Good morning,
It's day fourteen in the selling stampede and with the looks of things this morning, as I write, its going to be a nasty day in the markets. In checking the futures for the S&P 500 I am seeing red and the same with most of the global markets with Greater Europe & Greater Asia also being in the red.
Seems the stampede is following emotions and technicals ... and, not so much fundamentals. I am still with my thoughts that Fourth Quarter earnings will come in being down year-over-year but ahead of Third Quarter. In checking one of my reference sources it reflects that Third Quarter reported earnings for the S&P 500 Index came in at $90.66 and are projected to come in and close out the Fourth Quarter at $95.38. First Quarter 2016 reported earnings are projected to come in at $100.86. Folks these numbers are for reported earnings that come from companies bottom line and not from forward estimates which are just that ... analyst expectations.
Since the markets have failed to recgonize reported earnings are indeed improving ... the herd remains spooked. With this, Old_Skeet is still with his plan to buy good quality assets, at favorable prices, while the market remains spooked. How long will they remain spooked? I really don't know. However, Jeffery Saut of Raymond James states the selling stampedes usually run from 17 to 25 days with some lasting longer.
Yesterday, Charles posted Morningstar's Market Fair Value Graph. This is a graph that I have referenced for many years. It is currently reflecting that the markets are now about 13% below fair value. Can the markets sell off more? Yes, indeed they can and from the looks of things this mornings they will. I plan to check the graph tomorrow thinking, most likely, it will reflect that the markets are now undervalued by fourteen to fifteen percent. Why is this? My thinking is that big money is reducing their leveraged positions and calling money home in an anticipated rising interest rate environment. Perhaps some are getting sold out due to margin calls. I know I am glad I started to build my allocation to cash back in early 2014 and have raised it from 10%, back then, to now about 25%. With this, I don't have to think to much about how, when and where do I get out ... I'am thinking when and what do I buy. Recently, I added to a world equity fund I own at 1922 and1880 readings on the 500 Index. For these buys I was looking at 50 point spreads once the Index had pulled back to correction territory. Now, I may increase my spread to 75 points between buys should the markets keep dropping figuring the bear is getting closer and with that comes even greater fear. But, look at the earnings numbers ... according, to my reference source reported earnings have been improving since September.
Take a look and see for yourself ...
http://www.advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.phpAnd, so it goes.
Comments
Certainly been a brutal start to 2016.
I listened to the BAC 4Q earnings call yesterday morning, encouraged.
Earnings seemed strong across the board. Analysts appear to have issues though with its efficiency numbers.
"Not seeing signs of recession ... except in oil business" its Chief Financial Officer stated in response to a question during the Q&A period. Moynihan discussed record customer spending during holiday season.
Jamie Dimon reiterated on CBS Morning that he's seeing a net benefit so far from the drop in oil prices.
Let's hope he's right and the herd settles down in days ahead.
c