Earnings Season Begins

Earnings season begings in earnest this week, with several majors reporting. There’s a nice preview at the public site of the WSJ:

TUES Jan 16

WEDS Jan. 17
J.P. Morgan Chase & Co. & Washington Mutual
AMR Corp. & Southwest Airlines

THURS, Jan. 18
Merrill Lynch

FRI, Jan. 19
General Electric

I came across three very interesting but different issues relative to earnings season: The first was via Birinyi Associates, who looked at market performance relative to whether we were in or out of "Earnings Season" over the past 17 quarters.

As the chart and 1st table below shows, markets seem to do better off season than on:



The second was from Morningstar, who evaluated each S&P sector to determine relative valuation. Energy was the only sector they determined to be beow fair value.


One thing worth noting: Stocks stend to swing way above and below fair value . . .


Lastly, something stood out in today’s WSJ which I need to investigate further. The Journal noted that:

"According to both Thomson and Reuters, the S&P 500 is trading at less than 15 times this year’s expected earnings, which is cheap compared with long-term averages of about 20 times earnings."

Long term average of 20 forward P/E? That sounds awfully high. I need to look into the source of that, including whatever period it covers. My guess is that its a shorter term history (10 or 20 years?) dominated by the high P/E 1990s period, skewing it higher.


Earnings’ Stretch Run 
If Corporate Growth Slows,  Stocks Could Look Too Pricey
WSJ, January 16, 2007; Page C1   

Category: Data Analysis, Earnings, Investing, Markets

Countries GDP as US States

Fascinating stuff: Carl Størmer points us to this amazing map of the United States. Each state’s economic output is analogized to another country’s GDP. click for larger chart: Notable omissions: U.K., Japan, Germany, China, Russia, Italy. I cannot vouch for the precision of this, but by eyeball, it looks about right. Carl adds: “When seeing…Read More

Category: Currency, Economy, Finance, Valuation

MLK Weekend Linkfest

Category: Weblogs

25 Possible Surprises in Store for 2007

Doug Kass puts together a terrific list each year. They are thought-provoking, and truth be told, kinda fun. These are just the headlines; The full details are here.

These are not intended to be predictions, but rather "events that have a
reasonable chance of occurring, despite the general perception that the odds are
very long."

The real purpose of this endeavor is to consider positioning a portion of my
portfolio in accordance with outlier events — with large payoffs. After all,
Wall Street research is still very much convention and groupthink,
despite the reforms over the past several years.

25 Possible Surprises in 2007

1. Private equity deals begin the year in a spectacular fashion with
two separate $50 billion dollar acquisitions announced in January.

2. Robert E. Rubin returns to his brokerage roots and becomes the CEO
and Chairman of Salomon Brothers/Smith Barney
after Citigroup (C)
decides to break up into three separate companies: a domestic money center bank
(Citibank), investment banking/retail brokerage (Salomon Brothers/Smith Barney)
and international consumer finance (Citiglobal).

3. Based on misleading government statistics, the housing market
appears to stabilize in the first quarter of 2007.

Read More

Category: Economy, Markets, Politics, Web/Tech, Weblogs

Contrarian Approach to Investing

Category: Apprenticed Investor, Investing, Markets, Psychology

The Tao of Steve

Category: Digital Media, Film, Music

Greenspan Sculpture

Category: Federal Reserve, Psychology

World’s Assets Hit Record Value Of $140 Trillion

Category: Data Analysis, Investing, Markets

Oil Plunge: Good for Retail, Bad for Earnings?

Category: Commodities, Consumer Spending, Earnings, Investing, Retail

Ferocious Bubbles

Category: Digital Media, Music, Psychology