Forward Earnings Are Bound To Get Much, Much Worse

Quote from ByLoSellHi:

usual bearish article
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How come I can always tell about a thread that it was done by you?

I agree with Makloda, how can this information help me to trade today? It can not... So you might as well stop posting them. Yes, we are in a bearmarket, we got it....
 
Quote from ByLoSellHi:

Good luck to the perpetually bullish here.

Last week's 17% gain was the best U.S. markets enjoyed since 1933 - a time period frequented by outlying bear market rallies.

Some say that markets are efficient 'forward looking' mechanisms. If that's true, forward is likely to get much worse.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a53lCMziEuFg&refer=home

Job Cuts, Factory Slump Probably Worsened: U.S. Economy Preview


By Bob Willis

Nov. 30 (Bloomberg) -- The recession engulfing the U.S. economy deepened this month as employers slashed more jobs and manufacturing contracted at the fastest pace in a quarter century, economists said before reports this week.

Payrolls shrank by 320,000 workers in November, the biggest one-month drop since the 2001 terrorist attacks, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department’s Dec. 5 report. The jobless rate may have jumped to 6.8 percent, the highest level since 1993.

Employment may keep deteriorating as the credit crunch continues to bite, with Goldman Sachs Group Inc. analysts forecasting a 9 percent unemployment rate by late 2009. The worsening outlook prompted President-elect Barack Obama to craft a plan to save or create 2.5 million jobs in two years to stave off what he called a “crisis of historic proportions.”

“All signals point to a very weak labor market and further weakening,” said Dean Maki, co-head of U.S. economic research at Barclays Capital Inc. in New York. “We should expect a large stimulus program shortly after Obama takes office.”

The 11th consecutive drop in payrolls would follow a 240,000 decline in October and bring the total number of jobs eliminated so far this year to 1.5 million. Factories probably reduced staff by 80,000 workers, according to the survey median.

The jobless rate was 6.5 percent in October.

The employment report, the second issued since Obama was elected president on Nov. 4, is likely to intensify pressure on policy makers to come up with additional stimulus plans.

Cutting Forecasts

As economic data deteriorated and financial markets slid, economists at Goldman last week were among those marking down their estimates for gross domestic product. The economy will shrink at a 5 percent annual rate this quarter and decline at a 3 percent pace in the first three months of 2009, Goldman’s chief U.S. economist Jan Hatzius said in a note.

The world’s largest economy contracted at a 0.5 percent pace in the third quarter and consumer spending fell at 3.7 percent rate, the biggest tumble since 1980, the government said last week.

Obama has named an economic team that includes New York Federal Reserve Bank President Timothy Geithner as Treasury Secretary-designate and former Fed Chairman Paul Volcker as head of a new White House economic panel aimed at reviving the economy.

“My first priority and my first job is to get us on the path to economic recovery,” Obama, 47, said Nov. 25 as he announced his team.

Factory Slump

Manufacturing, which accounts for about 12 percent of the economy, shrank in November for a fourth consecutive month, a report from the Institute for Supply Management may show tomorrow. The group’s factory index probably fell to 37, the lowest level since July 1980, from 38.9 the prior month, according to economists polled. A reading of less than 50 signals a contraction.

U.S. automakers have been particularly hard hit as sales dropped to the lowest level in almost two decades. General Motors Corp., under pressure after Congress delayed action this month on aid to the industry, said it will idle plants in Michigan, Ohio, Kansas and Missouri for an extra week in January.

“We are all expecting the year 2009 to be a very low year in terms of demand, not only in the United States, but globally,” Carlos Ghosn, chief executive officer of Nissan Motor Co., said in a Nov. 19 interview on Bloomberg Television. “We may be facing a couple of difficult years, with very low demand.”

Services Decline

Service industries, which account for almost 90 percent of the economy and range from mortgage lending to retailing and restaurants, also contracted in November, economists forecast another report from the ISM will show on Dec. 3.

The group’s non-manufacturing index fell to 42 last month, the lowest reading since records began in 1997, according to the survey median.

Financial firms are at the forefront of the slump in services. Citigroup Inc., the U.S. bank with the most employees, said this month it plans to eliminate more than 50,000 jobs and cut expenses as the global economy contracts. Chief Executive Officer Vikram Pandit has already cut 23,000 positions.

Bloomberg Survey

=================================================================
Release Period Prior Median
Indicator Date Value Forecast
=================================================================
ISM Manu Index 12/1 Nov. 38.9 37.0
ISM Prices Index 12/1 Nov. 37.0 32.0
Construct Spending MOM% 12/1 Oct. -0.3% -1.0%
Productivity QOQ% 12/3 3Q 1.1% 0.9%
Labor Costs QOQ% 12/3 3Q F 3.6% 3.6%
ISM NonManu Index 12/3 Nov. 44.4 42.0
Initial Claims ,000’s 12/4 Nov. 29 529 540
Cont. Claims ,000’s 12/4 Nov. 22 3962 4025
Factory Orders MOM% 12/4 Jan. -2.5% -4.3%
Nonfarm Payrolls ,000’s 12/5 Nov. -240 -320
Unemploy Rate % 12/5 Nov. 6.5% 6.8%
Manu Payrolls ,000’s 12/5 Nov. -90 -80
=================================================================
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Not to detract from this, but I've posted about this on my blog at www.themarketchatter.blogspot.com. The point is all of that data is baked into the cake. Everyone is aware.

