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News Story Source: By David Stockman David Stockman’s Contra Co
We have been cogitating on the gross anomaly of our time: Namely, the fact that pre-tax corporate profits of $2.2 trillion (annual rate) posted for Q4 2018 were actually a tad lower than they were 7 years ago in Q1 2012, yet the S&P 500 has gained 125% during the interim.
To hear the talking heads of Wall Street tell it, of course, there is no anomaly at all because, why, corporate profits have been "gangbusters". For instance, so called "operating" profits are forecasted to rise by 23% between the end of 2018 and 2020, implying hitting the buy key is a no brainer.
But the above numbers are just another iteration of Wall Street's ex-items forward hockey stick, which is absolutely useless because it way overstates true GAAP profits; and it goes through a ritualized shrinking process so consistent that you could set your watch buy it.
As shown below, during 2014-2017 the initial two-year forward estimates ended up shrinking by 10-40% by the time actua
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