Tag: revenue expectations

An eye-opening moment

With great fanfare, the big news of the week was that finally the Silly Season has ended; to the winners go the spoils, to the loser…soul searching.  The election essentially unspoiled the status quo and now the frenzied media, realizing that there’s no real story to be had there anymore, attention immediately shifted to the impending “Fiscal Cliff.”  Ahem, dear media, by the time you hear the sirens, it’s already too late.  You’re about as useful as a football bat.  Anyone paying attention has followed this issue for months, literally.

For the record, I sincerely believe, that with the election results being what they are and as the demographic and political landscapes are forever changed, that the real possibilities of a “Grand Barging” being achieved in the next few weeks / months are entirely realistic.  Yes, we still have the same moronic players in the Congress but the circumstances are different if not historic.  The consequences for non-action will touch nearly every segment of American society in regards to increasing taxes.  I would not be shocked to see specifics emerge before the end of the month as the adults in the room finally decide to speak up.

Last week other big news was the highly volatile markets.  Wednesday opened with a severe move downward and gave us a 2% down day on the heavy volume.  Thursday carried the markets further to the downside and by Friday’s closing bell; all of the major U.S. equity indexes were negative by more than 2% on the week.   The S&P 500 closed below 1,400, the Dow Industrials below 13,000, the NASDAQ below 3,000, and the Russell 2000 below 800. It wasn’t only the political candidates who were made slack-jawed immediately after the elections.  Can it be called the Obama pullback?  It’s no secret that Wall Street wanted different electoral results however I reason to suggest that Europe held significant sway over last week’s market actions.  And by the way, there’s more of that to come, I suspect as European economic reports showed further deterioration.  Mario Draghi’s (European Central Bank’s President) comments regarding Germany on Wednesday actually sent the European market into a tail spin which in turn took down the US Market.

I remain optimistic.  While some in regards to the election results, will sulk and murmur “What went wrong?” they really should be wondering why they were the last to know.  How they did not see it coming is what is astounding.  The same can be said for our Fiscal Cliff.  The time to ignore reality and remain in an information free cocoon must come to an end.  Had enough with the conclusions from the ideological hacks, and their self-imposed, fantasy land of disinformation to the masses?  The American public sent a clear indicator of their risk off sentiment.  Americans voted against this nonsense and it ought to be an eye opener for many that hopefully won’t be quickly forgotten.  I remain optimistic, cautious and conspiracy free.

Motion sickness

How many changes in direction are you realistically supposed to tolerate in one week?  Wednesday through Friday we witnessed dramatic market movements across the broad indexes.   The markets appeared to be waiting, then panicking and then again waiting.  Granted, the unpleasant impact of Hurricane Sandy added a new level of uncertainty to an economy moving slowly towards recovery; last week’s economic data was respectable on the corporate earnings fronts.   Private sector payroll numbers, with the August-September upward revisions, were favorable, as was the upward gains in personal spending and in consumer confidence.   Internationally, eleven of 12 major markets turned positive, significantly.  Based on valuations, European, Asian, and Brazilian equity markets are becoming more eye-catching.   Comparatively, these foreign markets are cheap versus U.S. equities.

Internationally, with unemployment running above 25% in the twelfth largest economy in the world, the European Central Bank (ECB) has made it clear that it won’t let Spain collapse, as that would be the lighting of a fuse that would explode what is now known as the European Union.  As for another troubled country in the EU, specifically what needs to be paid attention to are the actions of the Greek parliament, as they are set to vote on new austerity measures and the 2013 budget.  If those measures don’t pass, the next tranche of bailout money from the ECB will not be given to Greece and the country could go bankrupt in November.  Not as calamitous as Spain going into a death spiral but a Greek exit from the Euro and a return to the drachma would no longer be unforeseeable in the near term.

I remain optimistic.  The ongoing hiatus of U.S. business investment where deferred decisions reign supreme and cash is stacking up is about to end, I sincerely have a confident feeling.  Businesses will receive certainty from the election (even if they don’t get the rules or politician they want).  I expect a period of each party licking their respective wounds and realizing that now that the silly season is over, it’s way past time to get to work for the American people.  I’m optimistic and confident for the week ahead.

