Down goes the Dow

agip wrote:

Ghost of Igloi wrote:

agip, Big, Muy loca, POTO, et al:

OK, off the GAAP and non-GAAP numbers. Lets just use the Wall Street standard of Operating Earnings for a little fact versus fantasy experiment. The high for Last Twelve Month (LTM) S&P 500 Operating Earnings was Quarter 3 2014 (09/30/2014) at $114.51 a share. LTM Q3 2015 Operating Earnings was $104.14, and LTM Q4 2015 with approximately 90% of the companies having reported is estimated to be $102.74.

Wall Street analyst have based their S&P 500 2016 price target on an average earnings of $120.16, and 2017 at $138.03. Seems like a stretch to me.

Igy

well that's again walking into the weeds of the huge earnings decline of oil and materials companies. That's the reason for most of the decline in earnings. How relevant that is...that's the question.

and of course the impact of the strong dollar. In 4Q15 the dollar was 13% higher than the year before. That has a large impact on earnings.

So bulls would say look the earnings decline at oil companies will tail off, the dollar will stabilize or even fall, and then earnings will have a tailwind instead of a strong headwind.

boom, $1.38 next year.

agip,

You hit the Easy button.

Igy

Ghost of Igloi wrote:

agip,

You hit the Easy button.

Igy

darn straight

agip,

The following article blows a bazooka size hole in your "its just energy" theory, unless of course your think Silicon Valley start-ups are somehow connected.

Igy

http://www.zerohedge.com/news/2016-02-22/mood-silicon-valley-moment-after-titanic-hit-iceberg-heres-why

agip, it is extremely easy to see that the funny-business is continuing.

Just look at what is happening with the credit ratings, pricing, and tax treatment of CoCos under the Basel III AT1 and T2 capital requirements.

Instead of actually increasing the strength of banks, movement of the bar downwards with the aim of increasing the CoCos investor base creates the mere illusion that their strength is increased,

This is another example of extreme mal-investment, and it has to do with what I was saying earlier--valuation. They are also subject to a secondary market, and we all know how that turns out in practice.

And coach d, being a pure technicals guy is every bit as bad as being a pure fundamentals guy. As with most things, the truth lies somewhere in-between, especially if you are an individual stock-picker, as you claim to have been. IMO financials are the source of fundamentals that even a technicals guy should look at when considering an individual stock.

Maserati,

Read my last link, it is an interesting insight to what is currently ongoing in

Silicon Valley.

Igy

Ghost of Igloi wrote:

agip,

The following article blows a bazooka size hole in your "its just energy" theory, unless of course your think Silicon Valley start-ups are somehow connected.

Igy

http://www.zerohedge.com/news/2016-02-22/mood-silicon-valley-moment-after-titanic-hit-iceberg-heres-why

what does this article have to do with energy company earnings dragging down the total earnings of the sp500? the word energy doesn't even appear in it.

agip,

The point was liquidity is drying up and Silicon Valley start-ups are struggling. My thesis has been that there is a reason for energy's struggle. If global central bank liquidity fueled a boom in commodity and energy investing, the same would be true of venture capital's interest in Silicon Valley's dubious start-ups. In my view it is all connected to the drive for yield in a low return environment. Translation: mal-investment.

Igy

Ghost of Igloi wrote:

agip,

The point was liquidity is drying up and Silicon Valley start-ups are struggling. My thesis has been that there is a reason for energy's struggle. If global central bank liquidity fueled a boom in commodity and energy investing, the same would be true of venture capital's interest in Silicon Valley's dubious start-ups. In my view it is all connected to the drive for yield in a low return environment. Translation: mal-investment.

Igy

ok I see

this is another example of how people who think the federal reserve is at the center of the problem see it everywhere.

You see the crash in energy prices as a result of central bank bad policy.

others see the energy crash as the result of new technologies producing far more oil than before. and maybe a little slowdown in china.

fear of the central banks is a lens many people see the world through - it's interesting.

Ghost of Igloi wrote:

Churnings by the algos means nothing if the fundamentals are declining. Your hope lies in that earnings and investor risk appetite reappears.

1 for 2, so far...

North American stocks were higher on Monday as prices of crude oil and other commodities surged, pointing to an uptick in investors’ risk appetite following a rout in global markets.

“You’ve seen oil rebound today, which people are viewing very much as a kind of a green flag in the short-term to take on risk again to a certain degree,” said James Abate, chief investment office of Centre Funds in New York.

agip,

I lived in Texas for a quarter of my life and I can tell you fracking has been around a long time before I left, which was twenty years ago. Granted fracking technology and horizontal drilling has improved tremendously over that period. However, large amounts of funding flowed to the energy sector in belief that energy process would continue to move higher. One easy area to look toward is MLPs and investment that was barely heard of five years ago. So I see the link as the central banks liquidity rather than the sector. That link can be applied to China as well with its Ghost Cities and mal-investment into productive capacity. If I am right our recent rally will fade, if you are correct it will only continue.

Igy

MLPs have been around for a long time. I was invested in one in the 1980s.

Moves,

Be careful to make assumptions from the hokum of a buy side (snake oil salesman) analyst. One factor affecting rising WTI is options expiration for forward contract, the short side has to roll the contract prior to expiration, driving up prices over the short run. High Frequency Traders (HFT) have their algorithm tied to a WTI-up-buy S&P trade. It has nothing to do with any kind of "green flag" to investors. Bunch of baloney.

Igy

Ghost of Igloi wrote:

agip,

I lived in Texas for a quarter of my life and I can tell you fracking has been around a long time before I left, which was twenty years ago. Granted fracking technology and horizontal drilling has improved tremendously over that period. However, large amounts of funding flowed to the energy sector in belief that energy process would continue to move higher. One easy area to look toward is MLPs and investment that was barely heard of five years ago. So I see the link as the central banks liquidity rather than the sector. That link can be applied to China as well with its Ghost Cities and mal-investment into productive capacity. If I am right our recent rally will fade, if you are correct it will only continue.

Igy

again, you don't see the problem as a simple and common problem of supply overwhelming demand because of the classic capitalist boom/bust cycle in energy.

despite oil doing this over and over again over decades, you think this time is different.

Ghost of Igloi wrote:

Moves,

Be careful to make assumptions from the hokum of a buy side (snake oil salesman) analyst. One factor affecting rising WTI is options expiration for forward contract, the short side has to roll the contract prior to expiration, driving up prices over the short run. High Frequency Traders (HFT) have their algorithm tied to a WTI-up-buy S&P trade. It has nothing to do with any kind of "green flag" to investors. Bunch of baloney.

Igy

Market activity clearly supports what I posted. You must be blind if you don't see the increase in activity.

Larry,

That may be true, but their popularity rose as a "bond proxy" over the last five years. One of the largest MLP ETFs, the Alerian MLP fund (AMLP) started in August 2010. Many of the oil, gas, storage, and pipeline companies did spin-offs to fulfill the demand. The mantra from the investment firms was MLPs are a "toll road" and their income would not be as affected by the price of the commodity. AMLP is down 20% on the year, WTI is down 22%.

Igy

Market Moves,

Check back with me at year end and we will compare notes.

Igy