Peter Boockvar – Mon 7 Aug, 2017

The best comment I’ve heard on the recent earning season

These comments come from our friend Peter Boockvar and his website The Boock Report (click here to visit the site)We have heard a lot about how recent earnings are beating expectations and that is a reason for the continued upward move in the markets. Peter breaks down exactly how much the markets have moved compared to the actual increases in earnings.

Click here to visit Peter’s Boock Report website for more great comments on a wide range of economic data points and markets

As we are close to wrapping up Q2 earnings, I need to put things into perspective as that is what I do. We hear all the time that the stock market is doing well because earnings are good but years of gains in stocks have been driven more by multiple expansion.

In 2013, earnings were up about 15% GAAP and 11% non GAAP but the S&P 500 rallied north of 30%. Thank you global QE Infinity. Assuming 10% earnings growth in 2017, earnings since Q4 2013 will TOTAL 16% GAAP and 19% non GAAP and since then while the S&P 500 is up about 35%. Taken together, the S&P 500 is up 74% since December 31st 2012 while GAAP earnings are up 35% and non GAAP earnings are up by 32%.

Thus, we’ve priced in the current earnings improvement twice over. This then begs the question of what happens to multiples when QT starts followed by ECB tapering. Predicting futures P/E ratios has as much to do with forecasting psychology as it does interest rates and inflation. So never easy. I’ll just predict that multiples are more likely going down than either staying unchanged or moving higher. Therefore, earnings better accelerate much further from here to offset that. That then will be determined by whether faster revenues can offset higher labor costs and lower profit margins.

I’ll repeat again, we are in the midst of a change in global monetary policy, no matter how gentle and gradual it is. This at the same time the price to sales ratio of the S&P 500 is at a record high if we take out a few weeks in March 2000. If lunch is free, markets will be ok. If lunch is never free, then…

I wrote a few months ago my frustration as a value investor and titled my piece ‘The death of the value investor.’ In case you didn’t see, the front page of the Business & Finance section of today’s Wall Street Journal has an article titled “Hot Stock Rally Tests the Patience of a Choosy Lot: Value Investors.” It went on to say: “Value investing is mired in one of its worst stretches on record, prompting concerns that the investment style favored by generations of fund managers is losing its effectiveness.” As an adherent of the front page magazine/newspaper effect where after it gets to front page news, a trend change in the opposite direction is about to occur, maybe this time will be the case again.


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Comments:
  1. On August 7, 2017 at 1:48 pm,
    CFS says:
  2. On August 7, 2017 at 3:22 pm,
    james says:

    The Elite will Monopolize Money econemy you’re Doc you’re live and all you need and will need in the INTER NET ! You all know Sky Net ! And you will wake up in the Prison ! https://www.youtube.com/watch?v=y_NSVxzaYaI

  3. On August 7, 2017 at 10:53 pm,
    Matthew says:

    Jack Chan says:

    Precious metals sector is on major buy signal.
    Cycle is now up.
    COT data is supportive for overall higher prices.
    We are holding gold related ETFs for long term gain.

    https://www.streetwisereports.com/pub/na/jack-chans-weekly-precious-metals-update?art_ref=17605

    I agree.

    • On August 8, 2017 at 7:30 am,
      Silverdollar says:

      Chan seems to me to basically watch trend lines and most importantly, MACD on the charts he presents. Looked to me that the trend lines (undrawn) are about to change……Am I looking at things cock-eyed?

      • On August 8, 2017 at 7:47 am,
        Matthew says:

        Yes, Chan keeps it simple and it could be that those short term trends are about to change but it is usually a bad idea to act in anticipation technical signals. The MACD lines could just “kiss” or embed/go sideways for awhile before the uptrend continues.

        Note that the charts in that update have nothing to do with the fact that the “Precious metals sector is on major buy signal.” In other words, those daily charts could move to sell signals but that would not change the bigger picture major buy signals.

        • On August 8, 2017 at 8:50 am,
          Silverdollar says:

          Thank you for your comments.

      • On August 8, 2017 at 7:52 am,
        Matthew says:

        Gold has achieved Michael Oliver’s breakout requirement.
        July 24:
        http://kingworldnews.com/this-will-signal-the-major-breakout-for-the-gold-market/

        • On August 8, 2017 at 7:48 pm,
          Excelsior says:

          That’s and encouraging thought for the day. Thanks.

  4. On August 8, 2017 at 6:26 am,
    OOTB Jerry says:

    Bitcoin……….$3402……
    Gold…………no big deal until $1307
    Silver……….77 to 1 ratio

    • On August 8, 2017 at 8:03 am,
      OOTB Jerry says:

      Gold back under 1255…….

    • On August 8, 2017 at 8:39 am,
      OOTB Jerry says:

      Stew Thomson covering bitcoin at 321gold………good read.

