Discussing Q3 GDP And The Markets


Jim Bianco was on CNBC yesterday discussing the latest GDP report, earnings and the markets.  To view the interview click on the image above.  To view any of our recent interviews click here. For more on Q3 GDP see the block below.
On the topic of earnings, Jim highlighted the charts below.  As we have pointed out many times, earnings are gamed and it has been completely normal for 70% of companies to beat expectations over the last several years.  That’s why we graded the earnings season a “gentleman’s C.”  Revenues, shown in the second chart below, have disappointed to a degree not seen in over a year.
Finally, the last chart shows the Guidance Index.  It is still positive, meaning more companies have offered positive guidance than negative guidance, but this measure has declined to its lowest level since April 2010.  Guidance is harder to game as corporations have to get analysts moving in the right direction.  Guidance is the weakest of the statistics shown below.

Click to enlarge charts:

Bloomberg Businessweek – Economy in U.S. Surpasses Pre-Recession Level After 15 Quarters

The value of goods and services produced in the U.S. surpassed its pre-recession level after 15 quarters, taking three times longer than the average for 10 previous recoveries since World War II. Gross domestic product expanded at a 2.5 percent annual rate in the period from July through September, the Commerce Department reported yesterday, the fastest pace in a year and up from 1.3 percent in the prior three-month period. After adjusting for inflation, GDP climbed to $13.35 trillion last quarter, topping the $13.33 trillion peak reached in the last three months of 2007.“The American economy finally has accomplished the recovery and has now entered the expansion,” said Neal Soss, chief economist with Credit Suisse in New York, who was an aide to former Federal Reserve Chairman Paul Volcker. “But the growth is clearly too slow to solve the most significant problems the economy faces: jobs and getting the public budgets under control.” Consumers reduced savings to boost purchases and companies stepped up investment in equipment and software, even as the biggest drop in incomes in two years raises concerns about whether the spending increase will continue. The number of Americans with jobs last month, 131.3 million, was lower than the 138 million workers in December 2007, when the 18-month recession began, according to Labor Department data.

The Wall Street Journal – Recession Fears Recede as Economy Grows 2.5%

The labor market has been improving slowly, and the number of Americans filing new claims for jobless benefits fell again last week by 2,000 to 402,000, the Labor Department said in a report Thursday. ut budget cuts by state and local governments signal more gloom for employment as well as economic growth. State and local governments subtracted 0.16 of a percentage point from growth last quarter. The government of Maryland’s Baltimore County is offering employees early retirement packages in a bid to trim 200 jobs. The move is designed to save at least $15 million a year out of a roughly $1.6 billion operating budget, a county spokesman said. The county’s tax revenue is declining, and it also is dealing with substantial cuts in state and federal aid. Economic uncertainty and a dreary job market have been a drag on housing, which showed little improvement last quarter, according to the GDP report.

Bianco Research, LLC

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