S&P 500 heads for NEGATIVE earnings for first time ever!

[refined silver]

Flippin' 'eck! Didn't see this before.

The S&P 500 is heading for its first EVER qtr of negative earnings! 400 out of the 500 S&P 500 companies experienced a loss in Q4 2008, and thats even excluding financials!

As of the close of business Thursday, Silverblatt calculates S&P earnings per share, on a reported basis, at a loss of $10.44 for the quarter. If financials were taken out of the equation, that deficit would drop to $2.35 a share.

http://www.marketwatch.com/news/sto...x?guid={A077A0AC-3404-42D2-843E-19706D565667}

Do you know what that does to the PE ratios???

Are retirement fund investors willing to trust the FED to bring back the post-1991 stock market? Will they remain fully invested in stocks because they think that fiat money and the largest deficits in American history will bring back the NASDAQ's P/E ratio in early 2000: 200 to 1?

Incredibly, if we use the TMT figure for earnings – twelve-month trailing earnings – the S&P 500 in today's range will be 183 in the second quarter and 235 in the third.

http://www.decisionpoint.com/TAC/Swenlin.html

Those earnings and PEs don't bode well for a bottom in the stock mkt even with the trillions of new dollars being created by the Fed.

 

[dhukka]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

Do you know what that does to the PE ratios???

Blows them through the roof, that's why I think Robert Shiller's method of taking a 10 year average of earnings is a better guide, even by that metric stocks are not cheap.

I wrote about this recently:

Stocks Can Still Get a Whole Lot Cheaper

 

[dhukka]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

Flippin' 'eck! Didn't see this before.

The S&P 500 is heading for its first EVER qtr of negative earnings! 400 out of the 500 S&P 500 companies experienced a loss in Q4 2008, and thats even excluding financials!



http://www.marketwatch.com/news/sto...x?guid={A077A0AC-3404-42D2-843E-19706D565667}

Do you know what that does to the PE ratios???

By the way that article is over a month old, as of March 17th with 99% of S&P500 companies having reported, 4Q08 reported earnings are now -$23.04. Even on an operating basis, (that is before writedowns and other nasty stuff) 4Q08 earnings are at -$0.11.

Charts of trailing and forecast 12 month PE's on a reported and operating basis are below:

 

[refined silver]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

By the way that article is over a month old, as of March 17th with 99% of S&P500 companies having reported, 4Q08 reported earnings are now -$23.04. Even on an operating basis, (that is before writedowns and other nasty stuff) 4Q08 earnings are at -$0.11.

Charts of trailing and forecast 12 month PE's on a reported and operating basis are below:

Added to this is the fact that many companies are allowed "mark to fantasy" rules on assets now. This is not just financials but also GE, the auto co's also that are up to their neck in dodgy OTC derivatives.

That chart on reported earnings, projected PEs, also assumes a quick recovery.

What does that chart project for the PRICE of the S&P500????

 

[doctorj]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

Is this really a worthwhile comparison. Surely accounting standards have changed enough over the years that results from today are not comparable to even 10 years ago.

I'm sure if today's accounting standards were applied to historic periods, there'd be many more periods of negative earnings.

 

[refined silver]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

I'm sure if today's accounting standards were applied to historic periods, there'd be many more periods of negative earnings.

On the contrary, I think we have laxer rules than ever before. Massive off-balance sheet SIVs and other derivatives, and accounting rules that now allow for assets not marked to market value, but able to be carried at a fantasy.

 

[dhukka]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

Added to this is the fact that many companies are allowed "mark to fantasy" rules on assets now. This is not just financials but also GE, the auto co's also that are up to their neck in dodgy OTC derivatives.

That chart on reported earnings, projected PEs, also assumes a quick recovery.

What does that chart project for the PRICE of the S&P500????

For the 12 month trailing PE of reported earnings I used Tuesday's S&P500 close of 806.25. The forecast earnings figures for 2009 and 2010 on a reported basis are:

2009 - $34.74
2010 - $41.49

PE's:

2009 - 23.2x
2010 - 19.4x

Hardly cheap, considering the average P/E over the last 70 years was 16.1x. Of course this all hinges on those earnings numbers being realised and given analysts track record the risk to those earnings is seriously to the downside.

 

[dhukka]

Re: S&P 500 heads for NEGATIVE earnings for first time ever.

For the 12 month trailing PE of reported earnings I used Tuesday's S&P500 close of 806.25. The forecast earnings figures for 2009 and 2010 on a reported basis are:

2009 - $34.74
2010 - $41.49

PE's:

2009 - 23.2x
2010 - 19.4x

Hardly cheap, considering the average P/E over the last 70 years was 16.1x. Of course this all hinges on those earnings numbers being realised and given analysts track record the risk to those earnings is seriously to the downside.

As of April 7th and using an S&P500 price of 855, the forecast earnings and PE's for 2009 and 2010 on a reported basis are:

Earnings:

2009 - $28.51
2010 - $35.31


PE's:

2009 - 30.0x
2010 - 24.2x


Even using Bob Shiller's 10 year average earnings method, multiples are just average on a historical basis out to 2010. More here

 

[sinner]

Thanks for keeping us updated dhukka.

It's an old article but worth noting in this case

http://globaleconomicanalysis.blogspot.com/2009/01/is-stock-market-cheap.html

You can see his target for earnings of $25-$35 is 300-420!