Corporate Profits-Dropping Faster Than Before The Last Recession

smiley-face

This is how the Federal Reserve and others want you to think of the US Economy.

Unfortunately, the only people that think the economy is like this are located at the Federal Reserve, and the media who continue to paint the rosiest of pictures.

The numbers behind the economic performance show that it  is anything but a big smile.

Quarterly Profit Detailed Analysis 201603018

Click Here To See the Quarterly Profits After Taxes By Quarter

How well do you remember the year 2007?  This was before the economy imploded before “The Great Recessions”.  At the end of the year 2007, Corporate Profits after taxes had fallen by 7.64% year over year, and for the fourth quarter of 2007, had fallen by 8.12% from the same quarter in 2006, indicating that things were getting worse.  But we ignored the signals this was telling us.  Why? Continue reading

The Real Economy? It’s MUCH Worse Than You Think

This week Janet Yellen, Chairman of the Federal Reserve Bank reiterated her outlook on the US economy and how well we are doing.  Many armchair economists such as myself have suggested that that perception is far from reality.

Over the last four quarters, I have watched profits per share from continuing operations declining while at the same time the Federal Reserve and the Obama Administration jawbone about just how great things are.  They are lying, to put it bluntly.

We’ve been told that the weakness is limited to the Energy sectors within our economy.  They are lying about that as well.  Below is a list of all the sectors where the Earnings Per Share from Continuing Operations are lower than they were the previous year. And the amount of that drop follows the Sector Name.

Businesses are in business to earn a profit.  When profits fall, they will right-size their businesses in operations and headcount to return to a profit growing enterprise. This occurs during the twelve months following the drop in earnings.  That is why employment is a trailing economic indicator, and not a leading economic indicator as the “professional” economists want to insist.

Have a look at the list for yourself.  The pain being experienced in this economy is far and wide, and spreading rapidly.  We are fast approaching the 50% mark, where more companies are earning less than they were a year ago.

How bad will it get?  How bad will it have to get before we can actually discuss that we do have a problem, and get to the real solutions that can grow the economy in a healthy manner once again?

The Federal Reserve was the last entity to acknowledge we had a problem the last time around.  Rest assured, they will do the same this time.  Trust your instincts. Those empty storefronts you see are empty for a reason.

Click here to see the list:

Continue reading

What’s The Real Cost Of the Old Alabama Road Delay to Drivers, Johns Creek?

Johns Creek residents have been fighting a losing battle with traffic for the past several years.  Key road closures and construction projects have taken their toll on drivers and residents who find themselves trapped in their neighborhoods during rush hours, or face 20 minute ride to the grocery or school, which is within a mile or two of their homes.

Last year I did some calculations to determine what our delays cost us. Some local residents asked me to do the same for the Old Alabama-141 project, and so I have. You can read more about the details in the link below, but I explain as we go how the numbers are generated.

http://ejmoosa.com/blog3/2015/06/05/the-high-cost-of-traffic-dollar-and-sense/

The Old Alabama Road project is, has, and will be going on for a long time, by any measure that you can find.  With less than a 1/2 mile of widening to be accomplished, the cost of the road construction itself is at least $5 million and maybe higher.  The City of Johns Creek went with the GDOT to do the project to save the taxpayers money.

But, like any government agency, they seem to forget about the costs to the taxpayers themselves.  Being stuck in traffic for two years or more has a very high price. Most DOT project guides that I have seen give credence to the costs of that impact on residents.  Johns Creek may be the exception.

According to the Georgia DOT webserver on traffic volumes, there were about 8619 cars per day traveling on Old Alabama during the three morning and evening hours that make up peak travel periods in Johns Creek in 2013.

Most of us have experienced worse delays than the 10 minutes I use for this example, but we will use that as the additional time each vehicle is taking to make it through the intersection.

That equals 86,190 minutes per day wasted sitting in traffic.

That equals 1,436 hours per day.  At a value of $16 per hour(based on what other DOTs use for the cost of traffic delays), that works out to a cost of $22,984.00 per day.

And since there are 250 or so work days a year, that works out to $5,975,840.00 per year.

This suggests to me that the residents and drivers in and around Johns Creek will have nearly $12 million dollars in lost time, wear and tear on their vehicles, and general frustration while the City of Johns Creek will have saved around $5 million by having the Georgia Department of Transportation run this project.

Was it worth it?

Just How Weak Are We(Economically Speaking)?

As I wind up the collection of data for 2015, and adjust for the estimates for 2016, it is becoming increasingly clear just how weak our economy is.  The total profit for the Dow 30 Industrials (not per share profit) is now forecast to be below the levels we saw in 2012 for the current year.  We were also below the 2012 levels for the year 2015.

The question I continue to ask is if profit levels are back to 2012 levels, shouldn’t this index also be back to similar levels?  Adjust for the total number of shares outstanding if you must, but then add up the debt taken on to achieve those buybacks, and it is still a bleak reality.  Here is a screenshot of my work.  You can try to spin it how you want.  But there is nothing on tap to jump start this economy into a recovery.

The reason these companies exist and the reasons we value them in the first place is because they can earn profits.  But what happens when they earn less profit than in the past?  Should their valuation continue to move higher?  History says no.

And those forecast earnings for 2021?  Those numbers are just a pipedream.  So be sure to put something good in that pipe.

Something else that you should note:  Look at the data for 2007 and 2008.  The losses we see today in profitability are far worse that what happened in 2008.  Profitability better suddenly improve quickly, because it may just be that we are further into a recession now than we were in 2008. The metrics of the “professional” economists will not point this out for some time to come.

The reason companies go into business is to profit.  They expand their businesses as they make more profit.

What do they do when their profits vaporize? They cut. Everything.

What about your own personal household budgets?  If your income was back to levels last seen four years ago, how would that affect your spending going forward?

 

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