, to illustrate, operating profits of the S&P 500 were up a neat 11.5%, the 14th quarter in a row of double-digit gains.

However, as the indefatigable David Rosenberg of Merrill Lynch points out, such a splendid performance reflects not so much any inordinate growth of revenues as the impact of an unprecedented mass of buybacks — $456 billion worth of stock repurchases that TrimTabs Investment Research estimated took place last year.

Operating earnings in dollar terms — as against per-share net — actually were up only 7.8% over the comparable year-earlier total. Which, David notes, was the narrowest gain in three years.

The bottom line: there’s a good deal less to the corporate bottom line than meets eye.

This is yet another example of how the headline data can be misleading versus what lies beneath.And that’s before you figure in the disproportionate impact of the energy complex to the SPX year over year gains.

As we have pointed out before, it is somehow, okay to count great energy earnings caused by oil price increases — but not inflation caused by oil price increases. Hmmmm.

The earnings story is far less robust than many are making it out to be.


Hold the Bubbly
Barron’s MONDAY, JANUARY 2, 2006

Category: Earnings, Finance, Markets

New Column: CULT OF THE BEAR, part II

Category: Investing, Markets, Technical Analysis

Chart of the Week: S&P500/Gold ratio

Category: Commodities, Markets

WSJ Econoblog: Reasons to Pout?

Category: Economy, Markets, Media


Category: Investing, Markets

WSJ: 2005 Markets Scorecard

Its not just the NYT that has a great graphics department — the WSJ has put out their fair share of terrific charts (as this blog has long since demonstrated).

Here’s the WSJ Market Scorecard for 2005:   

"U.S. stocks took a backseat in 2005. Big gains in oil and gold drove commodities prices to a second-straight banner year, while the Fed’s faithful campaign to raise interest rates made bond yields the talk of Wall Street. Here is a scorecard for major financial-market indicators:"

The graphs are actually too wide for my layout, so they require a 2nd click . . .

Read More

Category: Markets

GOOG: Be More Impressed with Cap than Share Price

Category: Markets

2005: A Bumpy Year

Category: Economy, Financial Press, Markets

Margin Debt Hits 5-Year High

Category: Investing, Markets, Psychology

P/E Expansion and Contraction

Category: Investing, Markets, Psychology