  5. On August 8, 2017 at 8:05 am,
    OOTB Jerry says:

    Dam…….1251…….

  6. On August 8, 2017 at 8:52 am,
    CFS says:

    The market opening:
    Stocks, Dollar down, Gold and PMs up…..

    And then the ESF stepped in…..

    Stocks up, Dollar up, PMs flat.

    I give up.

  7. On August 8, 2017 at 8:56 am,
    CFS says:

    The ESF stepped in at exactly 10 a.m. EST…..instead of at opening….I wonder why.

  8. On August 8, 2017 at 9:03 am,
    JohnK says:

    Shad, Wolfster:

    I missed getting in on the Labrador conversation yesterday due to the extremely beautiful day and my never fascination with the lushness of the grass at the golf course this time of year.
    Turns out before the set appointed tee time I was doing some DD and came across a pod cast on the Northern Miner with Lesley Stokes and legendary Yukon prospector, Shawn Ryan..Underwater/Kinross, Cofee/ Kaminak.

    Wolfster mentions that Auryn has exposure through Torque Resources.TORQ.V Torque Resources, formerly Stratton, has optioned the past season of staking in Labrador by none other than Shawn Ryan.
    I have made a big blunder by not keeping up with the doings of Shawn and his company White Gold Corp.Notice the rise in the past year of the White Gold stock from .10 to a high of 2.30.
    Shawn has a proven track record in the Yukon and still has a 40% piece of the land package in the White Gold Area with Agnico Eagle and Kinross on board for a three year exploration program.Also there is an option in place with GNG Capital.
    TORQ Resources is one to keep your eye on now in Labrador as is WGO.V,White Gold Corp.
    Shawn Ryan is taking advantage of new technology with his drones to drilling approach and the advent of GPS.This could truly turn out to be a game changer.
    I will post a link to the interview.

    http://stockcharts.com/h-sc/ui

    • On August 8, 2017 at 9:10 am,
      JohnK says:

      Now that I’m not a paying member os Stockcharts,I cannot upload individual charts. Sorry.
      WGO.V .10 to 2.30.

    • On August 8, 2017 at 9:34 am,
      Wolfster says:

      Thanks JohnK. Just so you know that was actually discussed this morning…..as for the lushness of the grass on the course. Good for you for enjoying it. My golf game is no different than a walk through the forest minus my dog. 😁

      Yes Shawn Ryan is another one to always keep an eye on. 👍

      • On August 8, 2017 at 7:50 pm,
        Excelsior says:

        Agreed. Yes both Anaconda and Torq look set to jet.

        Yes Shawn Ryan has knack for making things happen.

        • On August 8, 2017 at 7:51 pm,
          Excelsior says:

          It is interesting to see Labrador and Newfoundland back in the sites of more exploration and development companies. Even in Canada, there is untapped potential.

  9. On August 8, 2017 at 9:06 am,
    Matthew says:

    Silver is acting well versus gold today. An upside breakout on the following SLV:GLD chart would be good for the sector…

    http://stockcharts.com/h-sc/ui?s=SLV%3AGLD&p=D&yr=0&mn=7&dy=11&id=p60667454306&a=533646134

    • On August 8, 2017 at 10:08 am,
      spanky says:

      Too bad my silver miners havent gotten the memo and continue to tank.

  10. On August 8, 2017 at 10:07 am,
    spanky says:

    Dow:gold ratio set to explode upwards. $usdjpy moonshot will do the trick.

    http://stockcharts.com/h-sc/ui?s=%24INDU%3A%24GOLD&p=W&b=5&g=0&id=p90526186127&a=538622479&listNum=1

  11. On August 8, 2017 at 10:09 am,
    spanky says:

    The miners have the burden of proof, and right now they look guilty as hell:

    http://stockcharts.com/h-sc/ui?s=GDXJ%3AGLD&p=D&b=5&g=0&id=p98438866169&a=538621826&listNum=1

  12. On August 8, 2017 at 10:15 am,
    spanky says:

    $gold:$xjy ratio monthly chart bollinger bands are basically at their narrowest ever. Expect fireworks starting by next month at the latest.

    http://stockcharts.com/h-sc/ui?s=%24GOLD%3A%24XJY&p=M&b=5&g=0&id=p51231598211&a=538624110&listNum=1

    • On August 8, 2017 at 10:39 am,
      Matthew says:

      Let me guess… you expect those fireworks to favor the yen over gold. If so, the odds are against you.

  13. On August 8, 2017 at 10:41 am,
    Matthew says:

    Re: yen
    “As expected, the commercial traders are shorting the yen into the rally. What is much more interesting is the overall size of the long position they hold. It’s truly enormous.”

    http://www.321gold.com/editorials/thomson_s/thomson_s_080817.html