Saturday, October 20, 2012

Revenues Lead The Way . . . Down

The verdicts coming in on the economy's health are not good, at least from the perspective of corporate financial results.  A string of S+P 500 revenue misses can't all be chalked up to poor execution.  UNP is having a banner time but I suspect railroads are riding the peak of a bow wave of imports, driven by retailers accumulating inventory for the Christmas season.  That will collapse when consumer spending is exhausted.

Earnings misses are next but we won't see them until corporations are done trimming expenses.  That means more layoffs are coming.  Forget about the falsified employment numbers from BLS.  The line out the door of your city's unemployment office is a better indicator.

Oh yeah, here's an unrelated tidbit.  The home price recovery is driven by the lack of supply of existing homes, and banks are still withholding foreclosures from the market.  Mortgage rates are at all-time lows and won't stay there forever.  The accelerants are lighting this fire without any kindling to sustain it, and it will be gone in a puff of smoke.

Wall Street's sell-side preppies and wealth management flim-flam salespeople love people who buy into this market.  So do realtors desperate for the commissions of five years ago.  Forget it.