"Earnings for S&P 500 companies will slide 35 percent this quarter and 23 percent in the July-to-September period, according to analyst estimates compiled by Bloomberg."
And since PCE is usually one of the engines of recovery (along with residential investment), I expect the recovery to be very sluggish too (no Immaculate recovery).
So if PCE = 70% of GDP how exactly does USA get of recession when Obama admin has already spent $12 Trillion bailing out too big too fail banks and has a projected 2009 deficit of $1.8Trillion ?
Its ironic isn't it. Most American families need to save more for retirement. And, they have begun to do that.
But, with $8K homebuying tax credits, automobile tax sales tax credits, and automobile junker vouchers, the US government is screaming "spend! spend! spend!"
"So, like 500,000 g.i.'s overseas haven't much of a clue what's really happening back in the world, and then they come back to no jobs..."
Then they come back?
They won't be coming back. BHO is no more going to end overseas wars than GWB. he might shift them from Iraq to Afghanistan, but that is it. After that, if we did wind up Afghanistan, there would be somewhere else.
But I agree with your point: if those troops ever came home, it would not be a happy scene.
Tim waiting for 2012 if consumer spending accounts for 80% of economy then Obama admin and MSM happy talk about coming out of recession is even sillier !
Mortgages Over 5% Mean Fed Purchases as Bonds Slump
"The world’s biggest investors are increasing bets that Federal Reserve Chairman Ben S. Bernanke will boost purchases of Treasuries as the steepest losses on government debt since 1994 send mortgage rates above 5 percent. "
iceman (profile) wrote on Mon, 5/11/2009 - 2:23 pm reply Ignore user Its ironic isn't it. Most American families need to save more for retirement. And, they have begun to do that. But, with $8K homebuying tax credits, automobile tax sales tax credits, and automobile junker vouchers, the US government is screaming "spend! spend! spend!"
km4, I think the U.S. will probably emerge from a technical recession in the 2nd half of '09. But if I'm correct about a sluggish economy - that means there is a possibility of a double dip recession along with rising unemployment. And I think the Obama administration will be under pressure to close the budget deficit, and the Fed to unwind some of the liquidity programs - and that could increase the chances of a double dip.
Back in 2003 and 2004, I was writing about the dangers of a low Fed funds rate and large structural budget deficits. What would happen when the housing bubble burst, I asked. Our monetary and fiscal hands would be tied.
Now the disaster has happened. Monetary policy is at the zero bound, and a huge cyclical deficit has been added to the Bush structural deficit - creating a monster of epic proportions. Hopefully it will eventual work out, but until the economy recovers we will be stuck with incredible deficits. And even when the cyclical deficit is reduced, we will be stuck with the structural deficits (that I estimate are around $1 trillion right now).
CR yes I agree we'll see double dip recession along with rising unemployment. Even Tiger Woods could not hit the green out of the woods by a long shot.
ghostfaceinvestah (profile) wrote on Mon, 5/11/2009 - 2:26 pm reply Ignore user
If no one has figured it out yet, the war has never been in Afghanistan, thats only where we have been allowed to go.... the war, or should i say the targets are all in Pakistan.... we will just use Afghanistan as our staging ground, hell the paki's wont tell us where their nukes are (but we know).... eventually we will cross the uncovertly into the mountains, and that will be on BO's watch, we just need to be mindful of who is holding their football....
"Banks wrote off an average of 5.5 percent of their credit card balances in 2008, while the average unemployment rate was 5.8 percent. By the end of the year, the rate of credit-card write-offs was 6.3 percent; more recent data was not available."
"Experts predict that the rate of credit-card losses could eventually surpass the jobless rate because of the compounding effects of the housing crisis and lackluster consumer confidence. Shortly after the technology bubble burst in 2001, credit card loss rates peaked at 7.9 percent."
""We will blow right through it," said Inderpreet Batra, a consultant at Oliver Wyman, which specializes in financial services."
sm_landlord (profile) wrote on Mon, 5/11/2009 - 2:35 pm
"... we haven't seen the effects of the tax increases that are coming down the pike.
And when inflation kicks in, the Misery Index will be back with a vengeance.
Just to add a few notes to your summary...."
Exactly why I have the feeling this ain't gonna be pretty....
Calculated Risk writes:
"We are not out of the woods by a long shot."
actually we are still going in the woods, maybe we have come through but we are in another fairway, still have enough elevation to make it across that fairway and into second farther woods, eventually , depending on the hole being played, we may or may not be OB....... no free drops , not that it would do any good, best thing that could happen is declare the ball lost and go back to the tee and pray that your caddy gets it and doesnt point your ball out to you within the 15 minutes....
It's no coincidence that so many industries are in trouble simultaneously and so fast. The growth of the America's Zombieconomy should have been a wake-up call to do something different ( like change we can believe in ) but unfortunately Obamanomics is built on same obsolete set of ideals of capitalism 1.0 and crony capitalism e.g. spending $12T on the too big too fail banks.
The US imports about 13.15MM barrels of oil per day. Let's say world economic recovery does take hold, but we have debased our currency relative to the BRIC countries, and with demand pickup, oil reaches $100 a barrel in debased USD. That is 1.3B USD per day we are sending out to our good friends in Venezuela, Algeria, Angola, Nigeria, etc.
$475B annually doesn't seem like a lot of money in the days of $1.5T deficits, but it will add up eventually.
lol, didn't catch the dates. My eyes kinda glaze over all the S&P numbers because I know you are right about the negative numbers. S&P don't make any sense. If Chewbacca lives on Endor you must acquit.
why isn't anyone keeping a running total of earnings? particularly S&P?
are we so retarded that we can be fooled every day by the scripted press saying we beat nebulous, unattributed estimates? is it the prozac in the water?
the earnings are right there out in the open!
i remember in my investing 101 class they taught that earnings underly stock prices. that, and interest rates/inflation expectations are the largest factors influencing a stock price and thus an index price.
