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Financial sector earnings rose to comprise 40% of S&P earnings by 2008 ...
Govt removed its DoD war bid from the building materials market and new construction prices collapsed thus causing insolvencies in the financial sector to the point of requiring a govt bailout... (nice job Rummie!)
Bank earnings went to zero due to the markdowns in property portfolios... as govt exited the bldg materials markets ...
Thus S&P lost 40% of its earnings ... accordingly it also lost 40% of its value on the index...
Banks were re-set via the bailout and the index has been working back up from the re-set... iirc financial sector back up to the more normal approx 20% historic average of S&P earnings...
No earnings growth over the last 12 months in the S&Ps as monopoly rents have been being destroyed in the energy sector, Europe in austerity mode... thus S&P hasnt moved over last 12 months... earnings are still $1T which is basically supportive...
Howard Silverblatt at S&P is looking for a return to 12 month earnings growth at the end of Q4 as last 4Q 2014 the oil collapse was the first place it worked into earnings...
So Howard is looking at last year Q4 2014 as reported at $26.75 EPS while this year he is projecting Q4 2015 at $29.41 so the YoY starts to become easier in Q4...
I dont see anything in fiscal policy to argue against Howard's projection we are slightly UP YoY ...
so we might start to see some decent YoY S&P earnings growth again starting in current Q4 2015... but only getting back to levels slightly above previously achieved in Q4 2013...
also looks like they are going to start to raise in Dec. so probably expect reactionary sell offs in view of such rate increases...
This is a good example of the relevance of deficits wrt macro outcomes. Yes, S&P cos will get increased earnings from increased top line govt spending but they would also get increased earnings from large tax cuts holding govt spending constant.
6 comments:
Tom, any thoughts on the discussion here:
https://www.blogger.com/comment.g?blogID=1879770534244304287&postID=2994501167730292263
Financial sector earnings rose to comprise 40% of S&P earnings by 2008 ...
Govt removed its DoD war bid from the building materials market and new construction prices collapsed thus causing insolvencies in the financial sector to the point of requiring a govt bailout... (nice job Rummie!)
Bank earnings went to zero due to the markdowns in property portfolios... as govt exited the bldg materials markets ...
Thus S&P lost 40% of its earnings ... accordingly it also lost 40% of its value on the index...
Banks were re-set via the bailout and the index has been working back up from the re-set... iirc financial sector back up to the more normal approx 20% historic average of S&P earnings...
No earnings growth over the last 12 months in the S&Ps as monopoly rents have been being destroyed in the energy sector, Europe in austerity mode... thus S&P hasnt moved over last 12 months... earnings are still $1T which is basically supportive...
Howard Silverblatt at S&P is looking for a return to 12 month earnings growth at the end of Q4 as last 4Q 2014 the oil collapse was the first place it worked into earnings...
So Howard is looking at last year Q4 2014 as reported at $26.75 EPS while this year he is projecting Q4 2015 at $29.41 so the YoY starts to become easier in Q4...
https://us.spindices.com/documents/additional-material/sp-500-eps-est.xlsx?force_download=true
I dont see anything in fiscal policy to argue against Howard's projection we are slightly UP YoY ...
so we might start to see some decent YoY S&P earnings growth again starting in current Q4 2015... but only getting back to levels slightly above previously achieved in Q4 2013...
also looks like they are going to start to raise in Dec. so probably expect reactionary sell offs in view of such rate increases...
This is a good example of the relevance of deficits wrt macro outcomes. Yes, S&P cos will get increased earnings from increased top line govt spending but they would also get increased earnings from large tax cuts holding govt spending constant.
Auburn if it is bottom up imo....
As opposed to 'trickle down'...
Iow top down has a shitty multiplier....
Matt-
No doubt.
which is why "taxing the rich" to pay for increased social spending isnt anti-inflationary.
The rolex market doesnt drive CPI
The yacht market doesnt drive CPI
The ferrarri market doesnt drive CPI
Rich people cant buy enough consumer goods to drive up CPI just like they cant buy enough consumer goods to employ everybody.
tax cuts for the rich = shitty mulitplier
tax increases on the rich = shitty inflation deflator
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