In just over 24 hours, the third quarter will come to a close. Not long thereafter, Corporate America’s CEOs and CFOs will update investors on how they did – and what they expect sales and profits to look like for the rest of 2015 and 2016.
Market Roundup
Some bulls appear to be hoping the earnings news will save their bacon. But based on the figures I’m seeing, that’s just plain nuts!
Look, second-quarter profits at S&P 500 companies fell 1.6%. That was the worst performance since the end of the last recession.
The apologists will lay all the blame on energy, and it’s true you get a better reading … +5% … if you take oil and gas companies out of the mix. But even that ex-energy number was the slowest in the last few years.
What about the soon-to-be-reported Q3? Well, things look even worse there. Analysts currently forecast earnings will drop 4.5% … almost three times as much as they did in Q2. The ex-energy number is a dismal 0.5%, one-tenth the growth we saw just three months earlier.
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| Corporate America is about to add up the third-quarter results – and the outlook isn’t good. |
In the wake of the recent rash of earnings warnings, analysts are also taking their knives to the Q4 outlook. That means things aren’t getting better as we head into year-end … they’re getting worse.
So sure, markets can bounce when they get oversold. We saw just such a rally attempt earlier today. But with growth slowing worldwide, and that slump washing up on our shores, I think we could be in for one heck of a rough Q3 earnings season.
Or in other words, I’ll repeat the advice I keep giving: Buckle up!
So what do you expect to hear from Corporate America? Good news? Bad news? Something in between? Do you think analysts will have to cut numbers even more aggressively, or is profit growth going to bottom out soon? What will that mean for stocks? Let me know your current thinking over at the Money and Markets website.
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Yesterday’s market rout stemmed from ongoing turmoil in commodities and foreign stocks, and several of you shared your opinion on where things might go next in response.
Reader JRJ said: “Seems to me that the ultimate worry should be the value of all these abused fiat currencies. Central banks have been loading all their economic problems onto these 100% fiat, confidence-backed currencies. I wouldn’t be so quick to trade your real assets for cash (Dollars). I don’t think fiat currencies, backed by bankrupt governments, are the safe harbor many believe.”
Reader Chuck B. said: “Your remarks about Glencore and similar companies are rather scary. If very many of such companies actually fail, there seems no way that we could avoid a terrible crash. The things they produce and sell are the very basis for all else. Without them, recovery would seem problematical, at best.”
Reader Fred151 added: “Looks like this Bear is just getting started. The Nasdaq-100 was down approx 3% yesterday … quite a jolt if you were in tech. There could be a small bounce here for that index as there is a little shelf of support in this area going back to late 2014. But we still have no panic and the bigger charts say down, down, down so that should be the overriding trend.”
Finally, Reader Frebon said: “Central Banks out of bullets, recession looming, sovereign debt exceeding GDPs, artificial lower oil prices, massive stock buybacks, no business investment, no demand for commodities, only a matter of time until someone’s sovereign debt goes unpaid. Not a pretty picture.
“It just goes to show when economists rely on data and not common sense, this is the world they create. No wonder Ms. Yellen needed medical attention after two hours of blowing hot air. It seems the only fix is massive bankruptcies both corporate and sovereign. That would create a huge re-distribution of wealth and maybe this time, with the emphasis on creating demand not stock buybacks and mega mergers.”
Thanks for weighing in. It’s clear that many of you are worried about the same threats I am, and that you agree staying cautious is a smart move here. At some point, that will change … but I agree that point is not here yet.
Didn’t comment yet? Then don’t wait. Hop on over to the website and do so today.
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The bulls here may think they have it bad. But at least they aren’t Qatar! The Middle Eastern nation is losing boatloads of money on its investments in several troubled companies, including about $12 billion on Volkswagen (VLKPY), Glencore PLC (GLNCY), and Agricultural Bank of China. Its sovereign wealth fund is one of the largest in the world, with $250 billion in assets.
The bond market is continuing to signal trouble in the world economy, with the so-called five-year breakeven rate sinking to a six-year low. The rate is the difference between yields on nominal 5-year Treasury Notes and 5-year Treasury Inflation Protected Securities; the lower the number, the more worried the market is about recession, deflation, and risk.
Several years after our original post-9/11 intervention, U.S. forces are still being called upon periodically to help battle the Taliban in Afghanistan. Warplanes launched airstrikes overnight to help Afghan soldiers beat back Taliban fighters in the northern city of Kunduz. The fighting there has claimed at least 25 lives so far.