Watch this video Fed Oversight: Intentionally Absent? - The Market Ticker of the moron that is the Fed's IG and you decide if we've hit bottom in the economy or the markets or if we are heading towards another big, fat leg down with trillions of dollars of losses shifted to the taxpayers.
You can only expect a 2nd half recovery if you only look introspectively at the USA. If you notice the rest of the world, the recovery will not be in H2Y09 for the USA
CR, with an r^2 of 0.125, the correct conclusion to draw from a model built from such noisy data is that there is no relationship. (Even if there was, only a tiny fraction [i.e., 12.5%] of the change in PCE can be predicted from the change in PSR anyhow, so it hardly matters.)
The ultimate conclusion of the blog entry may or may not be correct ("I'd expect PCE growth to be sluggish for some time.") -- though I happen to agree with it. However, you should not cite the PSR data modeling results as support for it.
The Romans had those troop problems too. Exascerbated by said troops sending lots of low paid workers home to Rome--aka slaves. One solution was to settle 'em on small farms, some of which were confiscated territory. I think I read that many of the farms failed since soldiers aren't farmers, normally.
I think you signed up for 20 years, unless you could weasel out somehow.
I will repeat what I have been saying, Bernanke is the most dangerous person in America today. He is "The Great Enabler", printing money to allow our broken govt to avoid making hard decisions.
It has been 21 months since the private label secondary mortgage market froze up, and 9 months since Fannie and Freddie were taken down, and Congress has not lifted a finger to even start talking about the future of housing finance in this country. To his credit, at least Barney Frank has brought up some ideas (like requiring originators to keep 5% of the credit risk in all mortgages they originate), but of course has been struck down by the banksters.
Meanwhile, Bernanke allows the whole charade to continue by creating a market (basically the only market - even Bill Gross has started selling) of agency MBS.
If we had some real pain in the MBS market, that drove up mortgage rates to where they would be without Fed interference, in the 6 - 7% range, we would at least get some debate as to what changes we need to make.
Instead we get currency debasement and money pumped into the system that will never be extracted. And all the mortgage bankers are fat and happy with their sub-5% mortgage rates, even COMPLAINING that they should be lower.
We are living in la la land, and it ain't gonna last.
do you buy PE of POSITIVE 15 for SP500 with NEGATIVE (23.25) earnings for the fourth quarter?
COME ON!
The hedgies have to buy something. It's getting too dangerous to short and you can't just sit in all that cash.
It's the nature of the markets we have - they're not driven by economics; they're driven by liquidity. And there's no political desire to allow markets to accurately represent reality because that might upset people.
It's an interesting time when even people like Faber and Grantham are talking about the S&P heading well north of 1000 and people are talking about waiting for a correction to get on board the express elevator to stock market nirvana.
Of course psychologically you would expect the real low in stocks to come as a surprise to even the "smart guys". And that a real rip-roaring bear market rally would manifest as a buying panic to get back onto the recovery train - that a necessary condition would almost be that nobody is expecting new lows.
Who knows, but with a fiat currency if the government wants markets to rise, markets will rise. The question is do they finally get to the point of fearing long-term consequences more than short-term consequences (whether or not those fears are justified).
Usually that kind of long-term worry is born of calamities of the kind we haven't experienced in recent years.
Samdog (profile) wrote on Mon, 5/11/2009 - 11:52 am reply Ignore user
Wait a minute ...
Microsoft to issue bonds to buy back its own stock. How exactly does that work? Anyone?
Microsoft execs can't get their price for their stock so they get their price for whole cloth bonds and then get their price for their stock. It is all about getting the stock price up no matter the cost. MSFT could invest some $10-$15b in itself but they are not that stupid. they see the end to several of their cash cows and ever thinner margins.
DCRogers
Savings is related to expected net worth and expected expenditures. Inflation in the 70s transferred cash/bonds into equities or houses. Savings were only so low recently because housing/stocks were so booming. Obviously when you are currently underwater, the push to save is high (and debt forgiveness which counts as income/savings doesn't hurt one bit). CR is right, but for more involved reasons than choosing between savings or expenditure baskets (which implicitly assumes taxation/transfers unchanged)-- obviously credit and unrealized capital gains play an important role.
Goodness, otishertz, we have looked, we have seen, and we agree with you ... negative earnings (historically rare, to put it kindly) do not lend themselves to positive p/e ratios. I am sorry you thought I was ignoring you. I am just in complete agreement: I, too, do not expect the forecasted results to line up well with current trends.
The data would seem to indicate a looming correction; alas, timing, as always, is everything.
Supposedly, the S&P, like the banks, will earn its way out of the quicksand, but objects in mirror may be closer than they appear.
"You and Nassim Taleb should corner BB and taunt him with pitchforks and pikes. "
I have a feeling that in a couple years it won't just be me and Nassim cornering him. That guy is going to have a lot of heat on him when J6P is looking at $5 a gallon gas and $10 a gallon milk.
Samdog (profile) wrote on Mon, 5/11/2009 - 11:52 am
Wait a minute ...
Microsoft to issue bonds to buy back its own stock. How exactly does that work? Anyone?
Rob Dawg (homepage, profile) wrote on Mon, 5/11/2009 - 2:58 pm
Microsoft execs can't get their price for their stock so they get their price for whole cloth bonds and then get their price for their stock. It is all about getting the stock price up no matter the cost. MSFT could invest some $10-$15b in itself but they are not that stupid. they see the end to several of their cash cows and ever thinner margins.
Interesting point about not getting "their price," It just seems so circular and so unproductive -- and, dare I say "transparent."
I guess they've been seeing storm clouds on their 'Vista" for some time (heh, heh) ....
EHP -- interesting analysis -- but my narrower point was statistical. There may be a relationship in fact, but the data modeling didn't demonstrate it, and so should not be used as evidence.
yes many foreign US military bases
AND
counting black ops spending and off budget wars
USA spend more on "defense" than nearly all other countires in the world combined, including our allies
Rob Dawg writes;
"Microsoft execs can't get their price for their stock..."
