Measured yr/yr, total business sales growth slowed appreciably toward the end of 2011 and
into early this year, with top line momentum decelerating from better than +10% to a touch
above 7%. Another "top line" proxy I use is the $ value of industrial production. That measure
was 8.8% yr/yr in 3/11 and slid down to just 6.0% by year's end.
However, there has been a positive reversal in available data so far for this year. For example,
the $ value of industrial output has accelerated yr/yr to stand at 7.1% through Feb. even though
power generation -- an important input -- has declined with warmer weather this winter.
With the first quarter set to wind up at week's end, it would appear that top line growth should
be sufficiently strong to avoid broadscale profit margin erosion from fixed costs.
On balance, materials costs were little changed from the prior year. This is a plus to profit
margin. There was, however an acceleration of the labor cost component owing to higher staffing
levels, but it was rather mild, as the real wage remained below year ago levels.
Net Per Share
My macro indicators suggest earns. per share for the SP 500 should rise close to 10% for
Q 1 '12 viwed yr/yr. Keep in mind though that I am using just two months' worth of data.
Banking Sector Earnings
Now popularly viewed as a moral scourge upon all of us innocents, bank sector earnings do
continue to recover. Viewed yr/yr, interest earning asset balances are now rising as is net
margin. The loan loss reserve has now dropped another 18.5% or $38 bil for a major positive
lift to the sector's bottom line. There are still concerns about litigation and CDS derivatives
and banks are fighting to raise fees whenever and wherever they can, which no doubt, is not
doing the industry's image any favors. Recent action of the group. $BKX
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!
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