I’ve just got home after a fast West Coast trip, and its pretty amazing what passes for good news these days. Beating dramatically lowered earnings forecasts on cost cutting and layoffs — rather than top line growth — seems to be the order of the day.
The irony is that the Wall Street analyst community overestimated earnings at the top of the cycle — pure extrapolation of trend to infinity. They seem to be doing thesame thing now, only extrapolating falling earnings to zero.
What that produces is not true upside surprises, but merely jumping over a dramatically lowered bar.
Then there is the straight out bad news:
• Microsoft Profit Drops 29% as PC Slowdown Weighs on Revenue; Shares Slump
• U.S. Stock Futures Fall on Microsoft, American Express, Amazon.com Results
• Amazon.com Profit Drops 10% as Sales Fall Short of Estimates; Shares Slide
• American Express Profit Drops as Recession Pressures Cardholder Payments
We have been lightening up into the rally, and are sitting on some cash. Regardless, I expect tomorrow will sting a little on the long positions.
In this environment, capital preservation is paramount . . .
UPDATE: July 24, 2009 5:32am
Futures say not so much sting aftert all . . .