Of course one can believe that there will "no bad days." This guy thinks so, maybe we are going to 75 times next year's earnings....
http://thesovereigninvestor.com/exclusives/dow-50000/?z=529980
Of course one can believe that there will "no bad days." This guy thinks so, maybe we are going to 75 times next year's earnings....
http://thesovereigninvestor.com/exclusives/dow-50000/?z=529980
eh, in the end I didn't race. been doing a lot of miles, was tired, it was raining. basically I was lazy.
I did a time trial instead and it was only middling so am a bit disappointed.
onward.
Agip, where does that 14% higher number come from? The news I read is that S&P 500 earnings is forecasted for -2%.
http://www.wsj.com/articles/profit-slump-for-s-p-500-heads-for-a-sixth-straight-quarter-1474836341
Does your number reflect share buybacks? Is it some broader metric than the S&P 500?
agip wrote:
Econ 101 wrote:I got out of Europe and emerging markets months ago. Money from those countries is pouring into US investments for good reason; we are not experiencing what you describe. So, I'm not worried.
Now if you're invested overseas, you should be worried.
why are emerging markets up 18% this year?
I guess I got out too soon. No regrets. I think overseas opportunities are too risky right now for my tastes. And with the domestic markets doing so well, I'm happy stand pat.
Best wishes to those with money overseas.
Ryan,
All Dr. Kelley is doing is using the Q3 consensus number subtract the Q2 actual to get his 14%. As I have pointed out the consensus numbers have been way off for a number of years, yes years not quarters.
So not much original thinking on Dr. Kelley's part. Who am I to criticize I am Mr. Igy? At least I can figure out nothing special here. Let's compare his thinking with the often criticized Dr. John Hussman. You may disagree with his conclusion, but at least there is some originality in the thinking.
Igy
Ghost of Igloi wrote:
Econ,
I would say there are a significant number of money managers that find more value in emerging markets and Europe than the US. Reversion to the mean you know.
Igy
Econ 101 wrote:I got out of Europe and emerging markets months ago. Money from those countries is pouring into US investments for good reason; we are not experiencing what you describe. So, I'm not worried.
Now if you're invested overseas, you should be worried.
Good for them, I guess. My current comfort level is going to keep me at home. I don't like what I see elsewhere.
That doesn't help me at all. Its my understanding that in recent quarters actual has been up a couple percentage points from consensus. It does nothing to reconcile what I'm seeing to what Agip is saying. Does Agip or anyone have a link or source to that 14% number? Is that top line earnings before expenses? I'm not doubting the number. It would just be nice to what it is and reconcile to what I'm reading.
Ghost of Igloi wrote:
Ryan,
All Dr. Kelley is doing is using the Q3 consensus number subtract the Q2 actual to get his 14%. As I have pointed out the consensus numbers have been way off for a number of years, yes years not quarters.
So not much original thinking on Dr. Kelley's part. Who am I to criticize I am Mr. Igy? At least I can figure out nothing special here. Let's compare his thinking with the often criticized Dr. John Hussman. You may disagree with his conclusion, but at least there is some originality in the thinking.
Igy
Ryan,
I hope the following table copies to the thread. The following data is from the S&P 500 Earnings Estimate Report. The following table was extrapolated from the observation date. The observation data is a record of Wall Street consensus EPS estimates which are non-GAAP or pro-forma EPS estimates. As you can see for Q2 2016 at no time did the actual exceed the observation EPS estimate. If you could review the history, which I have some at my office, this trend has continue for years. That is the projected EPS estimates of Wall Street have failed to meet the actual EPS, and we are talking non-GAAP. The GAAP EPS data is even a worse projection.
Date Q2 2016 Q3 2016 Q4 2016 2016 Est
3/31/2015 $33.27 $34.61 $36.24 $135.03
6/30/2015 $32.27 $33.78 $35.60 $132.36
9/30/2015 $31.82 $32.88 $34.73 $129.37
12/31/2015 $31.02 $32.35 $33.35 $125.56
3/31/2016 $29.05 $31.07 $32.06 $118.12
6/30/2016 $28.32 $30.33 $31.69 $114.31
Current $25.70 $29.36 $31.14 $110.16
So Wall Street has a habit, in fact an addiction to inflating EPS estimates and bringing those numbers down over time. The 14% that agip quoted can be found above. The 2016 Q2 actual EPS is the $25.70 the Q3 EPS estimate is $29.36. Dr. Kelley has found the difference between Q2 and Q3 EPS as the difference of 14%. Please note at the start of the Q2 non-GAAP EPS was projected at $28.32 and came in at $25.70. So there is high likely hood that the number Dr. Kelley and Wall Street is using will be far off the mark. In fact the history since 2014 has been for estimates to be far off the mark. In fact the number Dr. Kelley is using is very close to the highest non-GAAP EPS ever record the $29.60 of Q3 2014. Hard to imagine how we will ever get close to that number. It is a big fat baloney sandwich fed to the uninformed as caviar and crumpets.
igy
Ryan,Here is a link to the data, hit the "additional information" tab where you will find the spread sheet data. As noted above Dr. Kelley is using this data to project the EPS growth.http://us.spindices.com/indices/equity/sp-500Igy
Thanks GOI. Those numbers pasted were kind of a jumble. But just the terms "non gaap" and EPS told me enough. In other words, "earnings" includes a company using debt to buy back shares. And we have already gone over non-gaap in this thread. It could be anything, but I can safely assume it is earnings friendly in this case.