Russian President Vladimir Putin and President Obama butted heads at the United Nations yesterday over Syria, Ukraine, and other global hot spots. Putin is challenging the U.S.’s Syria strategy in large part to defend his long-time confidant, leader Bashar al-Assad, and because he wants to maintain a Russian military base in the country.
What do you think about the losses hitting these large pools of capital worldwide; Will that lead to more withdrawals and more downside? Should we be worried about deflation rather than inflation, or Putin’s ongoing effort to outflank Obama? Let me know over at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Hi Mike,
Re Syria: At least Putin is taking steps to hold off anarchy. So far the US has no position other than Assad must go. It is good to see another world power, neighbour and traditional ally step up to the plate to coordinate a meaningful response to ISIS.
I agree…buckle up for an interesting ride in the market.
Cheers….Gord
Yea gord,Hussian must go.Gaddifi must go,yeaJust look at the sh#t we are in
I am very happy that I heeded Weiss Research’s recommendation to have a lot of cash in my portfolio during this market craziness. I can sleep at night. Thank you.
Kraig Cummings
With velocity of money at all time low and labor participation rate at 38 year low watch out below
With safe savings earning nothing for years , many retirees are using up their savings. Now with market gyrations and advice to be in cash, our money is not growing to keep up with the cost of living. Despite talk of deflation – groceries, prescriptions, utilities, car costs, etc. continue to rise. Many retirees have been helping their adult kids and grand kids, due to
job losses, low wages, etc. This doesn’t not bode well….
The government has created the national debt to mask their printing presses and their Ponzi fiat finance scheme which is a fraud from its inauguration.
Wake up Americans, there has never been any intention to pay anybody except the Federal Reserve, to whom you now owe interest on nonexistent national digital debt.
That is why all your paper currency is called a “Promissory Note†there was never any attempt to pay back any of the debt.
A quick study of history shows fiat currency is nothing more than a confidence game played by the government against ignorant citizens, and if handled perfectly, many Americans will never know… At least not until the final stages when the funny paper money collapses.
I HAVE BEEN RECEIVING EMAILS FROM WRITERS OF THESE FINANCIAL NEWSLETTERS talking about a CASHLESS SOCIETY, that the FED is in the process of taking away our physical monies.
WHAT IS YOUR TAKE ON SUCH?
TRUE OR NOT?
And what to do?
thanks
In two words, GOLD and SILVER
Ricky, I live in Vietnam and can tell you that far too frequently when I go to my bank there have been tourists struggling to get cash because they relied on their credit cards to get them by. I have worked in many countries where I have seen this same situation and have lost my own credit card to the ATM. You need cash; which is why most dollar bills printed are shipped overseas. There presently is and will continue to be one purely electronic currency, and that is the SDR; and the SDR will become more widespread for international trade and the USD will become more limited for international trade due to mismanagement of the USD over recent years. As a Project Manager on World Bank and Asian Development Bank Projects I sometimes need each year to calculate surplus funds remaining as a result of currency fluctuations among other things. These WB and ADB loans are written in SDRs to help minimize the impact of currency fluctuations, but the construction contracts are in various currencies, sometimes within the same contract so long as the guidelines are properly followed. The main change in the future is that use of the USD may be less widespread and mor like the Euro today. My advice for what it is worth is for you to keep some USD cash hidden at home and not let anyone know about it as the US will become more like being in another country. I should guess most politicians have some starched away; so why not you? It will be a lot harder for politicians to get their hands on your hidden cash than your electronic accounts. If you ever see a SDR Banknote treat it as counterfeit. The new USD 100 bills are the way to go at times of low interest. I also like Gold, Silver and Platinum; but somebody is still messing with those markets. Gold dropped right at NY opening. Could it be the Fed? To me this is the mystery of the century.
Hey Will,
Thanks for doing my tax returns for the past 5 years. How’s things in Vietnam? I guess not many North Americans have been there, other than military? You have an excellent opinion, and I thank you for your input. I cannot find anything about that SDR currency, other than a few sprinkled letters and notes from selective authors, and those authors carry a lot of sentiment with their stories. Perhaps you can say more, about that SDR currency? Appreciated, for certain. For now, Cheers ! The best to you !
Just to show you how messed up our financial system is, when asset prices across the world can be so easily manipulated by the very government bureaucrats, banks and institutions that demand our trust…?
June 2, 2015, something very unusual happened, the price of propane actually became negative, hitting an unbelievable -0.625 cents per gallon in Edmonton, Alberta, Canada.
This insane system of price manipulation is pure insanity, as are the prices it sets.
