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Are You Ready For The First Y/Y Decline In Corporate Earnings Ex-Energy Since 2009?
Last week was a wild ride for US equities, but you wouldn't know it if all you were told was that the S&P fell 0.4%.
Another sub-50 ISM manufacturing print, a soft ADP report and the worst ISM services read in three years conspired with systematic flows to push stocks sharply lower on Tuesday and Wednesday, before expectations of a more accommodative Fed, a "Goldilocks" nonfarm payrolls report and a reversal of the same mechanical flows that contributed to the selloff, rescued markets into
SP500 at record highs when SP500 EPS growth is going negative – if this were a stock, that combination would make no sense unless rip-roaring earnings re-acceleration were expected, either next year (typical stock) or in a few years (high growth hope trade tech stock). Is SP500 EPS expected to grow 20% in 2020? Doubt it.
Low rates, buybacks, TINA and fear of trade deal are all supporting the SP500 in this weird situation.
I think the on-going earnings decline and stagnating GDP is a feature, not a bug — and oddly fits onto a mashed-up consolidated evolving theory that’s taking over my brain. Yesterday, there was a post on MMT here and of course, many blog posts about current troubles in the White House and various recession-like economic things and my obsession with the IOER-thing.
Mashed together in a blender, the resulting smoothy is to view our current economic situation as to be akin to a giant auto manufacturing entity/consortium, i.e., a massive complex global effort put forth by a massive amount of people, to produce an outcome that has positive benefits, but that effort essentially has to be realized in profitability.
Thus, the actions and policy choices of government entities and characters and their constituents are not too different from the workings and output of a corporation like Chrysler. Think about the vast armies of engineers and bureaucrats working like an engine, including a CEO with a vision and a treasurer who balances the check books — and of course the overall budget and planning for the future.
In a nutshell, the similarities in basic management structure can be thought of in terms of success and failure over time and thus compare the outcomes of various cyclical periods.
Therefore, when a company or administration has crappy policies and crappy people playing with designs, models and budget projections, the current and future value of management choices play out in economic terms which result in poor sales — causing dynamic cascading chains of events to unfold, sending the armies of engineers into accountability mode, in hopes of correcting compounding errors … and as Mr. Einstein said, you can’t fix stupid (you can’t solve a problem with the same kinda thinking that was used to create the problem).
So, the theory is, once you have really stupid people push all the wrong buttons on the super computer and feed-in too much idiotic bullshit and build really stupid cars, because some gangster family wants their kids to take part in the design and implementation of engineering – it’s highly likely that an idiot will produce really shitty thinking which results in a handful of other idiots agreeing with stupid shit — and ipso facto, like magic, we all end up looking at the results of stupidity and laughing at the emperor who walks around with his willy hanging out of his zipper ll day while he pretends to tweet shit that nobody understands, except his kids and all their sycophants.
In closing,here’s the winners in Edmunds worst cars of all time and a tribute to the parallel universe of crap cars and crap government:
1974 Ford Mustang II: Built upon the spindly bones of the Pinto, this shrunken, malformed pony is instantly appalling to Mustang lovers. Unfortunately, it was hugely popular with buyers stuck with serial fuel crises.
2001 Pontiac Aztek: It may be cliche, but it’s hard to argue with. Drive one and you quickly realize that the Aztek’s exterior design is its best feature. It’s the very worst car of all time because it’s the only car on the list to kill an 84-year-old car company. The Aztek drove the biggest and last nail into Pontiac’s plastic-clad coffin.