October Flummox

It was a week that should have resonated differently as it’s reasonable to conclude that it was important for the average investors’ psychology to see GDP data beating estimates.  The expectation was a 1.8% increase, so when U.S. GDP grew 2% in the third-quarter, the clouds should have gone away and the sun should have come out.  That pesky little rumor of burgeoning growth is becoming evident and there is some actual momentum happening.  Consumer spending was the principal factor of the increase, furthered by purchases of durable goods.  Not too shabby it would appear right?  Ahem, for the week, the Dow fell 1.8 percent, the S&P 500 lost 1.5 percent and the NASDAQ dropped 0.6 percent.  D’oh!

The familiar culprit of lack of business investment provided a headwind to stronger growth.  Lighter revenues are a concern this earnings season with just about 37 percent of S&P 500 companies have reported revenues that beat forecasts, compared with the 62 percent that typically exceed expectations, according to Thomson Reuters data.  Sales missed forecasts at 59 percent of companies, the data also showed.  Third-quarter earnings at about 71 percent of the index’s companies beat analysts’ estimates, according to data compiled by Bloomberg.   The data and the overall GDP sentiment have presented a sort of alternative reality where the confused and perplexed reign supreme.   Hurricane Sandy is only going to add a new twist to the narrative, with the potential of market closures into Wednesday, Insurers preparing for the worst in storm damage to property and lives of as much as $4.9 billion, according to Kenetic Analysis Corp.  Home and business owners are bracing for potential economic losses ahead during what may be a challenging storm recovery.  This wasn’t the October Surprise they were expecting, not even close.

I remain optimistic.  This earnings season has been a very challenging one and Investors should look beyond some disappointments and focus on an improving economy.  A growing economy will underpin growth in stocks and all other instruments.  External bearish factors include concern about the European debt crisis after Spanish unemployment rose to a record 25% and after Germany expressed more doubts about whether Greece will be able to meet requirements for its European bailout.  Our own ‘Fiscal Cliff’ is rapidly approaching, not to mention the elections next week.  It’s understandable why confidence is missing; present circumstances present a mixed bag of joy and distress concerning weaker global and domestic economic growth.  I remain optimistic, but cautious and defensive.

Expectation and interpretation

The U.S. market began the week with better than expected economic data and by the end of the week, earnings results actually had beaten expectations (true, the bar had been lowered) but the revenue beat rate and outlook have been disappointing.  Approximately 20% of the S&P 500 companies have reported thus far, only 42.3% of them have beat Q3 revenue expectations and 57.7% have missed.  However, 64.9% have beat earnings per share (EPS) estimates.   As I’ve mentioned before, this market is all about expectation and interpretation.  To close the week off, the S&P and Dow finished the week with minuscule gains, the Russell 2000 with a small loss, and the NASDAQ proved to be the worst performer with a 1.26% drop.  There is a noticeable change in sentiment, again with little response to good news. Stocks had the worst week in a few months all the while the data has actually been somewhat positive.  On the global perspective things were considerably better, with eleven of twelve major foreign indexes posting gains.  The under performer was Brazil and they missed by .41%.

Overall it was a quiet but positive week for economic data.  Retail sales, industrial production, housing starts and building permits all beat expectations right on up until Thursday’s employment numbers.  First time unemployment claims took the wind right out of the swelling sails and then Friday’s sell off, which just by coincidence happened on the 25th anniversary of the Crash of 1987, capped off a surprisingly vexing week.  Uncertain outcomes remain and the market’s fluid reaction bears caution.

I remain optimistic.  I won’t be making any predictions when the overall earnings story is this mixed, the Doom and Gloom crowd will be providing more than enough downbeat outlook commentary.  Adding to the neurosis of the market, the last Presidential debate happens Monday evening.  I am curious which candidate (the fake Mitt or fake Barack) will play to undecided voters via their foreign policy positions.  The last two events were certainly eyebrow arching to say the least.  My short-term outlook predominately screams for caution and risk control due to market psychology and sentiment.  Mid to long-term, I remain optimistic as there are many immediate opportunities for long-term growth potential; once the equilibrium shifts and the fundamentals are once again recognized by a sane market place.