S&P Q4 Earnings Collapsed

From the Big Picture: S&P500 Q4 Earnings Collapse

Because of the "kitchen sink" earnings writeoffs being reported currently, trailing four-quarter earnings per share are down some 67% from their $84.92 high in 2Q'07 down to $27.69 in 4Q'08 as estimated from 85% of the S&P 500 companies who have reported through 2/12/09.

S&P further estimates that the current $27.69 will drop to $14.15 in 3Q'09, which will be a 83% collapse from their high nine quarters earlier.

With the S&P 500 index at 827, the stock market's current P/E ratio is currently 30 and an incredible 58 based on earnings three quarters from now.

Weekend Picture Post

Fair Value for S&P = 440

From Big Picture: Fair Value for S&P = 440

From WSJ about earnings collapse.

The flip side of earnings is valuation — and that is the main problem here:

There are hints lately that the economy’s collapse isn’t quite as precipitous as it once was, which suggests the worst may be over for corporate profits, too. That doesn’t mean they are anywhere close to normal.

Since World War II, earnings have grown at about 6% a year, slightly trailing economic growth. But earnings have fallen well off trend during the current recession.

“As-reported” earnings per share — which, unlike “operating” EPS, conform to accounting standards — of companies in the S&P 500 are on pace to total just $28.75 for the past four quarters, according to Standard & Poor’s. That is roughly 61% below where they would be had they maintained a 6% growth rate in recent years, estimates Vitaliy Katsenelson, head of research at Investment Management Associates in Denver.

Slap a 15 multiple on that, and you end up with a very ugly S&P500 number . . .

New Office Policy - Fun!

EFFECTIVE AUGUST 1, 2008

NEW OFFICE POLICY

Dress Code:
1) You are advised to come to work dressed according to your salary.

2) If we see you wearing Prada shoes and carrying a Gucci bag, we will assume you are doing well financially and therefore do not need a raise.

3) If you dress poorly, you need to learn to manage your money better, so that you may buy nicer clothes, and therefore you do not need a raise.

4) If you dress just right, you are right where you need to be and therefore you do not need a raise.

Sick Days:
We will no longer accept a doctor's statement as proof of sickness. If you are able to go to the doctor, you are able to come to work.

Personal Days:
Each employee will receive 104 personal days a year. They are called Saturdays & Sundays.

Bereavement Leave:
This is no excuse for missing work. There is nothing you can do for dead friends,
relatives or co-workers. Every effort should be made to have non-employees attend the funeral arrangements in your place. In rare cases where employee involvement is necessary, the funeral should be scheduled in the late afternoon. We will be glad to allow you to work through your lunch hour and subsequently leave one hour early.

Bathroom Breaks:
Entirely too much time is being spent in the toilet. There is now a strict three-minute time limit in the stalls. At the end of three minutes, an alarm will
sound, the toilet paper roll will retract, the stall door will open, and a picture will be taken. After your second offense, your picture will be posted on the
company bulletin board under the 'Chronic Offenders' category. Anyone caught smiling in the picture will be sectioned under the company's mental health policy.

Lunch Break:

* Skinny people get 30 minutes for lunch, as they need to eat more, so that they can look healthy.

* Normal size people get 15 minutes for lunch to get a balanced meal to maintain their average figure.

* Chubby people get 5 minutes for lunch, because that's all the time needed to drink a Slim-Fast.

Thank you for your loyalty to our company. We are here to provide a positive employment experience. Therefore, all questions, comments, concerns, complaints, frustrations, irritations, aggravations, insinuations,
allegations, accusations, contemplations, consternation and input should be directed elsewhere.

The Management
Pass this on to all who are employed!

Stimulus Package Explained (Q&A) - Big Picture

From Big Picture: Stimulus Package Explained (Q&A)

Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China ?
A. Shut up.

Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Queda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.

And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US.

Weekend Picture Post

Worst 10-Year Market

From NYTime:

Readings for the Day

From Mish: Wells Fargo's Balance Sheet: Scaring the Horses
From Mish: Case Shiller and CAR Analysis January 2009 Release

Worst January Ever

As goes January so goes the year. Or so they say.

It was the worst January ever for the Dow industrial and S&P 500, according to Stock Trader's Almanac data.

The Dow lost 8.8% and the S&P 500 lost 8.6% in the month.

The Nasdaq's loss of 6.4% was eclipsed by last January's loss of 9.9%. That 2008 loss was the worst in the tech average's history, going back to its inception in 1971.

Great January Economic Summary

From Calculated Risk: January Economic Summary in Graphs
1. New Home Sales in December
2. Housing Starts in December
3. Construction Spending in November
4. Strip Mall Vacancy Rate
5. December Employment Report
6. December Retail Sales
7. LA Port Traffic in December
8. December Capacity Utilization
9.Vehicle Sales
10. NAHB Builder Confidence in January
11. Architecture Billings Index for December
12. Vehicle Miles Driven in November
13. Existing Home Sales in December
14. Existing Home Inventory
15. Case Shiller House Prices for November
16. California Notices of Default
17. ATA Truck Tonnage Index
18. Unemployment Claims
19. Restaurant Performance Index for December
20. New Home Sales

Weekend Picture Post

Existing Home Sales Increase in December

From Calculated Risk: Existing Home Sales Increase in December
From Calculated Risk: Existing Home Sales (NSA)
From Calculated Risk: Annual Existing Home Sales
From Big Picture: Existing Home Sales Fell 13.1% for 2008

Readings for the Day

From Big Picture: Worst Dow Drop Since Election Meant Rally in '33
From Big Picture: Fed Balance Sheet Decaying
From Big Picture: 2008 U.S. Foreclosure Heat Map
From Big Picture: Paul Volcker / Group of 30 Report on Reform

Should We Nationalize Our Banks Now?

