Authored by Sven Henrich via NorthmanTrader.com,
Something doesn’t add up and it smells. If you read Fool me Twice you’ve probably sensed that I’m not all that convinced by the “there won’t be a recession” line of argument.
Yea we may experience some slowing, but overall things are solid and steady so the argument goes. But are they really?
For one the earnings outlook picture is deteriorating quickly (never mind the Fed induced vertical rally in stocks):
“As the fourth-quarter results roll in, the S&P 500 is poised to post an average earnings growth rate of 12.4 percent, the fifth straight quarter of double-digit growth. These results have boosted the stock market, with the S&P 500 enjoying its best January in more than 30 years.
While companies are reporting great numbers, their outlooks are falling short. And that’s caused analysts to rapidly slash their earnings expectations for the current quarter. In fact, Wall Street’s expectations for earnings growth for the first quarter of 2019 have just turned negative with profits expected to fall on average by 0.8 percent, according to FactSet. That would mark the first year-over-year decline in earnings since the second quarter of 2016″:
“Earnings are deteriorating even faster than we expected,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note Monday. “The earnings revision breadth over the past month has been even more negative than we expected leading us to think are earnings recession trough in the U.S. could be later than 1Q and deeper.”
So negative growth with a view of a bounce back later in 2019. So we have slowing growth in the economy and negative earnings growth now in Q1 2019.
Now if 2018 was fantastic perhaps a temporary blip is not so bad so the current thinking goes. But was 2018 really so great?
If it were we should be able to see it in earnings and earnings are generally reflected in tax receipts, specifically growth in tax receipts, but there is no evidence of that:
Tax receipt growth went negative in 2018 which is typically reflective of recessionary pressures building.
Oh I know what you’re thinking. While tax receipt growth has declined for years it was exacerbated in 2018 by the tax cuts. And that argument may make sense if you look at what happened to corporate tax receipts. It just collapsed:
And hence its growth figures are abysmal:
Very much recessionary, but yea it’s due to tax cuts and hence profits for companies were just fantastic, but were they?
Yes they improved and showed record profits after tax, but notably they were just above the Q4 2014 levels, an improvement, but overall not a runaway picture especially considering that 2019 is now slowing down and stock prices are much higher compared to 2014.
But here’s the kicker: Take the tax advantage out of the equation and earnings before tax were actually less than in Q4 2014:
Maybe Q4 results will round that picture up and show us new highs, but generally it should be clear that the overall profit picture has really not done much in the past few years.
Which brings us back to the tax receipts. How has the consumer faired from all these tax cuts?
After all tax receipts are also regressive here:
What? No big salary increased that would show higher taxable incomes? But at least tax cuts went to consumers’ pocketbooks?
Not if you look at real disposable income, it has flat lined, doesn’t even show a blip for 2018:
So we have slowing growth, regressive earnings in at least Q1 with estimates coming down hard and we have negative tax receipt growth and flat real disposable income. Oh, but we’ll have trillion dollar deficits to show for it all.
But there’s no risk of recession.
Got it. Great job everybody, but it smells. Just a little.
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Are you on the streets of San Fran Cisco? Perhaps that is what smells.
….or u.s. capitol steps where shit is piled high and deep
At 25k DJIA is overvalued at least 4-5x, never a post 2008 correction. Bullshit on bullshit ever since.
So much paper, Park Place and Boardwalk worth less, and the game ends.
Blah fucking blah, the sky is falling any day now.
The rate of increase is slowing?
It’s all bull shit promoted by the circle jerk that is Wall Street to K-Street to Capitol Street . As the real owners of America continue feeding on the dead carcus of the rotting flesh of our once free republic as the bulk of the population circle the drain economically it’s only a matter of time now . The badge wearing minions are becoming more aggressive and asset forfeiture the order of the day and the death of the presumption of innocence . Add to this local governments taxing once middle class property owners into the street to cover their debt heavy budgets and underfunded pension obligations that must be paid as those being taxed to cover this debacle are forced into bankruptcy after their pensions were flushed down the tubes by the likes of Mitt Romeny and company . Wow cannot imagine why socialism is on the rise when things are going so well
Yep. Greed.
Like it or not, right or wrong, good or bad wealth/income inequality, once it gets bad enough, leads to socialism.
What a steaming pile!
Compare the Used Car Salesman In Chief’s SOTU address claim to fame with the facts in this article. Almost 180 degrees opposite. Some true, mostly not though.
5.3 million new jobs
600,000 new manufacturing jobs
Wages rising at the fastest pace in decades
And wages for blue collar workers growing faster than anybody else thought possible
5 million Americans have been lifted off food stamps
Economy growing twice as fast today as when I took office.
Unemployment has reached the lowest rate in over half a century
African-American, Hispanic-American and Asian-American unemployment have reached lowest levels ever recorded
Unemployment for Americans with disabilities has also reached an all-time low
157 million Americans are working – more than at any time during the history of our country
Passed a massive tax cut for working families and doubled the child tax credit
We’ve virtually ended the estate tax for small businesses, ranches and family farms
Eliminated “very unpopular” Obamacare individual mandate penalty
Gave critically ill patients access to life saving cures with “right to try”
America is a red, white and blue steaming pile of bullshit. ~ George Carlin
SOTU addresses have been given throughout the history of the US. None of them were negative, they all are positive. How can that be? Ever heard a negative eulogy given at a funeral no matter how evil the dead fuck was? No, they’re all spoken well of as we have seen in the deaths of politicians that committed atrocities and war crimes. SOTU addresses are on the same steaming pile of bullshit as eulogy’s are.
Here is a partial lineup of Used Car Salesmen elected in the U.S. Steaming Pile States Of AmeriKa:
The Clinton administration was a continuation of the Bush Sr. administration.
The Bush Jr. administration was a continuation of the Clinton administration.
The Obama administration was a continuation of the Bush Jr. administration.
The Trump administration is a continuation of the Obama administration.
SEE A STEAMING PILE PATTERN YET?
Ross Perot warned us about NAFTA etc but Congress and Clinton allowed the NY Investors to sell manufacturing and agriculture to China; they made a huge profit. Workers woke up screwed and elected Trump who is trying to reverse “Economic Niagara Falls” but the Democrats, the Deep State, and the GOP etc are against him; so are the workers unions and 99% of the people who blog. Useful Idiots swallowed the Blue Pill (re Socialism) and then the White Pill (re Communism) because they believe everything the stupid lying Democrats say. Legal immigration rejects Whites and Christians, illegal immigration is mostly low IQ Communist, most births are to Useful Idiots; the country is being destroyed on purpose. This is Red Pill Reality, not Black Pill fear mongering: Prepare for Chaos.