Earnings Crush(ed)

Total Earnings by quarter Up Same Down $952.48 $972.31 $999.32 $983.51 $1,099.24
QTR Change % year over year 49.94% 810 45 767 -13.35% -10.39% -2.96% 3.52% 11.25%

Here’s the pivotal point I have been watching for on the economy.  Less than 50% of the companies listed in the Valueline Index made more money for their most recently reported quarter than they did one year ago.  And the steepness of that drop is severe.

For the most recent data I have, companies earned $952.48 on a per share basis.  That is down from the same period of a year ago of $1,099.24 on a per share basis.

The most recent quarter was also the worst of the last four quarters.

On average, the stocks made 13.35% less in income per share than they did one year ago.  This means that adding up all the stocks that made more than they did a year ago and all the ones that made less than they did a year ago, and the total is down a whopping 13.35%.

Do you think those businesses will be expanding for the rest of the year?  Or fighting for survival?

I have not seen this indicator of mine turn negative since the last recession.  It’s not a normal event, and it indicates that there is something wrong with this economy.

The regulatory and tax burdens faced by American businesses are crushing the bottom line.  Obamacare is crushing the bottom line.

The Federal Reserve, with rising fuel prices year over year, and low unemployment(thanks to a plethora of low paying part time waiter and bartender jobs) will have no choice to but to raise rates at least once more this year.

Those rate increases, which will affect the refinancing of the the debt that American corporations hold at record levels, will decimate the bottom line even further.

These are not one time or one off events.  This is the cost of doing business in the United States today.

Further compounding the bleak picture is the outlook going forward.

Dow 30 Profits Analysis 20160517

 

2012 2013 2014 2015 2016 2017 2021
Dow 30 Total Profits(millions) $347,711 $341,897 $351,263 $326,459 $319,660 $351,990 $469,760
Change $24,953 -$5,814 $9,366 -$24,804 -$6,799 $32,330 $143,301
% YOY 7.73% -1.67% 2.74% -7.06% -2.08% 10.11% 40.80%

Above is an analysis of the profits of the DOW 30 Industrials in total dollars earned.

The year 2015 was the worst  since the year 2011.  Adding icing to that cake is the forecast that 2016 will be worse than 2015.

The year 2017 will get us back to the performance we saw in the year 2014.  We have lost years of economic performance gains while the Federal Reserve Bank has constantly told us that we had an improving US economy.

Do the numbers in the table above appear to indicate that our economy has been improving?

Not even close.

The US economy is dead in the water, and is taking on water.  The forecasts for future years are way too optimistic in my view, and there is no economic stimulus available, other than reducing regulations and cutting taxes that will get this economy moving again in a healthy manner.

Prepare accordingly.

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