From Big Picture: Nationalize Now!

Leading Economic Indicator Up

From Big Picture: Fed Activity Boosts Leading Economic Indicators:

Leading economic indicators (LEI) index rose 0.3% month over month in December. However:

Stock Prices, Jobless Claims, Pace of Deliveries, Average Work Week, and Building Permits were all negative. Consumer Goods Orders, Non-defense Cap Goods Orders, and Consumer Expectations were all essentially flat.

Coincident-to-lagging index fell; The coincident to lagging index, which tends to have a stronger correlation with GDP growth, conversely fell 0.1% over the month to stand 4.7% lower year-over year.

The surge in real money supply growth added a full percentage point to the headline number. From September till today, this has added between 0.4ppts and 1.0ppts to each month’s gain. The artificial boost to the LEIs has not translated into increased lending from the banks.

How bad are tech earnings?

From the Big Picture: How Bad Are Tech Earnings?

1. PC DEMAND IS SUFFERING big time. Microsoft and Intel are both cutting jobs; Advanced Micro Devices (AMD) posted a 33% drop in profits; Disk-drive maker Seagate ’s (STX) revenues were down 34%; Logitech (LOGI), reported a March-quarter miss.

2. MOBILE-PHONE SALES are in trouble. Nokia (NOK) reported a 19.5% Q4 revenue decline; Warnings were already out from Motorola (MOT) and Sony Ericsson;

3. CONSUMER-ELECTRONICS demand is non-existent. Sony (SNE) expects a loss for its March 2009 fiscal year. GPS device maker TomTom (TOM2.AE) issued an earnings warning; and Foxconn International (2038.HK)

4. THE CHIP BUSINESS CONTINUES to erode. Taiwan Semiconductor (TSM) reported a 31% Q4 earnings decline. MEMC Electronic Materials(WFR) sees March-quarter revenues down 50%; Marvell (MRVL) sharply reduced its Q4 guidance.

5. EVEN THE GOOD EARNINGS REPORTS aren’t so good. IBM’s Q4 revenues actually missed by more than $1 billion, dropping 6%, and their full-year profits reflect cost cutting, not top-line growth. Apple (AAPL) exceeded both top line and perofit expectations, but iPhone sales disappointed, falling 36% from Q3; desktop Mac sales were weak, and Apple same-store sales were down from last year. Google (GOOG) beat estimates, but concerns as the ad market continues to soften.

Layoff Today

1. Texas Instrument: 12% = 3,400 jobs
2. IBM: 2,800 jobs
3. Caterpillar: 20,000
4. Sprint: 8,000
5. Pfizer: 19,000 = 10%, does not include merge with Wyeth
6. Home Depot: 7,000
7. Phillips: 6,000

Bloomberg reports 74,000 job cuts today alone. Before today, at least 15 companies announced they planned to eliminate 93,000 positions so far in January.

Banking Fears

From Calculated Risk: MPs Urge Nationalize of RBS
From Calculated Risk: State Street and Regions Financial
From Calculated Risk: Roubini: U.S. Credit Losses May Reach 3.6 Trillions
From Calculated Risk: Bank of England to Start Buying Assets, Germany Bails Out Hypo - Again
From Calculated Risk: Big Bank Cliff Diving
From Calculated Risk: Bad CRE Loans Threaten Regional Banks
From Calculated Risk: More on New UK Bank Bailout
From Calculated Risk: The Next Step for the U.S. Bank Bailout
From Calculated Risk: Assistance to BAC
From Calculated Risk: JPM Earnings Call Notes

Housing Data Wrap Up

From Calculated Risk: Housing Starts at All-time low
From Calculated Risk: Architecture Billings Index Near Record Low
From Calculated Risk: NAHB Housing Market Index Falls to New Record Low
From Calculated Risk: National Association of Home Builders: Prices to Fall 29% in 2009
From Calculated Risk: Apartment market Weakens Further

U.S. Vehicle Miles Driven Falls Sharply

From Calculated Risk: DOT: U.S. Vehicle Miles Driven Falls Sharply

Travel on all roads and streets changed by -5.3% (-12.9 billion vehicle miles) for November 2008 as compared with November 2007. Travel for the month is estimated to be 230.4 billion vehicle miles. Cumulative Travel for 2008 changed by -3.7% (-102.1 billion vehicle miles). The Cumulative estimate for the year is 2,656.2 billion vehicle miles of travel.

So far the slowing economy is more than offsetting the sharp decline in gasoline prices last year. As the demand falls, oil price might fall more also the oil companies.

From CNBC: Take your positions: Energy Earnings