Posted on 08/10/2009 9:26:00 AM PDT by SeekAndFind
Despite grim predictions, most major U.S. companies have reported positive earnings for the second quarter of 2009. Given how wrong past predictions have been, the fact that earnings have blown away expectations shouldn’t be so surprising. Still, the numbers are genuinely impressive: More than 73% of the companies that have reported so far have beaten earnings estimates—and stocks have rightly rallied.
Yes, profits are down sharply from a year ago, but this is in the context of an overall global economy that is shrinking. If a company made $30 million on $100 million in revenue a year ago, and made “only” $20 million this quarter, it’s accurate to have a headline that says its profits fell 33%. But making $20 million, or a 20% margin, in an economy that contracted is nonetheless startling, or should be.
The same Wall Street culture that failed to anticipate the tipping point in the financial system is just as prone to a herd mentality of negativity. Having overlooked the gaping fissures in the system last year, most analysts went to the other extreme in their analysis of what would happen this year. A similar process occurred in 2002 and 2003, as views whipsawed from unrealistic optimism to irrational pessimism.
This time, the slew of better earnings has also led to the conviction that the worst of the economic travails are behind us. As the stock market has soared, many have declared the recession either over or ending. These voices range from public officials at the Federal Reserve to notable pessimists such as New York University economist Nouriel Roubini. This rosy view assumes a connection between how listed companies are fairing and how the national economy will fair. That assumption is wrong.
(Excerpt) Read more at online.wsj.com ...
But the asshat in the White House said we have pulled back from the cliff!.....Could he be a liar?
All it takes is one major crisis... currency crisis... defaults... or a major war... and BOOM!! And watch the giant house of cards collapse like there is no tomorrow...
Invest with one hand on the trigger to sell...
All of those profits are due to cost cutting. The unemployment situation is what will drive the next phase of this collapse. We have a whole class of graduates that has not found employment, half of last year’s still haven’t and in the meantime experienced employees have been laid off with nowhere to go.
As long as the fear of unemployment is the albatross that hangs over the economy we will not be pulling out of this one. No different than the 70’s or 30’s.
As the author suggests: this is not good news for us, the workers and We must REMEMBER this when we hear the obamanation say that things are going well, because:
“1) First, companies have been profiting because they can cut costs . It’s not as if demand has picked up. Take Starbucks, which reported a surprising surge in profits. Little of that was due to American consumers suddenly becoming comfortable with $5 grande mocha lattes. Instead, it was because Starbucks—faced with weak demand and sluggish sales—closed stores and laid off workers. That has been a trend across industries.”
and
2) larger companies are profiting because they can focus on where the growth is around the globe. Companies such as Intel, Caterpillar, Microsoft and IBM now derive a majority of their revenues from outside the U.S. Companies are thriving in spite of economic activity in the U.S., not because of it.
waiting for the axe to fall bookmark.
Let alone the uncertainty for businesses while the Dems are busy trying to pass Cap and Tax, Health Care Deform and numerous tax increases. Especially for small businesses, there is just too much potential risk for hiring now and then getting hosed later.
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