Even the cubicle drones have this problem, but it's much worse for the execs. If they don't get some more money into the pockets of their employees, they will be suffering an even worse brain drain. Why do you think they need to hire H1Bs? Could it be because the employee options are under water, and the stock hasn't shown any signs of life (other than the spring bounce) for way too long now?
MSFT is paying a dividend of over 2.6%, but that doesn't help the option holders.
lawyerliz writes;
"Well, Microsoft could give their employees--what was that called??--ah, a raise!!"
AHAHAHAHAHaHaHaHahahahaha!
Um, no. Not that company. Maybe they'll bring back the towels and the Starbuck's carts, but raises are out of the question. They have a vast HR machine working to keep salaries down.
there were just a few unstated assumptions
* taxation. increased taxation would cause lower PCE + lower savings
* credit. increased borrowing would cause higher PCE + higher savings
• expectations would also cause variation
the reason why increased borrowing boosts savings is that for the borrower, they are neutral, but their spending will multiply through the economy. problem right now is debt servicing became more expensive than the multiplicative GDP boost . Lowering credit rates to zero cannot arrest the decline because it was never sustainable to begin with, and it is not within possibility to sustain the required offsetting spending indefinitely
Nevertheless I do agree that the loose model is not to be trusted, even if it happens to support the correct conclusion at this time. We would not use a clock with such accuracy to tell the time.
edit: I'm still in favour of posting the chart. It's up front, we can draw our own conclusions, reader beware
EHP -- Agreement on posting (and publishing) negative results -- as a scientist, it's often hardest to find out information about things that don't work! (And as a Bayesian modeler, without the negative data, you've got nothing!)
I get a chuckle everytime someone reports that a store/restaraunt was busy (or even better yet - the parking lot was full) as a sign that things aren't so bad.
Even assuming you are not guaging traffic at that establishment's peak hours you have no idea what is in the till. And let me tell you people are being thrifty. The traffic might still be there but there is a lot of substitution going on (water w/lemon as opposed to a beer) which unfortunately cuts into margins.
My retail business relies on discretionary income and I can tell you the shopper is holding on to their money.
Last week I had two conversations with customers that sums it up. Got to talking to a gentleman on the markets and he mentionned his ira - 'yeah, I was down 30% now only 20%'. Another works for Continental Teves which makes brakes for auto makers (mentionned that Chrysler stiffed them for $47million). All employees have taken a 5% paycut and they are having rolling unpaid furloughs (a week at a time). She was needless to say looking for something on a budget.
Wake me when Saks and Neiman Marcus report an uptick.
Calling Malpass's "analysis " bad is being polite. It made soome wild assumptions such as (1) stock values never fall and (2) house prices not only never fall but they always go up. Not surprising his assessment was lousy - he was with Bear Sterns when he did it.
Stock and houses only represent the idea of money. They are not money. They are only real money when you sell them and have the cash in your hot little hand. All the rest about what they are worth or what they have gained in value is an illusion and not real.
I think the savings rate is more dependent on the mentality of the people, and that partly depends on the economy and the housing markets. Main factor would be the basic structure of the government/society. Since the western countries have all those socialist programs in place (unions, unemployment insurance, public health.. sort of), people will tend to be more confident and spend more.
At least I don't think the savings rate would shoot up to 25% (1940s), because back then there is not that many social policies in placed to help the poor (correct me if I were wrong).
Take a name asswipe................Awesome video thx for the link! Did anyone see the people in the background behind the Inspector General panic while she was trying to answer the questions? It looked like they were having an O-sh!t moment! Lol!!!!
There's no stinkin' savings rate! Consumer liabilities (mortgages, credit cards, car loans, etc.) are going down NOT because we're paying them down as much as they are being discharged in BANKRUPTCY COURT! Good lord, check the charts! There's enough disinformation already coming out of the Obama/Geithner/Bernanke Green Shoot Club.
What income we have is going into grocery & drug stores, and Walmart. Consumer debt, along with our net worth, is grinding down in a very ugly and convulsive manner as the world de-leverages from the housing bubble. Only after we de-leverage to the point our personal burn rates are cash neutral will we actually see a substantive increase in savings rate.
And save we will. The bulk of boomer retirement accounts have been unceremoniously blown away as the market and paper equity in our homes have evaporated. Job growth will stagnate for YEARS as boomers stick around the job market a LOT longer to painfully rebuild meager retirement funds. Economic growth will become an oxymoron for the next decade.
Good luck, college grads. Better check if the illegals doing your mom & dad's lawns are hiring. It might be a wise career move, if you know what I mean.
Isn't the savings rate actually a "plug" number? Something like the caculated difference between income and expenditures as opposed to an item that is individually calculated or tracked? While the savings rate will rise and PCE will decline I suggest the demographics involved have as much or more to do with that shift than the depressed economy. However, that depressed economy will exacerbate the shift. See my post at:
CR, your argument posted above about ageing populations tending to have higher savings rates is wrong.
Overall as the proportion of retirees grows relative to workers, the dis-saving of the retirees outweights the saving of the younger cohorts resulting in an overall savings decline. This is a well documented process based on much evidence from japan.
CR - very nice. Glad somebody's poking at this. Not only aren't most businesses reacting well or preparing to for short-term responses these longer term structural changes are beyond their event horizons and will be IMHO until the black hole swallows many - along with our jobs, investments, etc.
The backup data that looks at all the major data series is here: http://llinlithgow.com/bizzX/2009/05/whats_it_all_mean_economic_lan.html
When you look at it YoY Q4 GDP went down -.9% but -2.6% in Q1. Of the major indicators only PCE went up on a quarterly basis but (discussed in the post) monthly went down on a YoY basis.
Not only is the 2nd derivative still not turning positive it may in fact be increasing. The jury's out but still...
"Running on Empty" is such perfectly bad analysis. I've appropriately filed a copy on my local machine under "False Prophets". It's great how at the very end he says people actually should be saving, this way, a couple years from now he can say, "Before the downturn, I called for an increase in personal savings in my article 'Running on Empty'!"
