Profits And Prophecies

With 90% of market cap reporting, earnings season in the US is over for all intents and purposes. Profits fell just 3% YoY against expectations for a 7% decline, leaving investors to ponder a familiar question: Is "better-than-expected" an accurate description when the hurdle was so low? "Q1 reporting season does little [to] alter our view that growth is slowing," JPMorgan analysts led by Marko Kolanovic wrote. "The large EPS positive surprise... comes after bottom-up analysts had lowered the

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2 thoughts on “Profits And Prophecies

  1. Still not sure how to think about any contraction of profit margins in the light of the greedflation discourse we’re having. Is it a matter of sectors? Of comps? I mean, margins are still historically high but any kind of contraction ought to suggest the worse of the greedflation is behind us?

  2. it is very hard to play the expectations game for a profit. We can say companies beat the lowered expectations, but you should remember that the thinking was that the lowered expectations were still too high. The beating the lowered expectations was therefore much better than it appeared going into earnings season.

    on the “greedflation” discussion: I have to admit I am a complete loss to explain it. It seems like companies are just as at a loss to explain it as anyone else. I had noticed even before the pandemic that prices for certain higher end items such as sports cars and luxury watches and handbags had gone completely haywire. People were willing to pay outrageous prices for items that are not considered collector items.

    Even with the widespread inflation on all items during and after the pandemic, that people are willing to continue to pay high prices on items they didn’t need right away or had ready substitutes just does not make sense to me. Why were so many people willing to pay 30k over sticker price for a F150? there is no rational explanation for this. Why do people pay 75% more for coke, Pepsi and Doritos when there are substitutes that are just as good where the price only increased 25% and are now priced at only 50-75% of the national brands? these companies of course will raise prices as much as they think they can get away with without damaging their brands. The billions they spend on advertising and building brands does seem to have some effect. Why is Las Vegas experiencing record visitors where the hotel prices have gone up over 100% since before pandemic? I occasionally watch YouTube streams from the Las Vegas strip just to see what is going on. The one thing that strikes me is how “normal” the people look. They look like an average group of people. but somehow they are able to pay on average 250/night during the week and 450/night on weekend in addition to all the other expenses.

    Even seems like insane housing prices are coming back. read an article last week about a house in a new Jersey suburb of NYC that was listed at like 450 and received 120 bids and sold for 50% above asking price. (I might be wrong about the asking price, but not about the bids or the final percentage). someday, some one may provide an expanation for all this very strange behavior by the consumer.

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