Monday, September 6, 2010

Weekly View Assesment of The Trend

What matters for equities is earnings and not GDP growth. US GDP growth projections are being cut, but earnings projections have been little affected so far. Investors and analysts are hoping that, to the extent the soft patch in US GDP growth lasts for only a few quarters ( and who cares about the part time workers without benefits ) and does not spillover to the rest of the world, US companies will be able to protect their revenues and profits (thanks to the Republicans ). Indeed, this is what happened during 2Q, when US companies were able to deliver strong top line and EPS growth even as US GDP grew at only a 1% pace.
The macro picture has deteriorated in recent months, but it has not collapsed. This has reduced the margin for error in terms of corporate earnings.
The market has been volatile, but it has remained resilient because we just aren’t seeing the weakness in corporate earnings. Persistent macro weakness and a few more earnings seasons will likely change that as corporations move to adjust expectations heading into a more difficult environment and the analysts subsequently play catch-up.
The Bulls saved the collapse on low volume this summer and the Bearish Head and Shoulders is in question.
Political comments by CNBC Analysts are in agreement that Investors and Corporate leaders are in a " nervous " mood. What the don't tell the public and viewers is that the majority of these people are republicans or independent high net worth individuals that never voted for this President and all they care for is lowering their taxes. CNBC maintains a republican bias and advocates a self serving anti-democratic view and anti-social-economic equality for many years, and that is odvious to anyone watching this channel. The obssesion with the Bush Tax Cuts continues in CNBC.

1 comment:

  1. Interesting ..undoubtedly corp earnings in the very near future will eventually be affected. Profits/earnings however, I do not feel necessarily reflect the current state of the econonmy. By streamlining corporate fluff, coupled with job layoffs, benefits/pension downsizing.etc....the profits eventually reflect the cost cutting. GM is boasting a profit and is ready to payoff the govt and issue a new IPO. Hmm interesting considering Detroit has areas of near 50% unemployment. This is a perfect example of big corp removing the excess. However is this a true reflection of current economic status, considering Gm reneged on a large portion of its debt. So without the debt load making a profit comes easier. it would be unfair to categorize all corps the same. However, without US exports, via manufacturing, I hardly see how this can be maintained. Yes exports are up 18% but so are China imports. I've always said with a progressive/competitve manufacturing sector I just don't see how an economy can be sustained. Anyways just my babbling and thinking out loud. Thanks for your posts.