What a pleasure though, to see the timing and where the author worked. What an idiot.
As mentioned by others above, value is fleeting, profits are realized when assets are actually sold.
Someone posted about the negative savings rate in the Great Depression with the idea we would see that now as well. I'm thankful CR went all the back to 1929, so I could see that information. I had assumed from media reports the negative savings rate was a contributor to the GD. However, looking at the timing, it appears the negative savings rate occurred after the stock market crash as CR points out people lived off of savings.
I suggest the negative savings rate we saw back in 2005 (however brief it was) was as low as the savings rate will go. Why? Because you have to have savings to live off them and clearly America as a whole has not been saving for awhile now. No, the only direction for the savings rate is up, and as others have mentioned, not by choice. Still, I would rather learn than be right, so if you see it otherwise, please enlighten me.
I'm thankful for the Calculated Risk blog teaching me that statistics can be interpreted by the media (and others) in a variety of ways which are both wrong and harmful. I await the media reporting how "good" it is that Americans are saving more.
The 25% savings rate in the 1940s was partly a combination of rationing (very little to buy, so low spending) and women in the workforce in large numbers while husbands worked or were stationed overseas (so more 2-income families).
bloomberg also boldface lying today about SP 500 earnings
"The S&P 500 ended last week trading at 15.1 times its members’ reported earnings, according to Bloomberg data, the highest since October. "
U.S. Stocks Slide From Four-Month High on Earnings Valuations - Bloomberg.com
According to S&P:
S&P 500 PE as of 12-31-08 = 60.7,
Earnings = -23.25
Someone should tell them a positive number divided by a negative number is a NEGATIVE NUMBER!
did earnings all of a sudden RISE and we all missed it?????????
chaw on this bloomturd
http://comstockfunds.com/files/NLPP00000/414.pdf
New post! Finally ...
Here is the video Rick Santelli metioned
Alan Grayson questions the Inspector General of the Federal Reserve
bloomturd goes on to say
"Earnings for S&P 500 companies will slide 35 percent this quarter and 23 percent in the July-to-September period, according to analyst estimates compiled by Bloomberg."
"Earnings = -23.25"
Is that really correct? S&P earnings, negative?
Where does that p/e of 120 for the sp500 come from?
Samdog, I was digging through a little bit of data ...
Sometimes I lose track of time!
best to all
So if PCE = 70% of GDP how exactly does USA get of recession when Obama admin has already spent $12 Trillion bailing out too big too fail banks and has a projected 2009 deficit of $1.8Trillion ?
So, like 500,000 g.i.'s overseas haven't much of a clue what's really happening back in the world, and then they come back to no jobs...
"Alan Grayson questions the Inspector General of the Federal Reserve "
Wanna bet they all get invited to dinner at the White House?
km4
Recently I read consumer spending accounts for 80% of the economy now that other sectors have declined. This is unsustainable.
let's see here, hmmm:
4th quarter earnings as reported were minus $23.50
bloomturd projects they fall by 35%.
so, bloomturd projects negative earnings for the SP500 of -$31.39 and somehow comes up with a positive PE of 15.1.
i guess math no longer applies
CR,
No need to explain your decision to the hoi polloi.
We who are about to post salute You!
Its ironic isn't it. Most American families need to save more for retirement. And, they have begun to do that.
But, with $8K homebuying tax credits, automobile tax sales tax credits, and automobile junker vouchers, the US government is screaming "spend! spend! spend!"
I think when its a minus number, we owe the S&P that money. Where's the hat?
blackhalo,
yes, according to S&P, the earnings for the fourth quarter were
MINUS 23.25
-23.25
(23.25)
(spreadsheet)
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,1,5,0,0,0,0,0.html
where it says "click here," do that.
download the spreadsheet and they plainly state
-23.25
it is above the other link where it says "S&P 500 Historical Average Price to Earnings Ratio."
"So, like 500,000 g.i.'s overseas haven't much of a clue what's really happening back in the world, and then they come back to no jobs..."
Then they come back?
They won't be coming back. BHO is no more going to end overseas wars than GWB. he might shift them from Iraq to Afghanistan, but that is it. After that, if we did wind up Afghanistan, there would be somewhere else.
But I agree with your point: if those troops ever came home, it would not be a happy scene.
Maybe I'll put a jar on the bar, and make some holes in the lid for patrons to put their spare change in, O wait, we dont make change at Leftys.
Tim waiting for 2012 if consumer spending accounts for 80% of economy then Obama admin and MSM happy talk about coming out of recession is even sillier !
Explains long bond moves today
Mortgages Over 5% Mean Fed Purchases as Bonds Slump
"The world’s biggest investors are increasing bets that Federal Reserve Chairman Ben S. Bernanke will boost purchases of Treasuries as the steepest losses on government debt since 1994 send mortgage rates above 5 percent. "
Mortgages Over 5% Mean Fed Purchases as Bonds Slump (Update2) - Bloomberg.com
iceman (profile) wrote on Mon, 5/11/2009 - 2:23 pm reply Ignore user Its ironic isn't it. Most American families need to save more for retirement. And, they have begun to do that. But, with $8K homebuying tax credits, automobile tax sales tax credits, and automobile junker vouchers, the US government is screaming "spend! spend! spend!"
The next bubble: flipping cars?
(Oh they do that already after the Superbowl).
compare the shift in current account ballances, and stagnant wages since the mid 80s with the declining savings rate
and add in a sprinkle of federal debt
essentially we have been eating our seed corn since 1984
ahhh
i love the smell of debt in the morning
Oh did Federal Reserve Chairman Ben S. Bernanke actually read this memo ?
China cancels America's credit card
Daily Kos: China cancels America's credit card
scatter graph rather similar to my full choke pattern for turkey this year from my old belgium browning...
km4, I think the U.S. will probably emerge from a technical recession in the 2nd half of '09. But if I'm correct about a sluggish economy - that means there is a possibility of a double dip recession along with rising unemployment. And I think the Obama administration will be under pressure to close the budget deficit, and the Fed to unwind some of the liquidity programs - and that could increase the chances of a double dip.
