Today, I have my number two reason to consider the market in a positive frame. Coincidentally, it links up nicely with some comments a long-time reader has sent in. First, though, let’s look at reason number two …
One analysis I read recently pointed out that the almost 80% success rate for companies meeting or beating expectations in Q3 is nothing out of the norm. This success rate has been the norm for some time. Maybe so, but as I said when I first brought this up, the point is not that it is the norm; the point is that business IS normal in these days of fear and uncertainty. If things were as bad as many keep saying, how is it that business keeps making money, It can only mean consumers are spending, and that too flies in the face of current “preaching. In any case, here are some S&P 500 stats to consider if you think I am blowing hot air …
- 3.12 stocks had a positive surprise for every 1 that was negative
- Year over year earnings growth is +17.6% on healthy revenue increases
- Expected earnings per share for the S&P 500 in 2012 = $106. That’s an impressive +11.5% increase over 2011 levels.
My oh my, just reading those stats as I wrote them impressed me again. Those numbers tell a story of huge potential, potential that will be realized when the global politicians are finished mucking up the works with their inability to do what is right, as opposed to what is in their own best interest. Ultimately, as I have said, the one thing the market cares about more than any other is corporate profit. That, my friends, is the essence of stock pricing. And in these days of wildness, it is also the root of the market’s ambivalence I wrote about the other day …
Thanks for posting my comments in another article. I have to agree there is ambivalence in the market. Even with all the negativity, the direction is up. I have watched my shorting turn into longs. I still remain very cautious but the market is speaking. So, I will throw some caution to the wind and am buying some selective long investments. I still look for selective short trades. I have learned, however, to not be too ambivalent. A single mentality can come back to bite. Was it the children’s story of the three little pigs (there’s more in the EU story), where one builds his house of bricks Pray that there’s no loose bricks/members/ financial lenders/unforeseen etc., or the wolf will be back with a new ending. I’m split on allowing EU members to fail or do whatever, to keep it together. Is a country too big/important or a financial institution too big to allow them to fail Countries are businesses. That’s why Obama is consulting successful business icons. To that end, why fight nature/survival of the fittest! Weed out the weak and what’s left is better suited. Ultimately, I’d like a quick resolution, so we can all profit from an orderly market. Silly me, this has all the ear markings of a drawn out affair. Enough.
Lots of good stuff presented creatively in the comments above. The answer to the one question – “yes, apparently.” There are countries, banks, etc., too big to fail. My response overall to his commentary is ambivalent. Sometimes, I think he is right – let it all go and rebuild. Then again, how long would that take As to his trading approach … Right on the mark.
Trade in the day – Invest in your life …
