CEOs Reflect Speculators' Bullishness

Bloomberg published an interesting report about CEOs (and companies) not cutting their earning forecasts in the face of what is a complete collapse of the economic outputs and numbers in just a couple of months.

Moreover, as you can see, even the author of the report is deluding himself into the ridiculous talks of valuations being super cheap while they are actually at historically high levels. Of course, the fact that markets have been overvalued for such an extended period of time — mid 1990s to now — doesn't help to have an objective view, and flaws the perspective.

Sept. 6 (Bloomberg) — The number of chief executive officers cutting profit forecasts fell 38 percent below average last month, even as the slowing economy pushed valuations to the lowest level at the start of September since 1985. 
A total of 138 companies reduced earnings forecasts in August, compared with the average of 221 for the same month since 2000, according to data compiled by Bloomberg. At the same time, the Standard & Poor’s 500 Index slumped 5.7 percent, pushing its price-earnings ratio to 13.3, the data show. 
“The bulls would say there’s more resilience,” Jeremy Zirin, who helps oversee $774 billion as New York-based chief U.S. equity strategist at UBS Wealth Management Americas, said in a phone interview on Sept. 1. “Companies aren’t seeing what consumers are seeing. The turmoil in markets and the weakness in some of the data was more of a reflection of policy makers’ inaction or lack of decisiveness both here and in Europe, rather than a true reflection of real economic prospects, which are not great, but also not recessionary.”
My opinion is that CEOs have become cheerleaders for the stock price of their company, being highly incentivised by massive stock options to try and keep the price high. So they will never say anything that might hurt the stock price, even if it means to hide the truth (polite way to say: they will lie when needed).


Tiho said...

Haha I love it!

I just wondering, which indicators showed a complete collapse of the economic output?

Ive been going through a lot of economic data recently, to see what the chance of a recession is, so I'm struggling to see this very subjective opinion.

Can you tell me which indicators collapsed?

I looked at employment, and that's pretty much the same since 08. Very average performance, but no collapse. Jobless claims are above 400,000 but no collapse.

I looked at manufacturing and industrial production. Both are still expanding, with ISM above 50. Nothing great, but no collapse.

I looked at housing, which has been awful. Not too much progress in terms of a recovery at all, but no collapse here either.

I looked at retail sales, vehicle sales and consumer spending. Very average data, but still no collapse, apart from vehicle one month Japanese earthquake data, which has reversed.

I looked at inflation and definitely no collapse there. If there is thing true about Economic indicators in the US, it is that there is no deflation.

I looked GDP, which is phony data from BLS just like everything else they lie about. Nonetheless, while growth is very slow, there is no collapse as of today!

Now... we might have a collapse in the future, we might not. But the point is there is no collapse today. Try and keep your opinions objective, it might help you with your market views too!


pej said...

You're right Tiho, or actually, half right, if such a thing exist.

You can have a look at <a href="http://globaleconomicanalysis.blogspot.com/2011/09/global-recession-right-here-right-now.html>Mish's post</a> here to find some indicators.

In addition, note that most of these indicators are "lagging" indicators so things have had plenty of time to get worse.

They point to the trend change, and should be used as is. If you wait for the indicators to have collapsed before acting, then you're too late.

In my opinion, the question about the "chances of a recession" is not the right question. The question to ask is whether "when did we get into recession". As we are already in one in my opinion — provided you believed the BS from the US Gov and that ever left the previous one...

Tiho said...

I agree with with everything you said about leading indicators, being too late and the change in trend. That's all fair enough.

My point is, in your post, you wrote, that the economy has collapsed and that indicators have collapsed.

Objective data please? Otherwise state, my opinion is, economy could be collapsing... that way we know it's your opinion and not a fact.

pej said...

Point taken Tiho, I should be more precise in my statements.

Speaking of what, I found this yesterday and saved for you. This is a good old collapse that is "factual" and not my "opinion":
(Bloomberg) — Japan’s machinery orders fell the most in 10 months in July, as the yen’s gain to a postwar record eroded company profits and discouraged investment.
Factory orders dropped 8.2 percent in July from June

Tiho said...

Well looking back at this post, we can see that currently no economic indicators show signs of recession just yet.

Where is the collapse?

Obviously anything can happen in the future, so please do not say... oh just you wait and see - its coming. Anything can happen, even pigs can fly.

pej said...

Pigs can't fly.

The slow motion collapse is happening globally, US, Europe, China, Singapore, Australia...