Down goes the Dow

"earnings are surging - easy to make a scenario in whcih they will get back to peak numbers. Since the main problem was falling oil prices."

Even using non-GAAP numbers for Q4 EPS 21% of the companies have missed already lowered EPS. Forty-two percent have beat lowered GAAP EPS and 48% have beat lowered sales numbers. So there are a host of companies beyond the energy sector experiencing no growth, including Apple which I gave numbers on yesterday.

Let's look some more facts. On 3/31/2016 Q4 2016 EPS projected to be $36.24. By 3/31/2016 it was lowered to $32.06. Even a little over a month ago, on 12/31/2016 it was lowered further to $30.48, only to fall to $30.16 by 1/31/2017. And these are all non-GAAP numbers.

So investors have been paying up for a unit of earnings since 3/31/2013, where the GAAP PE has expanded from 16.49 to 25.13 Q3 2016.

I agree that so far that doesn't matter. But since someone must own each share of stock at each moment in time, it will very much matter.

Igy

Please "splain" why that is dumb?

......silence.......pin drops......

you are still looking backwards

earnings have been rising around 10% SEQUENTIALLY (not year over year) for a couple quarters. That is what has been supporting the market.

I'm not citing GAAP numbers so we will probably not agree on this one.

Factset thinks the sequential earnings pop is 4.6% right now.

that's powerful stuff

but not GAAP, sure.

The blended earnings growth rate for the fourth quarter is 4.6% this week, which is higher than the earnings growth

rate of 3.5% last week. Upside earnings surprises reported by companies in the Information Technology and Energy

sectors were the largest contributors to the increase in the overall earnings growth rate for the index during the past

week.

Just reviewed my portfolio. I realized that I only bought Apple 9 months ago. As I said, I would rather wait until I have held it long term before selling (to take advantage of 0% tax rate on LT gains thanks to Obama retaining much of the Bush tax cuts). So I will not sell that right now.

Chevron is my only energy holding so I think I'll stick with that for diversity and the dividend if nothing else.

I really like the idea of holding GE for the long term. If fact I think I will set my dividend to DRIP on that one.

That leaves Intel. Frankly I' don't know a lot about Intel in terms of how well they are managed these days. But they talk a good game about pivoting towards data centers and Internet of things where there is apparently no end to demand. I feel like I should just ride that out as well.

So I guess I will not do anythings. Still, I'm realizing that I don't have any coherent plan on how or when to sell stocks. .

Estimates are estimates. They change as more information becomes available. It's only natural that some will be lowered. You make it sound like that's a big deal. It's not.

"Factset thinks the sequential earnings pop is 4.6% right now."

Data for the same period is different for FactSet versus Dow Jones S&P. As stated earlier Wall Street on 12/31/2016 had a non-GAAP Q4 EPS at $30.48 marked down to the current $30.16. So for Dow Jones S&P the estimates continue to decline. FactSet is using fewer reporting companies 55% to 56.9%, and a current estimate of $31.36 EPS for Q4 2016.

I believe they are using a common Wall Street trick. That is, they blend the non-GAAP and GAAP numbers to take the higher of the two. Since they don't report all the data I can only hypothesize on how they arrived at that higher number.

The FactSet data can be further questioned when you looks back at Dow Jones S&P 2015 non-GAAP EPS of $100.45 and compare it to what FactSet claims it to be $117.97. Of course this makes the market look more attractive on a valuation basis. But even using their inflated data the Forward PE of 17.1 is above the 10-Year average of 14.4 (+19 higher).

The FactSet 2017 Forward EPS is $132.16 while they have already marked down Q1 to $30.04. The name of their data set has a certain Orwellian flare to it.

Igy

Investment advisor wrote:

Estimates are estimates. They change as more information becomes available. It's only natural that some will be lowered. You make it sound like that's a big deal. It's not.

Then the opposite should be true.

That's doesn't work for you though does it?

Of course it works for me. Why would you suggest otherwise?

OK, then you disagree with agip contention that "surging" EPS is a good thing and driving markets higher.

Stop trying to put words into my mouth. My post was about estimates and your apparent lack of understanding of the same.

Year beginning CAPE 10 PEs before epic market collapses:

1/1/1929 27.06

1/1/1998 32.86

1/1/1999 40.57

1/1/2000 43.77

1/1/2007 27.21

1/1/2017 28.20

Today 28.62

The "surging" EPS was an estimate....check you own understanding.

So what? I made no judgement as to whether estimates were good or bad, unlike you. Learn to read

Ghost of Igloi wrote:

Year beginning CAPE 10 PEs before epic market collapses:

1/1/1929 27.06

1/1/1998 32.86

1/1/1999 40.57

1/1/2000 43.77

1/1/2007 27.21

1/1/2017 28.20

Today 28.62

🍒

Ghost of Igloi wrote:

Please "splain" why that is dumb?

You seriously don't think getting out before a 50% drop makes sense? I'm glad you're not my financial advisor.

Well if you are going to access significant portfolio principal in the next five years a reduction of stock exposure is wise.

I am glad you are not my client.