Back in 2003 and 2004, I was writing about the dangers of a low Fed funds rate and large structural budget deficits. What would happen when the housing bubble burst, I asked. Our monetary and fiscal hands would be tied.
Now the disaster has happened. Monetary policy is at the zero bound, and a huge cyclical deficit has been added to the Bush structural deficit - creating a monster of epic proportions. Hopefully it will eventual work out, but until the economy recovers we will be stuck with incredible deficits. And even when the cyclical deficit is reduced, we will be stuck with the structural deficits (that I estimate are around $1 trillion right now).
We are not out of the woods by a long shot.
best wishes
"Consumer spending accounts for 80% of the economy." As my dear old mom would say, what a messs, what a shittin mess.
oh crap.... belay my last ...i DO NOT own ANY guns, nope never.... cant hunt , feed mayself, i am helpless without my government...yeah ..whew....
Leftys Liquors Lubricants and Tarp and Bank (profile) wrote on Mon, 5/11/2009 - 2:26 pm "O wait, we dont make change at Leftys."
____
I guess that explains the "lubricants" part of you title? How considerate ...
friends and family wonder why im so pessemistic...fundementals
those green shoots
thats mushroom fungus fruiting upon the dead corpse
km4 MaryAnn
Let me find a link for that 80%. Just to be sure.
CR you left out future tax increases to pay for the deficits on the future. Can't borrow forever.
CR yes I agree we'll see double dip recession along with rising unemployment. Even Tiger Woods could not hit the green out of the woods by a long shot.
"Where does that p/e of 120 for the sp500 come from?"
projected twelve month trailing earnings of $6.66 for the SP500
which i think is a little rich
Calculated Risk writes:
"We are not out of the woods by a long shot."
That's probably an understatement, since we haven't seen the effects of the tax increases that are coming down the pike.
And when inflation kicks in, the Misery Index will be back with a vengeance.
Just to add a few notes to your summary....
If I hear anything about a blog tax, I'm sharpening my pitchfork...
current PE is not even a positive number.
i studied fractions in junior high.
Otis I just looked at all those spreadsheets for the sp500 again - the one on the earnings estimates belongs in the fiction section....
ghostfaceinvestah (profile) wrote on Mon, 5/11/2009 - 2:26 pm reply Ignore user
If no one has figured it out yet, the war has never been in Afghanistan, thats only where we have been allowed to go.... the war, or should i say the targets are all in Pakistan.... we will just use Afghanistan as our staging ground, hell the paki's wont tell us where their nukes are (but we know).... eventually we will cross the uncovertly into the mountains, and that will be on BO's watch, we just need to be mindful of who is holding their football....
S&P would like to educate you on "core earnings". You people are focusing on all the wrong sorts of details, apparently.
question for the group:
do you buy PE of POSITIVE 15 for SP500 with NEGATIVE (23.25) earnings for the fourth quarter?
COME ON!
to believe this is deliberate self censorship.
i know you people are better at math than i am!
Banks' Credit Card Troubles May Be Vastly Understated
"Banks wrote off an average of 5.5 percent of their credit card balances in 2008, while the average unemployment rate was 5.8 percent. By the end of the year, the rate of credit-card write-offs was 6.3 percent; more recent data was not available."
"Experts predict that the rate of credit-card losses could eventually surpass the jobless rate because of the compounding effects of the housing crisis and lackluster consumer confidence. Shortly after the technology bubble burst in 2001, credit card loss rates peaked at 7.9 percent."
""We will blow right through it," said Inderpreet Batra, a consultant at Oliver Wyman, which specializes in financial services."
I know RATM,
S&P's last update on that "core earnings" page is 2002.
i'm exasperated
sm_landlord (profile) wrote on Mon, 5/11/2009 - 2:35 pm
"... we haven't seen the effects of the tax increases that are coming down the pike.
And when inflation kicks in, the Misery Index will be back with a vengeance.
Just to add a few notes to your summary...."
Exactly why I have the feeling this ain't gonna be pretty....
Calculated Risk writes:
"We are not out of the woods by a long shot."
actually we are still going in the woods, maybe we have come through but we are in another fairway, still have enough elevation to make it across that fairway and into second farther woods, eventually , depending on the hole being played, we may or may not be OB....... no free drops , not that it would do any good, best thing that could happen is declare the ball lost and go back to the tee and pray that your caddy gets it and doesnt point your ball out to you within the 15 minutes....
It's no coincidence that so many industries are in trouble simultaneously and so fast. The growth of the America's Zombieconomy should have been a wake-up call to do something different ( like change we can believe in ) but unfortunately Obamanomics is built on same obsolete set of ideals of capitalism 1.0 and crony capitalism e.g. spending $12T on the too big too fail banks.
"We are not out of the woods by a long shot."
The US imports about 13.15MM barrels of oil per day. Let's say world economic recovery does take hold, but we have debased our currency relative to the BRIC countries, and with demand pickup, oil reaches $100 a barrel in debased USD. That is 1.3B USD per day we are sending out to our good friends in Venezuela, Algeria, Angola, Nigeria, etc.
$475B annually doesn't seem like a lot of money in the days of $1.5T deficits, but it will add up eventually.
otishertz,
lol, didn't catch the dates. My eyes kinda glaze over all the S&P numbers because I know you are right about the negative numbers. S&P don't make any sense. If Chewbacca lives on Endor you must acquit.
why isn't anyone keeping a running total of earnings? particularly S&P?
are we so retarded that we can be fooled every day by the scripted press saying we beat nebulous, unattributed estimates? is it the prozac in the water?
the earnings are right there out in the open!
i remember in my investing 101 class they taught that earnings underly stock prices. that, and interest rates/inflation expectations are the largest factors influencing a stock price and thus an index price.
i also remember junior high math!
