Monthly Archives: December 2010

Standard & Poors S&P500 Earnings Estimates For 2011 & 2012

As many are aware, Standard & Poors publishes earnings estimates for the S&P500.  My previous post concerning their estimates can be found at the September 17 and May 30 posts)

Currently, their estimates for 2011 add to the following:

-From a “bottom up” perspective, operating earnings of $94.79/share

-From a “top down” perspective, operating earnings of $88.46/share

-From a “top down” perspective, “as reported” earnings of $86.84/share

Currently, their estimates for 2012 add to the following:

-From a “bottom up” perspective, operating earnings of (N.A.)

-From a “top down” perspective, operating earnings of $93.32/share

-From a “top down” perspective, “as reported” earnings of $90.01/share

As seen in previous posts, there seems to be an overall consensus that 2011 S&P500 operating earnings will be in the $90-$95/share range.

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

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A Special Note concerning our economic situation is found here

SPX at 1259.78 as this post is written

Retail Sales Per Capita Adjusted For Inflation

On December 14, Doug Short posted to his blog a chart showing retail sales per capita, adjusted for inflation (CPI).  The data is through November, as noted on the chart:

(click on chart to enlarge image)

Of course, this view of total retail sales, on a per-capita (factoring in population growth) basis – as well as adjusted for inflation – is not one that is often seen.  I’ve posted it as I believe that this view is an important one, for many reasons.

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A Special Note concerning our economic situation is found here

SPX at 1257.54 as this post is written

CEO & CFO Surveys 4Q 2010

On December 14 the Business Roundtable’s CEO Economic Outlook Survey was released for the 4th quarter.  The December Duke/CFO Magazine Global Business Outlook Survey was also released on December 14.  Both contain a variety of statistics regarding how executives view business and economic conditions.

In the CEO survey, of particular interest is the CEO Economic Outlook Index, which increased to 101 from 86 in the 3rd quarter.  Also stated in the report, “In terms of the overall U.S. economy, member CEOs estimate real GDP will grow by 2.5 percent in 2011.”

In the CFO survey, “‘The current level of optimism has increased notably from last quarter,’ said Kate O’Sullivan, senior editor at CFO Magazine.”

Also, the survey states, “Top concerns for U.S. CFOs include weak consumer demand, the federal government’s agenda, and intense price pressure.”

The CFO survey contians the Optimism Index chart, as seen below:

It should be interesting to see how well the CEOs and CFOs predict business and economic conditions going forward.   I discussed various aspects of this, and the importance of these predictions, in the July 9 post.

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

A Special Note concerning our economic situation is found here

SPX at 1256.77 as this post is written

Updates On Economic Indicators December 2010

Here is an update on various indicators that are supposed to predict and/or depict economic activity.  These indicators have been discussed in previous blog posts:

The December Chicago Fed National Activity Index (CFNAI)(pdf) updated as of December 20, 2010:

The Consumer Metrics Institute Contraction Watch:

The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the November 24 Release :

“The November update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, stabilizing at 2.2% in December through March and 2.1% in April. Weak housing and employment combined with high debt and tight credit continue to impede growth.”

The ECRI WLI (Weekly Leading Index):

As of 12/10/10 the WLI was at 127.4 and the WLI, Gr. was at -.1%.  A chart of the growth rates of the Weekly Leading and Weekly Coincident Indexes:

The Dow Jones ESI (Economic Sentiment Indicator):

The Indicator as of November 30 was at 43.9, as seen below:

An excerpt from the November 30 News Release:

““The ESI signals that the economy is in a holding pattern,” Dow Jones Newswires “Money Talks” Columnist Alen Mattich said. “If it had risen sharply, confirming October’s strong rise, then it would have been a very positive sign. Instead we are seeing an economy still poised between modest growth and a slipping back.”

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting 12-11-08 to 12-11-10:

The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the December 17 release, the LEI was at 112.4 and the CEI was at 101.7 in November.

An excerpt from the December 17, 2010 Press Release:

“Says Ataman Ozyildirim, economist at The Conference Board: “November’s sharp increase in the LEI, the fifth consecutive gain, is an early sign that the expansion is gaining momentum and spreading.  Nearly all components rose in November.  Continuing strength in financial indicators is now joined by gains in manufacturing and consumer expectations, but housing remains weak.”

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

A Special Note concerning our economic situation is found here

SPX at 1254.60 as this post is written

“60 Minutes” On State Budget Problems

On Sunday, “60 Minutes” did a segment on state budget problems.  Both video and a transcript are available.

The segment is worth viewing, especially for those who lack familiarity with the issue.  While I don’t agree with some of its comments, it provides a good overview of the situation and some of the complexities involved.

I have written a few posts on the state budget issue.  I believe its severity lacks recognition.

A Special Note concerning our economic situation is found here

SPX at 1247.08 as this post is written

S&P500 Price Targets & Projected Earnings 2011 & 2012

Today’s Barron’s has a cover story titled “Outlook 2011.”