Ryan,
You can find a spreadsheet on the link that will make the data easier to read. The data is under the heading of Observation on or about cell 70. As you have noted these are inflated numbers, re-heated non-GAAP hash, overly optimistic projections referred to as "forward operating earnings." It makes me angry, based on lazy scholarship and divorced from reality, these EPS numbers are fiction.
Igy
Not entirely fiction. Non-GAAP is susceptible to abuse, but it can also provide better insight into a company's financials. Smart investors look at both GAAP and non-GAAP. As with other circumstances where two sides are presented, the "truth" often lies somewhere in between. Ignoring one side leaves one at a disadvantage versus those considering both.
Econ,
Smart investors realize non-GAAP EPS is an increasingly manipulated number. Smart investors know that $132 in 2017 forward operating earnings is fiction.
Igy
Increasingly? I'm guessing you can't prove that. But it doesn't matter. Smart investors are looking at both numbers and gleaning what has value to them. Anyone who doesn't look at both numbers is shortchanging themselves and anyone to whom they offer financial advice.
A couple thoughts.
In Agip's link it reads (in very fine print) that it is using operating earnings per share. I did a little google search and I'm warily accepting that operating earnings is earnings before interest and taxes. Therefore I'm guessing it does include stock based compensation. But its annoying because it is Non-Gaap. Its something made up by the investment banks and I can't find any standard for what is included (and excluded) in operating earnings.
To reconcile what I'm reading on earnings ( -2%) to the 14%, I see the difference as mainly share buybacks financed by debt. And in fact I do see that total corporate debt in the U.S. is near record highs and continuing to rise.
I'm not all negative on share buybacks. If debt is cheap to issue its reasonable for a company to take advantage of it. If a company doesn't see good profit from investing more, than buying back shares with that cash makes some sense. For highly profitable companies like Apple it does have some substance in avoiding taxes. But generally, buying back shares with debt is as gimmicky as it sounds. I think the -2% earnings estimate is the better number to follow.
Ryan,
Operating earnings is non-GAAP also referred to as pro forma and does not include stock based compensation or costs of failed businesses as an expense.
Igy
Econ,
SEC recently issued new guidance for non-GAAP reporting.
https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm
I would say there wash a reason behind the new guidelines.
Igy
Econ,
More on the increasingly issue from the National Law Review.
http://www.natlawreview.com/article/non-gaap-financial-measures-new-sec-scrutiny
Igy
U.S. stock futures on Wednesday showed little changed, as traders avoided big bets ahead of an employment reading that could offer clues about a more closely watched jobs report due Friday.
S&P 500 futures inched lower by 0.70 point, or less than 0.1%, to 2,144, while Dow Jones Industrial Average futures lost 16 points to 18,076. Nasdaq-100 futures shed 1.50 points to 4,856.
Investors are waiting for ADP's monthly private-sector jobs report, which is expected at 8:15 a.m. Eastern Time. It comes two days before the government's September data on nonfarm payrolls, and each release could spark bets on whether the Federal Open Market Committee will raise interest rates soon.
"Wednesday's ADP payrolls and Friday's nonfarm payrolls may drive more FOMC speculation trading," said Colin Cieszynski, chief market strategist at CMC Markets, in a note.
"Even if one side were to open up a big lead in U.S. election polling, December still looks more likely for an increase than the November meeting a week before the vote," Cieszynski added.
On Tuesday, the S&P 500 and Dow both closed 0.5% lower and retreated for a second straight session.
Other markets: Oil futures traded higher, while European stocks lost ground, after Asian markets closed mixed. Gold futures rose, and a key dollar index pulled back.
Economic news: Beyond the ADP report, an August reading on the U.S. trade deficit is slated to hit at 8:30 a.m. Eastern Time, with economists polled by MarketWatch forecasting a $39 billion deficit.
At 9:45 a.m. Eastern, Markit's September report on nonmanufacturing sectors is due, then an ISM figure for that same area is anticipated at 10 a.m. Economists expect an ISM reading of 53.1%.
An August report on factory orders is also scheduled to arrive at 10 a.m., with a decline of 0.1% predicted.