Watch this video Fed Oversight: Intentionally Absent? - The Market Ticker
of the moron that is the Fed's IG and you decide if we've hit bottom in the economy or the markets or if we are heading towards another big, fat leg down with trillions of dollars of losses shifted to the taxpayers.
sm_landlord (profile) wrote on Mon, 5/11/2009 - 2:40 pm reply Ignore user Banks' Credit Card Troubles May Be Vastly Understated
this is why (and all those auto loans) that i say Cap One has to need capital, their actual revenue compared to proposed rev cant be in line....
You can only expect a 2nd half recovery if you only look introspectively at the USA. If you notice the rest of the world, the recovery will not be in H2Y09 for the USA
CR, with an r^2 of 0.125, the correct conclusion to draw from a model built from such noisy data is that there is no relationship. (Even if there was, only a tiny fraction [i.e., 12.5%] of the change in PCE can be predicted from the change in PSR anyhow, so it hardly matters.)
The ultimate conclusion of the blog entry may or may not be correct ("I'd expect PCE growth to be sluggish for some time.") -- though I happen to agree with it. However, you should not cite the PSR data modeling results as support for it.
The Romans had those troop problems too. Exascerbated by said troops sending lots of low paid workers home to Rome--aka slaves. One solution was to settle 'em on small farms, some of which were confiscated territory. I think I read that many of the farms failed since soldiers aren't farmers, normally.
I think you signed up for 20 years, unless you could weasel out somehow.
Wait a minute ...
Microsoft to issue bonds to buy back its own stock. How exactly does that work? Anyone?
Microsoft raising $3.75 billion in first bond sale - MarketWatch
otishertz: My guess:
We are all B&B Dopes?
So much executive net worth is tied up in common stock its a no brainier for them
What is wrong with paying dividends?
Aren't they at least partially tax deductible. Wouldn't widows 'n' orphans in low tax brackets want them?
"Watch this video..."
It definitely is a "must see".
I will repeat what I have been saying, Bernanke is the most dangerous person in America today. He is "The Great Enabler", printing money to allow our broken govt to avoid making hard decisions.
It has been 21 months since the private label secondary mortgage market froze up, and 9 months since Fannie and Freddie were taken down, and Congress has not lifted a finger to even start talking about the future of housing finance in this country. To his credit, at least Barney Frank has brought up some ideas (like requiring originators to keep 5% of the credit risk in all mortgages they originate), but of course has been struck down by the banksters.
Meanwhile, Bernanke allows the whole charade to continue by creating a market (basically the only market - even Bill Gross has started selling) of agency MBS.
If we had some real pain in the MBS market, that drove up mortgage rates to where they would be without Fed interference, in the 6 - 7% range, we would at least get some debate as to what changes we need to make.
Instead we get currency debasement and money pumped into the system that will never be extracted. And all the mortgage bankers are fat and happy with their sub-5% mortgage rates, even COMPLAINING that they should be lower.
We are living in la la land, and it ain't gonna last.
The US has troops in 136 Countries. How can this be and how long can it be sustainable in the condition the US is in now.
RATM - 11:13 am
brilliant video thanks for the link - it should be mandatory for every taxpayer to watch
Here is the video Rick Santelli metioned
do you buy PE of POSITIVE 15 for SP500 with NEGATIVE (23.25) earnings for the fourth quarter?
COME ON!
The hedgies have to buy something. It's getting too dangerous to short and you can't just sit in all that cash.
It's the nature of the markets we have - they're not driven by economics; they're driven by liquidity. And there's no political desire to allow markets to accurately represent reality because that might upset people.
It's an interesting time when even people like Faber and Grantham are talking about the S&P heading well north of 1000 and people are talking about waiting for a correction to get on board the express elevator to stock market nirvana.
Of course psychologically you would expect the real low in stocks to come as a surprise to even the "smart guys". And that a real rip-roaring bear market rally would manifest as a buying panic to get back onto the recovery train - that a necessary condition would almost be that nobody is expecting new lows.
Who knows, but with a fiat currency if the government wants markets to rise, markets will rise. The question is do they finally get to the point of fearing long-term consequences more than short-term consequences (whether or not those fears are justified).
Usually that kind of long-term worry is born of calamities of the kind we haven't experienced in recent years.
ShadowInventory:
saw yr ubuntu reference on the last thread
you should try crunchbang, its a custom ubuntu-based distro that is about 450% faster than what you are running now
its so good that i just sold my $4500 mac on ebay last weekend and replaced it with a $100 dell box running crunchbang...its that good
they also offer a live cd so you can give it a test drive without actually installing
CrunchBang Linux - A nimble Openbox Linux distro
my GOD!
if people can't handle basic math on the premier finance blog then fuck all what the hell am i doing here?
B&B Dopes, never wanted to say it but...
FUCKING LOOK
"China cancels America's credit card"
Ha ha -- next headline will read: America makes minimum payment on Chinese Credit Card, threatens default if credit limit not raised.
Samdog (profile) wrote on Mon, 5/11/2009 - 11:52 am reply Ignore user
Wait a minute ...
Microsoft to issue bonds to buy back its own stock. How exactly does that work? Anyone?
Microsoft execs can't get their price for their stock so they get their price for whole cloth bonds and then get their price for their stock. It is all about getting the stock price up no matter the cost. MSFT could invest some $10-$15b in itself but they are not that stupid. they see the end to several of their cash cows and ever thinner margins.
You and Nassim Taleb should corner BB and taunt him with pitchforks and pikes.
DCRogers
Savings is related to expected net worth and expected expenditures. Inflation in the 70s transferred cash/bonds into equities or houses. Savings were only so low recently because housing/stocks were so booming. Obviously when you are currently underwater, the push to save is high (and debt forgiveness which counts as income/savings doesn't hurt one bit). CR is right, but for more involved reasons than choosing between savings or expenditure baskets (which implicitly assumes taxation/transfers unchanged)-- obviously credit and unrealized capital gains play an important role.
km4 at 1129
great link...very sobering (yes ive been drinking in the morning
Microsoft to issue bonds to buy back its own stock.