Among the average forecasts of the 10 respondents (strategists and investment managers) was the following:

  • A year-end 2011 S&P500 target of 1373.25
  • $92.90 S&P500 EPS for 2011
  • $100.83  S&P500 EPS for 2012 (an average from 6 respondents)
  • 3.2% GDP growth for 2011

In a separate story from Bloomberg of December 13 titled “No New Normal as Strategists Predict 11% S&P500 Gain” the average figures from 11 respondents are similar; a year-end 2011 S&P500 target of 1379 and an EPS of $92/share.

Both the Bloomberg and (especially the) Barron’s stories have a variety of economic and market commentary accompanying the forecasts.

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

A Special Note concerning our economic situation is found here

SPX at 1243.91 as this post is written

Quantitative Easing Exit Issues

During QE1 (the first round of The Federal Reserve’s Quantitative Easing) there seemed to be substantial commentary and discussion concerning the exit of such a program.

Over the last few months the discussions over the exit strategy seem to have diminished greatly – despite the start of QE2 and speculation of additional QE programs, i.e. QE3, QE4, etc.

I have discussed the various risks of Quantitative Easing in several posts.  As I stated in the August 13 post, “There are an array of risks embedded in such QE efforts.”  These risks, although very substantial, seem to (severely) lack recognition.

The (eventual) exit of Quantitative Easing is one of these risks.  This is a very complex topic of which much can be written.

While I believe it to be rather incontrovertible that The Federal Reserve does have the knowledge and tools to exit such QE programs, that is not to say that doing such will be without complications, adverse unforeseen consequences, or market disruptions.

While it is possible that the eventual exit from QE will go smoothly, I think that the possibility of adversity in doing so is high.  There is much that can go wrong in “a big way” on numerous fronts – especially if an exit is done under exigent circumstances.  As well, there are many conflicting incentives inherent in Quantitative Easing, which further complicates the “exit” issue.

One item that is particularly disconcerting is the potential for capital losses on the Fed’s growing balance sheet.  I’ve already commented about this in the November 5 post.  In a December 2 Cumberland Advisors commentary titled “Fed Exit Strategies – Technical Analysis” (pdf), there are some notable statistics on this subject in their commentary on the exit issue.

It should be very interesting to monitor this QE exit as it occurs…

A Special Note concerning our economic situation is found here

SPX at 1236.63 as this post is written

PPI & CPI Trends

On Tuesday the November PPI figures were released, and they continue their recent trend of being significantly higher than the CPI figures.

Should this trend continue, it will of course likely have a significant impact on many companies’ profitability.

I believe there are many reasons for why PPI growth is trending significantly higher than CPI.

As far as CPI is concerned, one factor that currently seems pronounced  is widespread discounting at the retail level.  This discounting has widespread future implications.  I have discussed other notable factors in the two Pricing posts of September 7 and April 23.

A Special Note concerning our economic situation is found here

SPX at 1236.63 as this post is written

The December 2010 Wall Street Journal Economic Forecast Survey

The December Wall Street Journal Economic Forecast Survey was published December 13, 2010.

I found a couple of excerpts, seen below, to be especially notable:

“The economists now see stronger expansion in the first half of 2011, with growth picking up speed as the year progresses. For the year, they expect GDP will rise 3%. Meanwhile, they have reduced the odds of a double-dip recession to 15%, the lowest average forecast of the year, from 22% in September survey.”

also:

“Also adding fuel to the recovery is the Federal Reserve’s bond-buying program, though the economists said the effect may not be large. A Boston Fed study estimates that through 2012 the bond purchases will result in 700,000 additional jobs. Forty-two of 52 respondents called that estimate too optimistic.”

I also found a variety of topics seen in the Q&A (spreadsheet tab) to be interesting.

The current average forecasts among economists polled include the following:

GDP:

full-year 2010 : 2.7%

full-year 2011 : 3.0%

Unemployment Rate:

for 12/1/2010: 9.7%

for 12/1/2011: 9.0%

10-Year Treasury Yield:

for 12/31/2010: 2.98%

for 12/31/2011: 3.71%

CPI:

for 12/1/2010: 1.2%

for 12/1/2011: 1.8%

Crude Oil  ($ per bbl):

for 12/31/2010: $86.00

for 12/31/2011: $88.26

(note: I comment upon this survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

A Special Note concerning our economic situation is found here

SPX at 1240.46 as this post is written

S&P500 Price Projections – Livingston Survey December 2010

The December 9, 2010  Livingston Survey (pdf) contains, among its various forecasts, a S&P500 forecast.  It shows the following price forecast for the dates shown:

Dec. 30, 2010   1200
June 30, 2011   1250
Dec. 30, 2011   1298.5
Dec. 31, 2012    1350

These figures represent the median value across the 33 forecasters on the survey’s panel.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

A Special Note concerning our economic situation is found here

SPX at 1240.40 as this post is written