Much of what I read blames this new round of weakness in the
market on the failure of Treas. Sec. Geithner to present a fully
fleshed out plan to corral toxic bank debt and put the system on
a sounder footing. Such may be hogwash. The Street is out after
Geithner because he represents the leading edge of more regulation
of hedge funds and other managed products. They are not going
to love Timmy.
Rather market weakness reflects the ever more obvious: Really
awful sales and earnings. Yr/yr SP 500 sales are down by more than
10%, and operating earnings for the final quarter now look to come
in below $6.00. That has knocked the wind out of the long side of
the market. Most know that Q1 '09 net per share promises to be
quite low as well, so that there can be no BS-ing about the second
half of the year: Net per share needs to bounce big time to provide
12 month eps that can bridge into a much stronger 2010. You have
to go back to 1932 / 33 to find a shortfall of earnings comparable
to what we have now. Unsure of a Half 2 '09 sharp positive turn
of earnings, investors now struggle with how to stay long on such
low current net per share.
Every stock investment manager out there has faced the challenge
of deep down earnings or worse for a particular stock or industry
sector, but none have faced such depressed earnings for the entire
market. It's gazing into the abyss and players may need more time
to adjust.
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