That would be a cool thing to do if you were expecting a lot of inflation.
Importantly CR noted that savings were actually negative during the Great Depression
as unemployed people had to use their savings ...
We aren't there yet , but we'll get there ...
Disposable income will fall and fall ...
Not only will savings fall but so will consumer purchases ...
down with bloomberg!
down with cnbc!
down with WSJ!
down with yahoo!
down with google!
down with standard & poorly!
down with all these fucking liars!
they spit in your face and you say
"thank you sir, may i have another"
YouTube - Kevin Bacon - Fraternity Paddle
The 2008 great white hope (dope) of the republican party, Joe the plumber, was only partially right.
Yes Obama is a wealth redistributor. Only Obama's redistribution scheme involves redistributing wealth from J6P to the banks.
Are the off-balance sheet transactions tallied into the total of the FEDs lending programs???
Otis, Otis, Otis.
Calm down. You are right. They are wrong. They'll get theirs.
You want to be alive to see it, not dead with a heart attack.
The Hubble mission shuttle got off just fine. My mom & I watched.
Goodness, otishertz, we have looked, we have seen, and we agree with you ... negative earnings (historically rare, to put it kindly) do not lend themselves to positive p/e ratios. I am sorry you thought I was ignoring you. I am just in complete agreement: I, too, do not expect the forecasted results to line up well with current trends.
The data would seem to indicate a looming correction; alas, timing, as always, is everything.
Supposedly, the S&P, like the banks, will earn its way out of the quicksand, but objects in mirror may be closer than they appear.
"You and Nassim Taleb should corner BB and taunt him with pitchforks and pikes. "
I have a feeling that in a couple years it won't just be me and Nassim cornering him. That guy is going to have a lot of heat on him when J6P is looking at $5 a gallon gas and $10 a gallon milk.
Samdog (profile) wrote on Mon, 5/11/2009 - 11:52 am
Wait a minute ...
Microsoft to issue bonds to buy back its own stock. How exactly does that work? Anyone?
Rob Dawg (homepage, profile) wrote on Mon, 5/11/2009 - 2:58 pm
Microsoft execs can't get their price for their stock so they get their price for whole cloth bonds and then get their price for their stock. It is all about getting the stock price up no matter the cost. MSFT could invest some $10-$15b in itself but they are not that stupid. they see the end to several of their cash cows and ever thinner margins.
Interesting point about not getting "their price," It just seems so circular and so unproductive -- and, dare I say "transparent."
I guess they've been seeing storm clouds on their 'Vista" for some time (heh, heh) ....
EHP -- interesting analysis -- but my narrower point was statistical. There may be a relationship in fact, but the data modeling didn't demonstrate it, and so should not be used as evidence.
"They'll get theirs."
Unfortunately "they" is J6P and his 401(k)
Riddle: What start with a "F" ends with a "k" and is meant to screw workers? 401(k)
Are you competing with Arbit, Tim?
MaryAnn at 1155
yes many foreign US military bases
AND
counting black ops spending and off budget wars
USA spend more on "defense" than nearly all other countires in the world combined, including our allies
How funny...
At the very moment the banks are showing just how insolvent they all are, rank and file sheeple start giving them money to watch over.
Nope. Where is he anyways?
Look--he was just above you all the time!
Rob Dawg writes;
"Microsoft execs can't get their price for their stock..."
Even the cubicle drones have this problem, but it's much worse for the execs. If they don't get some more money into the pockets of their employees, they will be suffering an even worse brain drain. Why do you think they need to hire H1Bs? Could it be because the employee options are under water, and the stock hasn't shown any signs of life (other than the spring bounce) for way too long now?
MSFT is paying a dividend of over 2.6%, but that doesn't help the option holders.
Aaarhhhh
So when Microsoft has 25 bil in cash, where is it?
It would take a great many Sealeys to fit this much.
In a bank? Which bank I'd like to know?
Well, Microsoft could give their employees--what was that called??--ah, a raise!!
Robdog 1158
samdog 1152
microsoft is swallowing a poison pill and benefitting execs etc who want to liquidate equity for cash soon
stock price goes up
debt goes up
acqusition becaomes more expensive
stockholders can liquidate some equity for profit
lawyerliz writes;
"Well, Microsoft could give their employees--what was that called??--ah, a raise!!"
AHAHAHAHAHaHaHaHahahahaha!
Um, no. Not that company. Maybe they'll bring back the towels and the Starbuck's carts, but raises are out of the question. They have a vast HR machine working to keep salaries down.
there were just a few unstated assumptions
* taxation. increased taxation would cause lower PCE + lower savings
* credit. increased borrowing would cause higher PCE + higher savings
• expectations would also cause variation
the reason why increased borrowing boosts savings is that for the borrower, they are neutral, but their spending will multiply through the economy. problem right now is debt servicing became more expensive than the multiplicative GDP boost . Lowering credit rates to zero cannot arrest the decline because it was never sustainable to begin with, and it is not within possibility to sustain the required offsetting spending indefinitely
Nevertheless I do agree that the loose model is not to be trusted, even if it happens to support the correct conclusion at this time. We would not use a clock with such accuracy to tell the time.
edit: I'm still in favour of posting the chart. It's up front, we can draw our own conclusions, reader beware
Gresham's Law is pretty basic: Bad metallic money drives out good metallic money...
But money nowadays is indistinguishable as far as casting dispersion one way or another.
The manna from heaven the Fed has created gets mixed in with everything else, whose the wiser?
EHP -- Agreement on posting (and publishing) negative results -- as a scientist, it's often hardest to find out information about things that don't work! (And as a Bayesian modeler, without the negative data, you've got nothing!)
Robert J. Samuelson - The Great Tax Dodge Demystified - washingtonpost.com
Article looks at Obama's plan to close multinational tax loopholes, gain $210bn over a decade. It's certainly not kind to him in tone, but it is fair when it comes to facts
I get a chuckle everytime someone reports that a store/restaraunt was busy (or even better yet - the parking lot was full) as a sign that things aren't so bad.
