Listening to the incessant chatter of confirmation bias from CNBC, you could be forgiven for thinking that earnings are ‘not that bad’. Headline-makers like AMZN, GOOG, and AAPL scare for a few moments but we are reassured back to numb BTFD-land by some disingenuous analyst (or worse a PM) who says he is buying with both hands and feet. The misleadingly top-down positive impression of looking at a ‘beats-to-total ratio’, suffers from one rather annoying bias (that often gets forgotten): analysts constantly revising their expectations throughout the reporting period, and hence rarely deviates from the current level of 71%. But, as Citi notes, if one examines results relative to analyst expectations prior to the reporting season, it’s clear just how disappointing Q3 has been – especially given the sell-side mark-downs already factored-in.
If one uses unrevised expectations – which simply anchor lower and make every succeeding number look relatively better and better as earnings season progresses in one direction or another – then the S&P 500’s earning surprises are even worse than Q2 – making the sixth quarter in a row of ‘missed’ pre-expectations…
Third quarter earnings have surprised to the downside even more than in the second quarter.
What’s more, earnings have been particularly disappointing given that sell-side expectations already underwent significant downward revisions months ago. Indeed, the bottom-up estimate for S&P500 third quarter earnings per share dropped quite precipitously from above 28 down to 26.5 in July as management teams lowered their own guidance. Intriguingly, for as downbeat as third quarter results have been, we’ve yet to see the sell-side revise down estimates for next quarter or 2013 (see chart).
More than three times as many S&P 500 companies have issued negative earnings-per-share guidance for the fourth quarter, compared with those who have issued positive guidance, according to a report from FactSet Wednesday. For the final quarter of the year, 52 companies in the S&P 500 SPX -0.94% have issued negative guidance, while 16 companies have issued positive guidance. If the final percentage of companies issuing negative guidance is 76%, the fourth quarter will tie the third quarter of 2012 as the quarter with the highest percentage of companies issuing negative EPS guidance since FactSet began tracking the data in the first quarter of 2006.
Tired of idiotic “expert assessments” how the destruction in the aftermath of Sandy is good for the economy and “creates wealth” (just ask these people or thesehow much wealthier they feel with their house halfway still underwater, or with not a bite to eat)? Then read the following brief summary by David Rosenberg what the real and full impact of Rosie on the US will be: “the surprise for Q4? A negative GDP print.
Collapse in real earnings which started in December 2008, now the lowest in history, wages not keeping up with inflation!
How ugly? As the BLS reported, the average hourly earnings in October declined from $19.80 to $19.79 in September, and at $19.57 last October. This was only the fifth sequential decline in this series since the start of the Depression in December 2007. But more important was the Y/Y change in average hourly earnings. At 1.1% (down from 1.4% a month ago), this was the lowest Y/Y increase in this series, topping the collapse in real earnings which started in December 2008, and is now the lowest in history. In other words, more jobs may be added, but on a real basis,wages are not even keeping up with inflation!
Compared to job “gains”, it is obvious that all nominal gains are at the expense of wage losses:
The situation in New York City in the aftermath of Hurricane Sandy is dire. Some have gone days without power, water or even food as the superstorm brought the nation’s busiest city to a standstill.
Just how bad is it? WNBC actually found New Yorkers dumpster diving behind a Key Food supermarket Thursday, searching for any remnants of food they could find.
WNBC reporter Jonathan Vigliotti said people are “so hungry they literally pried open this dumpster — you see that door open right now — and they are literally picking through for whatever they can take home with themselves.”
“We’ve seen everyone here from the elderly, to families with children, literally up on top of this,” he added.
Martin Hutchinson writes: Invariably, every major disaster comes with the pundits who promise it brings a silver lining.
With a price tag of $50 to $70 billion, some economic forecasters are already rejoicing about the economic “stimulus” that rebuilding from Sandy will bring. If only it were so.
In fact, this paradox is well worn since it involves one of the central conflicts of economics itself. You may recognize it as a battle between Maynard Keynes vs. Frederic Bastiat.
It involves Bastiat’s famous “Parable of the Broken Window”.
You see, according to Bastiat (1801-50), the glazier who fixes the broken shop window earns money from it, and so he regards the broken window as economically beneficial. However, that’s only half of the story.
It doesn’t take into account what the shopkeeper might have done with the money he used to pay the glazier to fix the broken window.
As Bastiat points out there is a “hidden cost” within the broken window itself. The broken window made the shopkeeper that much poorer.
What’s more, if the glazier secretly paid the boy who broke the window to generate the “new” business, he would be effectively engaging in theft from all the town’s shopkeepers.
On a net basis, it’s a no win ballgame.
A Nor’easter Winter Storm Could Hit The East Coast By Election Day !!! More Snow, Wind and Rain Coming!!!
While millions continue to cope and clean up after Sandy, the last thing anyone wants is another storm to add to the misery.
Fortunately, there are no equals to Sandy to be found on the weather forecast maps. However, there is some indication that a more typical storm for November will form along the Atlantic coast next week and travel northeastward.
If the storm develops quickly right along the coast, rain would break out and spread northward over the mid-Atlantic and New England. A slower developing storm would tend to swing out over the ocean and dodge much of the mid-Atlantic but could still reach part of New England.
The timing window of the storm would be Tuesday night into Thursday.
Any storm along or off the coast will kick up some wind, surf and seas. The difference being for coastal concerns is whether winds would blow onshore or offshore, and that is dependent on the track.