Comments on: About those Q2 earnings… http://www.bearishnews.com/post/1463 Fri, 12 Mar 2010 15:12:15 -0400 hourly 1 By: Refuting 2009's Supposed Economic Recovery http://www.bearishnews.com/post/1463/comment-page-1#comment-632 Refuting 2009's Supposed Economic Recovery Sat, 15 Aug 2009 00:46:52 +0000 http://www.bearishnews.com/?p=1463#comment-632 [...] Naufal Sanaullah of ShadowCapitalism.com put together this 22-page blockbuster on why “recovery” of 2009 is just smoke and mirrors. The common bull argument that indicators are less-horrible, credit/debt is flowing, and banks are earnings again just don’t cut it. The fundamentals don’t support it. Naufal, along with co-authors Tyler DeBoer and Qasim Khan, make the case well. Bearish News even gets a mention on page 2, for our post debunking Q2 2009 earnings. [...] [...] Naufal Sanaullah of ShadowCapitalism.com put together this 22-page blockbuster on why “recovery” of 2009 is just smoke and mirrors. The common bull argument that indicators are less-horrible, credit/debt is flowing, and banks are earnings again just don’t cut it. The fundamentals don’t support it. Naufal, along with co-authors Tyler DeBoer and Qasim Khan, make the case well. Bearish News even gets a mention on page 2, for our post debunking Q2 2009 earnings. [...]

]]> By: No volume on a momo day « Shadow Capitalism http://www.bearishnews.com/post/1463/comment-page-1#comment-568 No volume on a momo day « Shadow Capitalism Thu, 06 Aug 2009 08:56:46 +0000 http://www.bearishnews.com/?p=1463#comment-568 [...] and a sovereign default or two likely in the next few months, and Peter Pan-esque deluded Q1 and Q2 earnings that will eventually catch up with reality once supply enters the market(Enron anyone?) [...] [...] and a sovereign default or two likely in the next few months, and Peter Pan-esque deluded Q1 and Q2 earnings that will eventually catch up with reality once supply enters the market(Enron anyone?) [...]

]]> By: Adam Sharp http://www.bearishnews.com/post/1463/comment-page-1#comment-560 Adam Sharp Mon, 03 Aug 2009 14:02:05 +0000 http://www.bearishnews.com/?p=1463#comment-560 CFAholder - The story is not about Intel. It's about corporate earnings all over the board. Look at this spreadsheet, workbook "divisors&aggregates": www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS Q4 last year aggregate "reported earnings" were -$200b. Operating earnings were -$.78b. That's a big difference. The gap between headline and real earnings is getting wider and wider. CFAholder – The story is not about Intel. It’s about corporate earnings all over the board. Look at this spreadsheet, workbook “divisors&aggregates”:

www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

Q4 last year aggregate “reported earnings” were -$200b. Operating earnings were -$.78b. That’s a big difference. The gap between headline and real earnings is getting wider and wider.

]]> By: CFAholder http://www.bearishnews.com/post/1463/comment-page-1#comment-558 CFAholder Mon, 03 Aug 2009 08:32:07 +0000 http://www.bearishnews.com/?p=1463#comment-558 I thinks its a bit broad to use recent earnings of Intel as a proxy for 2Q earnings of major U.S. public companies. Besides, stocks don't directly move because of non-recurring charges OR gains. They move based on the baseline performance of the company, revenues, operating expenses, and other expenses - as well as a host of other factors, some of which take into account the effects of those charges. If Intel takes a huge charge, that will hurt the company yes, but not in the form of a one-time hit to earnings. It'll most likely be in the form of financing required to float the charge and spread out over time as a financing charge. I agree that shenanigans occur when certain items are classified as non-recurring that shouldn't be, but each example cited by the author has been historically considered a non-recurring charge. Non-recurring gains such as the one IPO example aren't factored into analysts' models either. Additionally, I'm not sure where to begin when the author talks about comparative valuation. First of all, neither the S&P nor the equities trade on a historical basis - they trade on a forward basis. The forecast models for those shouldn't include non-recurring items. Second, valuation is affected by one-time charges - just not as a part of earnings. They factor in through the balance sheet and cash flow - i.e. whether or not the company needs to raise cash. In fact, focusing on earnings alone seems a bit one dimensional and not indicative of how professional investors perceive securities. I thinks its a bit broad to use recent earnings of Intel as a proxy for 2Q earnings of major U.S. public companies. Besides, stocks don’t directly move because of non-recurring charges OR gains. They move based on the baseline performance of the company, revenues, operating expenses, and other expenses – as well as a host of other factors, some of which take into account the effects of those charges.
If Intel takes a huge charge, that will hurt the company yes, but not in the form of a one-time hit to earnings. It’ll most likely be in the form of financing required to float the charge and spread out over time as a financing charge. I agree that shenanigans occur when certain items are classified as non-recurring that shouldn’t be, but each example cited by the author has been historically considered a non-recurring charge. Non-recurring gains such as the one IPO example aren’t factored into analysts’ models either.
Additionally, I’m not sure where to begin when the author talks about comparative valuation. First of all, neither the S&P nor the equities trade on a historical basis – they trade on a forward basis. The forecast models for those shouldn’t include non-recurring items. Second, valuation is affected by one-time charges – just not as a part of earnings. They factor in through the balance sheet and cash flow – i.e. whether or not the company needs to raise cash. In fact, focusing on earnings alone seems a bit one dimensional and not indicative of how professional investors perceive securities.

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