Even assuming you are not guaging traffic at that establishment's peak hours you have no idea what is in the till. And let me tell you people are being thrifty. The traffic might still be there but there is a lot of substitution going on (water w/lemon as opposed to a beer) which unfortunately cuts into margins.
My retail business relies on discretionary income and I can tell you the shopper is holding on to their money.
Last week I had two conversations with customers that sums it up. Got to talking to a gentleman on the markets and he mentionned his ira - 'yeah, I was down 30% now only 20%'. Another works for Continental Teves which makes brakes for auto makers (mentionned that Chrysler stiffed them for $47million). All employees have taken a 5% paycut and they are having rolling unpaid furloughs (a week at a time). She was needless to say looking for something on a budget.
Wake me when Saks and Neiman Marcus report an uptick.
Calling Malpass's "analysis " bad is being polite. It made soome wild assumptions such as (1) stock values never fall and (2) house prices not only never fall but they always go up. Not surprising his assessment was lousy - he was with Bear Sterns when he did it.
Stock and houses only represent the idea of money. They are not money. They are only real money when you sell them and have the cash in your hot little hand. All the rest about what they are worth or what they have gained in value is an illusion and not real.
Would making mortgage payments counted as PCE?
I think the savings rate is more dependent on the mentality of the people, and that partly depends on the economy and the housing markets. Main factor would be the basic structure of the government/society. Since the western countries have all those socialist programs in place (unions, unemployment insurance, public health.. sort of), people will tend to be more confident and spend more.
At least I don't think the savings rate would shoot up to 25% (1940s), because back then there is not that many social policies in placed to help the poor (correct me if I were wrong).
Take a name asswipe................Awesome video thx for the link! Did anyone see the people in the background behind the Inspector General panic while she was trying to answer the questions? It looked like they were having an O-sh!t moment! Lol!!!!
Savings rate??? What savings rate?
There's no stinkin' savings rate! Consumer liabilities (mortgages, credit cards, car loans, etc.) are going down NOT because we're paying them down as much as they are being discharged in BANKRUPTCY COURT! Good lord, check the charts! There's enough disinformation already coming out of the Obama/Geithner/Bernanke Green Shoot Club.
What income we have is going into grocery & drug stores, and Walmart. Consumer debt, along with our net worth, is grinding down in a very ugly and convulsive manner as the world de-leverages from the housing bubble. Only after we de-leverage to the point our personal burn rates are cash neutral will we actually see a substantive increase in savings rate.
And save we will. The bulk of boomer retirement accounts have been unceremoniously blown away as the market and paper equity in our homes have evaporated. Job growth will stagnate for YEARS as boomers stick around the job market a LOT longer to painfully rebuild meager retirement funds. Economic growth will become an oxymoron for the next decade.
Good luck, college grads. Better check if the illegals doing your mom & dad's lawns are hiring. It might be a wise career move, if you know what I mean.
Isn't the savings rate actually a "plug" number? Something like the caculated difference between income and expenditures as opposed to an item that is individually calculated or tracked? While the savings rate will rise and PCE will decline I suggest the demographics involved have as much or more to do with that shift than the depressed economy. However, that depressed economy will exacerbate the shift. See my post at:
Fertility Based Ponzi Scheme « RedSt8r
CR, your argument posted above about ageing populations tending to have higher savings rates is wrong.
Overall as the proportion of retirees grows relative to workers, the dis-saving of the retirees outweights the saving of the younger cohorts resulting in an overall savings decline. This is a well documented process based on much evidence from japan.
It makes sense when you think about it.
CR - very nice. Glad somebody's poking at this. Not only aren't most businesses reacting well or preparing to for short-term responses these longer term structural changes are beyond their event horizons and will be IMHO until the black hole swallows many - along with our jobs, investments, etc.
My take on the economic landscape with some attention to consumer debt, savings and the outlook is here:
http://llinlithgow.com/bizzX/2009/05/whats_it_all_mean_economic_lan.html
The backup data that looks at all the major data series is here:
http://llinlithgow.com/bizzX/2009/05/whats_it_all_mean_economic_lan.html
When you look at it YoY Q4 GDP went down -.9% but -2.6% in Q1. Of the major indicators only PCE went up on a quarterly basis but (discussed in the post) monthly went down on a YoY basis.
Not only is the 2nd derivative still not turning positive it may in fact be increasing. The jury's out but still...
"Running on Empty" is such perfectly bad analysis. I've appropriately filed a copy on my local machine under "False Prophets". It's great how at the very end he says people actually should be saving, this way, a couple years from now he can say, "Before the downturn, I called for an increase in personal savings in my article 'Running on Empty'!"
What a pleasure though, to see the timing and where the author worked. What an idiot.
As mentioned by others above, value is fleeting, profits are realized when assets are actually sold.
Someone posted about the negative savings rate in the Great Depression with the idea we would see that now as well. I'm thankful CR went all the back to 1929, so I could see that information. I had assumed from media reports the negative savings rate was a contributor to the GD. However, looking at the timing, it appears the negative savings rate occurred after the stock market crash as CR points out people lived off of savings.
I suggest the negative savings rate we saw back in 2005 (however brief it was) was as low as the savings rate will go. Why? Because you have to have savings to live off them and clearly America as a whole has not been saving for awhile now. No, the only direction for the savings rate is up, and as others have mentioned, not by choice. Still, I would rather learn than be right, so if you see it otherwise, please enlighten me.
I'm thankful for the Calculated Risk blog teaching me that statistics can be interpreted by the media (and others) in a variety of ways which are both wrong and harmful. I await the media reporting how "good" it is that Americans are saving more.
The 25% savings rate in the 1940s was partly a combination of rationing (very little to buy, so low spending) and women in the workforce in large numbers while husbands worked or were stationed overseas (so more 2-income families).