Early into reporting season, earnings have been running 20% ahead of estimates. That’s good news, as far as it goes.
But really, as Karl Denninger notes, the numbers are still godawful:
Revenues were down 17% – another double-digit contraction, and this is particularly troublesome in what it says about the global economy, given GE’s global reach.
Again, we continue to see the same sort of theme in industrial and consumer products reporting – Harley Davidson (NYSE: HOG) reported units shipped down 30% year over year yesterday, and now GE out with a 17% year over year revenue decline.
Stocks are, at their core, priced on earnings growth, with the most-common ratio used for such metrics being P/E/G, or Price-to-earnings-growth.
But earnings are not growing, they’re contracting – dramatically – in percentage terms over year-ago levels. How can it be otherwise? Even with no inefficiencies due to firms having too many employees for the revenue contraction that is occurring, a 30% reduction in business done should lead to a 30% decline in profits earned.
don’t know how long we have to continue to put up numbers like this before people wake up, but wake up they eventually will. When Harley Davidson ships 30% fewer motorcycles, when GE sells 17% less “stuff” (including their financial cooking) and when company after company, including Intel, IBM and others come out with revenue numbers that are down double-digit percentages on an annualized basis, there is no possible way you can justify the multiples that these firms are selling at.
When The Port of Long Beach shows container shipments down nearly 30%, when freight carloadings are down nearly 25% year over year, when sales tax receipts are down in the double digits and when income tax collections, both personal and corporate have effectively collapsed there is simply no argument that “the recession is over” or that “trend growth is around the corner.”
The fact of the matter is that port, rail and tax receipts are not subject to being “gamed” by government number-crunchers, they do not play “seasonal adjustments” (since they’re year-over-year numbers), they do not represent wishes, dreams, or desires.
They represent real-time, high-frequency, “right now and in your face” economic performance metrics and are impossible to argue with.
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