Guidance was lowered from 20% losses in earnings to 50%. If you lower guidance anymore you're saying every company loses money. Fat chance. The volatility is emotional more than it is fundamental. And that's why bulls can make a lot of money here.

The market is broken down this way for much of the loss:

Financials were 20% of the market, they've declined about 80% with a recent 40% retracement. There's a 16% loss. Commodities and energy stocks were 25% of the S&P 500. They've declined a little bit more than half, so say that's 10% of the loss.

So we've found 1.16*1.1=1.276-1=27.6% of the decline in the S&P. What's the rest? Stocks thrown out with the bath water. Wall Street has mistakenly gone with flow and lowered guidance for retailers. The only one that won't lose that is a huge part of the dow and S&P is WMT. That'll single handedly keep the market from going down. The baths are pretty specific to commodities and financials, IMO.
 
Too funny. You're a bright young guy (I mean that) who knows shit about markets.

For starters if your macro-economic view is correct then municipal bonds will be the single best short in America.

How do you start a thread a week ago asking for help avoiding dollar risk and then settle on a dollar denominated fixed income investment?

Makloda has it right. The key is to take an opinion-right or wrong- and make money on it. If Domesday comes do you think Salinas Ca muni bonds are a worthwhile solvency bet? I see munis as toxic.

While I have no idea if the low is in-the 70's and 1938 say yes-this too could be the "big one" though-a few other guys make the points that your young ears had better listen. Bad news is expected. There have been multitudes of times when stocks lead economic data lower and then while the economy is still tanking stocks begin pre-emptively rallying on expectation of recovery. Ala' the past 6 days.

I am short. Since Friday. Technical reasons. Sooner or later we could fail off a rally like this. Take out Fridays highs though and I'm out. Until I see an increased number of NBA/NHL teams playing in front of less than sellout crowds or until I can get a Friday night table at a restaurant without waiting an hour I'm inclined to say this is 1938 redux. World War in Pakistan/India/China awaits.....


Quote from ByLoSellHi:

makloda, I am in cash and thinking deeply about committing to muni bonds right now.

When I ask myself what asset classes are investable now, I struggle mightily. That either portends a basic common sense or a unwarranted risk-aversion.

I have never been more confident that things will get much worse long term.

I see it in every aspect of everyday life, from what I observe with my own eyes, to comments made by people who I think know best.

Whenever I am tempted to become less pessimistic by the more persuasive members of what I like to call 'the 12-24 month recession crowd,' I think about the most basic leading economic indicator of all, where most relevant data begins and ends: JOBS.

I see no stabilization in the firmly entrenched rising unemployment rate, and I don't dare become constructive on our economy until we at least quit shedding jobs.

A fundamental strengthening of our economy would necessitate job growth at least commensurate with population growth (about 160k jobs per month). We are in reverse now.

When I look to the question of whether export-dependent nations can prop up the global economy, their low levels of domestic consumption does not make me feel anymore hopeful.

A small but symbolic fact that demonstrates my perspective is when I recently read that both Toyota Motor and Hyundai Motors are laying off employees - not here, but in Japan and Korea, respectively (I have never heard of or read about Toyota laying off Japanese Auto Workers before).

A larger symbol is the talk of Chinese officials urging the need for their own domestic stimulus plans.
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China breaking hard, and IMVHO, it will be a long, dry spell for them:

" Dec. 1 (Bloomberg) -- China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing major economy.

The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e- mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction."

http://www.bloomberg.com/apps/news?pid=20601068&sid=aVRGLHihqJtM&refer=home

The million dollar question for the day is: Where will all the world's discretionary consumers have gone if the Americans don't or won't play fully up that role as they have for decades past?


(Pabst, I appreciate the compliment, registered the comments, and will respond comprehensively sooner or later - especially with respect to the shorting of treasury proposal ; it's a very good question, and deserves a thoroughly calculated response.)
 
More grist (worthy, at that) for the mill:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0XWoWq6J5k8&refer=home


So, we now have 'synchronized (and real) slowing around the globe,' with the U.S. exporting unemployment.

I sure as hell can't see how egg head, wonkish economists at central banks are going to magically create jobs, let alone stem further job losses, among the 20 most developed economies in the world.

As they say in Vietnam movies, 'I got a bad feeling this time, LT.'

platoon-john-c-mcginley.jpg

Tom-Berenger---Platoon--C10102604.jpeg
 
I expect the market to fluctuate today, so I will trade accordingly:p

As for the future, I worry for my kid's sake.

As for trading...serve it up:D
 
Riots reported in China, with factory workers who have been shut out of the plants burning police cars and anything else.

Serious issues, PEOPLES...


Russia just reported record economic contraction, in addition to China's record manufacturing contraction.

pabst - muni bond spreads are at record or near record levels compared to treasuries.
 
Quote from Pa(b)st Prime:

There's a reason why. Default risk city......
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I read that the risk of default with muni bonds is less than 1/70th of one percent -

I believe the hard numbers are something like less than 7 defaults in 42 years.

They are backed by taxpayers, after all, with many states having arrangements to back the local units in the event of default.

Anyways, given their tax exempt status and full faith and credit of taxpayers, along with a low historical risk of default, a muni bond fund with at least 82% AAA holdings may be a good thing going.
 
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