Believe me, I never let their prices guide my decision about real hard assets. It wouldn’t bother me to very much if the price of gold went negative relative to paper fiat currency, just like propane in Alberta, Canada.
After all, I’m not trading paper currency for gold, just to trade it back for more paper currency if the ‘price’ goes up. But just for fun, let’s see, how do I go about paying for several thousand gallons of propane…?
The idea behind buying gold with promissory notes is to swap paper money for something real.
Here’s how I see it, banks can rig gold’s price all they want, however gold’s true value comes from its function as a long-term form of savings and a hedge against a broken financial systems.
And the more ridiculous the systems get, the more valuable gold becomes…!
Promises, Promises?
Funny you mention about propane being priced negatively. Is that done electronically if I may ask. Gives one faith in electronic banking and markets, doesn’t it?
Hi mike,I signed up for your safe money report a week or so ago,but I have had no response from you. That may be normal, but thought I would check. Thanks
Should have had a response in seconds. Are you sure you clicked “Enter”?
are t-bills safe?
I LIKE DOG/////AND EEV/////DTE///////IS CEF CENTRAL FUND OF CANADA STILL A GOOD GOLD SILVER BUY ? THANX FOR YOUR RECOS!!!!!!!!!!!!
I suspect that bear is just beginning to cause havoc and that safety appears to be in cash or low yielding treasuries for as, I believe, Carl Ichan said , ” I am not as concerned with what I can get on my money but with getting my money.”
There will be a time to re- enter the market with gusto and being able to do so seems to be a prudent move at this time.
Great Ichan quote…..and it is oh so apropos. Many will wish they had at least just kept their principal before this all over. He also has reportedly called for a bloodbath in the markets.
BTW….this Glencore thing could really spread. Reportedly they are having serious credit problems….sorta like Lehman. …with no credit…..companies die. Many companies in the Great Depression were in good shape…..they just could not make regular payroll because there was NO credit for even such small costs. Most companies need revolving credit for week to week…or month to month……payroll. They gotta have it or they die.
During the Great Depression, there was no shortage of people willing to work and there were still many who were willing to invest (Packard and Cadillac did not go out of business and the Empire state Building was built in record time) but governments and their agencies around the world worked at cross purposes preventing policies that would have aided recovery. Look around today; nothing has changed.
it’s a scary time in this world. financial instability in the markets brings the same to families, loss of jobs, education cuts, etc.it brings instability to the poor and middle class. So finances is a pot that stirs many troubles, so keep your pennies and nickles, they may be needed and their worth may be more that one may think Greed has unfortunately caught up to us all. If only we could go back to the days of unlocked doors and leaving keys in the car???
Mike; I believe we are in a deflationary cycle. It has been proven over and over again that during the boom period, especially when interest rates are at low levels, investors tend to borrow and over invest, especially in the capital goods part of our economy. When the yield curve flattens, people begin to start paying down debt,by selling other assets. Depending on the amount borrowed, these other assets are sold at fire sale prices. this process spreads like a contagion, which as you well know is known as bad deflation. The Fed will try to fight this by printing more money. It will not work. The market must be allowed to clear itself of its mistakes. What the government at all levels should do during this process is cut taxes and spending simultaneously, By doing this we would commence with an orderly and responsible transfer of wealth from the government who took it back to the people who have worked and sacrificed all their life to earn it! Hopefully businesses and consumers will have enough capital to pay down their debt, and hopefully avoid more layoffs and bankruptcy. .Interest rates should be raised by a quarter of a percent per quarter as taxes and spending are being cut. As you know it takes 12 to 18 months for taxes to work their way through the economy. The forward guidance should be if the economy is growing by 2.75% to 3% a quarter then interest rates should go up by a quarter of a percent per quarter. Regards, Robert Calabro.
Robert, how on earth can the U.S. government cut taxes and stop spending…?
The Republicans and Democrats only know how to spend and tax… Cutting taxes and spending less is as alien to the U.S. congress as Muslims are to Christians.
“Orderly and responsible transfer of wealth from the government to people who have worked and sacrificed for it…”
The U.S. has anything but a growing economy which is why the Fed rhetoric is nothing but empty words because as devious and ludicrous as they act, they could not sleep at night knowing that they broke the final straw that flung America under the bus of complete depression.
Robert, not to be insulting, but you should consider the possibility of a late night comedy show… So, I really hope you were trying your skill at sarcasm…
Hi Donnie
Agreed. We need a new face in 2016, a businessman who can make this country work again. Someone who can cut the guts out of the strangulating red tape and who understands how to attract business back again. We can all do it together if we want change.
