3/21/2017 – A positive day with Dow Jones up 21 points (+0.12%) and the Nasdaq up 13 points (+0.28%)
In the past we have looked at how out of touch with reality today’s GAAP vs. non-GAAP earnings are. Case and point…..
- Carl Icahn: Earnings Are Shockingly Overinflated
- GAAP Earnings Collapse 18% As Valuations Approach “Insane Levels”
Here is the latest.
Companies haven’t fudged their numbers this much since the financial crisis
“The gap between GAAP (reported) and pro forma (adjusted) EPS continued to widen in 4Q, with the GAAP/Pro forma ratio of 0.74 still at its most extreme levels since 2009,” Bank of America Merrill Lynch’s Savita Subramanian said on Monday. “Trailing four-quarter (2015) GAAP EPS came in at $87 vs. $118 for pro forma EPS.”
And that goes to the heart of the matter. GAAP earnings are collapsing at the fastest pace since 2008 financial crisis. Meanwhile, stocks are still selling at historic “bubble” level valuations.
Once again, the market was selling at higher prices in 1929 and 2000 tops. We are now on par with 2007 top. We all know how all of that ended.
Now, an argument can be made that the US Economy and earnings are about to accelerate higher and resolve the imbalances above. Yet, I would like someone to explain to me exactly how that would happen.
Recall, most of the earning growth over the last few years, or since 2009, was liquidity driven (QE, zero interest rates, stock buybacks, etc). There very little evidence to suggest that we will miraculously recover.
For that to happen we would need to see productivity gains, new technologies, CAPEX and growing wages across corporate America. We are not seeing any of that. Again, what the FED did is it infused a dying patient (post 2008 economy) with massive amounts of “heroin and cocaine” in order to stimulate economic activity. Now that the effects of those drugs are wearing off, there is no fuel left.
What’s more, any more “stimulus” is likely to kill the patient. Invest accordingly.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. March 21st, 2016 InvestWithAlex.com
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