With earnings season having kicked off this week, today’s chart provides some long-term perspective in regards to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today’s chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low — the largest decline on record (the data goes back to 1936). Since its Q1 2009 low, S&P 500 earnings have surged (up over 700%) and currently come in at a level that has only been exceeded during the latter years of the dot-com and credit bubbles. Current expectations on Wall Street are that earnings reach the mid-$70 level by the end of 2011 — a level surpassed only briefly during the tail-end of the credit bubble. Where’s the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.
Market Going Down With the Ship?
The Baltic Dry Index is Shouting “Danger, Will Robinson!” But Are Investors Listening?
The BDI most recently topped out in May. As of yesterday (Thursday), it has already dropped 35 days in a row.
That’s significant.
This string of “down days” is the longest in at least nine years, The Economist reported this week. During the crash of 2008, the index never fell 35 days in a row.
Today, the BDI is again flashing serious warning signs that not everything is as it appears. It may be warning us about the start of a “double-dip” recession, or it may be telling us that something even worse is at hand.
Historically, the Baltic Dry Index has shown itself to be the EKG of future industrial demand. And, right now, the BDI is screaming “Danger, Will Robinson!” to any investor who will read it and heed it as a true leading indicator.
If the price of refined copper is called “Dr. Copper,” for its ability to ascertain the health of the demand for growth in an economy, the BDI is the daily heartbeat for near-term future industrial demand.
Combined, those two indicators can provide investors with a view of whether the world economy is growing or shrinking, based on the big picture of world demand for growth. Currently, the BDI is flashing serious warning signs to anyone who is looking at it.
The drop in the BDI index in 2008 was one of the most obvious signs of the real impact that the so-called “Great Recession” would have. From May 20, 2008 to Dec. 3, 2008, the BDI fell from its high of 11,793 to its low of 663 – a near-freefall of 94%.
Via Jack Barnes – Jack Barnes started his career at Franklin Templeton in 1997, working with the company’s portfolio team in its fund-information department – just as the Asian contagion infected the Asian tiger countries. He launched his own RIA shop in 2003 just as the second Gulf War was breaking out. In early 2006, after logging a one-year return of nearly 83%, Forbes named Barnes the top stock picker in its “Armchair Investors Who Beat the Pros” competition. His two audited hedge funds generated double-digit returns in 2008. Last summer, Barnes retired to the beach – which is where he writes from now.]
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Where’s the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.