Well said and true Robert….Now in retort from the Right Wing Wacho “tin hat” fringe who have never had any “skin” in the American game… :(
” It’s not the politicians that are the problem, it’s the power. Political power corrupts because it is itself corruption. It is the legalized privilege of using brute force on persons who have not harmed anyone. This is what sets government apart from all other institutions.” Richard Maybury
Good quote Jim… And so true.
despite the general tenor of any bear market. what I see is a relatively unprecedented scenario of the top 3 major equities markets Japan, Europe,
and China in sufficient turmoil and which leaves our markets the clear choice
for the Worlds Wealthy and those nations smart enough to realize that our
markets are probably the safest possible place for what wealth they have left.
and even if they have to imagine some possible (hopefully minor) losses,
they may also realize that such losses will be much smaller than investmen
in all other major exchanges… The only positive markets in Europe today
were Sweden and Finland. Kudos to the gnomes of Zurich ? !!!
lastly with keen insights into the assets and benefits of highly specialized
firms in cutting edge Biotech, who have predominant control of patents,
there are firms which (even in Biotech) can rival Apples appeal ?
just my opinion. . best wishes. Bill Griffin Gainesville GA
Well said Bill…. You’ve “Been there done that” to a degree that few on this site understand… American, is still the best place on the face of this earth….. Mary made a good choice!… :(
Sooner or later, the government is going to have to weaken the Dollar – possibly by a fairly sizeable factor. They can, of course, pay off bonds by issuing replacement bonds – assuming there is still a market for them. But such debts as Obamacare and Social Security, in the not too distant future, can only be paid for with a cheaper, and inflated Dollar. The politicians may cheapen benefits some. but they are going to have to think about the political repercussions of that. They can always blame someone or something else for inflation. It is the easiest way out. That is where material assets such as gold or silver will come into their own. Advisors tend to say hold no more than a few percent of your assets in precious metals, but if inflation really takes off, that is not likely to help much. Maybe we should rethink the percentages a little, hmmm?
Michael, you better believe you need to buckle up in this environment as we are talking severe turbulence just about ready to begin. To me, there are absolutely no surprises as to what is happening in the capital markets. In fact, more eerily, this decline and the factors surrounding it most likely will be much worse than 2008/9, something that not even your colleague Larry Edelson, is taking into account, even for the US. This is a VERY serious money and banking crisis that is finally reaching an epic point given the Trillions and Trillions and Trillions of dollars of debt and derivatives that are floating around a deflating world.
Understated Billy… We have no idea how much we will feel the pain of the previous excesses by the worlds governments and central banks that provided the wherewithal to screw us…
Deflation due to selling of assets to pay debts. Then Government driven inflation with currency printing to cover debts and commitmentss that cannot be fully paid.
Is it all possible that we could trade Obama for Putin for the last leg ofthe US presidency?……………………..I think we woild be way ahead.
Might be a darn good plan…
Why not; one tsar for another. Fair trade.
Why are we surprised that Russia is supporting the Syrian president, he always has and the Russians have a naval base there. Also, we are attacking Syria, I believe without Assad’s consent, while promising to remove Assad once we get rid of ISIL Whatever we think of President Putin’s actions he obviously is a better defender of his countries interests than our esteemed leader who is more interested in Golf, Saturday Night Live and Global Warming, while ignoring or insulting our true friends and allies.
The VW diesel software deception is literally criminal and the senior management must be treated as criminals, but my 7 year old SEAT (Not sure if the Seat brand is sold in the US, but it’s part of the VW group) with a 1.9 Tdi engine routinely matches and exceeds the mpg claims made when I bought it in 2008. I have no means of checking emissions.
On the other hand, I had a diesel SAAB (then part of GM) which could only achieve 70% of the mpg claimed for it. When I asked the dealer what was wrong, I was told that all auto companies cheat by submitting cars tuned for performance to the performance tests and tuned for economy to the economy tests.
The Federal Reserve is not part of the U.S. Federal government. It is a private company, secretly owned, registered in Puerto Rico. It prints up Federal Reserve Notepaper in direct violation of the U.S. Constitution which clearly states, Article 1, Section 8, “The Congress shall have the power to…coin money, regulate the value thereof…” Also, that purchases and sales among the states must be based on gold and silver, Section 10, “No State shall…make anything but gold and silver coin a tender in payment of debts.” Clearly, the Federal Reserve is an unAmerican activity. John F. Kennedy was assassinated because, by reestablishing the Silver Certificate he was taking a first and substantial step to send the Federal Reserve Nuts back to Puerto Rico where they belong.