Best of the Week
Most Popular
1.Trump Delirium Triggers Stock Market Brexit Upwards Crash Towards Dow 20,000! - Nadeem_Walayat
2.The Future Price Of Gold Will Drop Below $1000 In 2017 -InvestingHaven
3.May Never Get Another Opportunity to Buy Gold at this Level Again - Chris_Vermeulen
4.Delirium - The Real Reason Why Donald Trump Won the US Presidential Election - Nadeem_Walayat
5.Why Nate Silver / Fivethirtyeight is one of the Most Reliable Election Forecasting Indicator? - Nadeem_Walayat
6.Gold Price Forecast: Nasty Naughty November Gold Price Trend - I_M_Vronsky
7.Gold Mining Stocks Screaming Buy! Q3’16 Fundamentals - Zeal_LLC
8.Delirium of Trump Mania Win's Mr BrExit US Presidential Election 2016 - Nadeem_Walayat
9.The War On Cash Goes Nuclear In India, Australia and Across The World - Jeff_Berwick
10.Hidden Signs for Gold and Silver - P_Radomski_CFA
Last 7 days
The Rise of Anti-Establishment Italy - 7th Dec 16
The Rise of Anti-Establishment Italy - 7th Dec 16
Trump Likely to Drive Another Bump in Stock Market Buybacks — Here’s How to Hedge - 7th Dec 16
World War II and the Origins of American Unease - 7th Dec 16
Online CFD Trading for Traders on a Budget - 7th Dec 16
Silver Bullion Price Buying Opportunity for 2017? - 7th Dec 16
The Imminent Multi-Trillion Dollar Surge In Social Security & Medicare Costs - 7th Dec 16
Gold Bullion Price Buying Opportunity for 2017? - 6th Dec 16
Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market - 6th Dec 16
THE Gold Play for 2017 - 6th Dec 16
Trump Sets The Stage For A Huge Gold Rally In 2017 - 6th Dec 16
BrExit Tsunami Claims Emperor Renzi's Scalp, Counting Down to End of the EU, Next? - 6th Dec 16
Failed EU - Means an Expanded Dictatorship - 6th Dec 16
Crude Oil Prices: "Random"? Hardly - 5th Dec 16
The Coming Stock Market Crash and WWIII - 5th Dec 16
This Past Week in Gold Market - 5th Dec 16
Stock Market Short-Term Correction Underway - 5th Dec 16
If Trump Doesn’t Do This, We Will Have the Great Depression 2.0 - 5th Dec 16
India’s Demonetization Could Be the First Cash Domino to Fall - 5th Dec 16
Our Future Economy, Jobs, Banking, And Governance - 5th Dec 16
Gold and Silver Bullion Buying Opportunity for 2017? - 4th Dec 16
First UK BrExit then Trump, Next BrExit Tsunami Wave to Hit Italy HARD Sunday! - 3rd Dec 16
The 10YR Yield and SPX Stocks Bull Markets - 3rd Dec 16
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16
How Moving Averages Can Identify a Trade - 1st Dec 16
Silver Prices and Interest Rates - 1st Dec 16
America, is it Finally time for us to say Goodbye? - 1st Dec 16
Blockchain Technology – What Is It and How Will It Change Your Life? - 1st Dec 16
Burn the Flags, Can Trump Salvage The Sinking US Economic Ship? - 1st Dec 16
Will US Housing Real Estate Market Tank in 2017? - 1st Dec 16
Referendum Puts Italy's Government to the Test - 30th Nov 16
Why We Haven’t Seen Gold Price Rally after Trump Victory - 30th Nov 16
Breakdown and Slide in Crude Oil Price - 30th Nov 16
A 'Wicked Rally' in Gold Price Predicted - 30th Nov 16
Silver Market Sentiment Looks Golden - 30th Nov 16
Indian Demonetization Denotes Severe Stress in the Global Gold Market - 30th Nov 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

Corporate Earnings Are Down, But Debt Keeps Rising…

Stock-Markets / Stock Markets 2016 Jan 26, 2016 - 04:04 PM GMT

By: Harry_Dent

Stock-Markets I recently wrote to you about a number of factors that show the stock market saw a major top back in May 2015.

The most glaring?

Small-cap stocks have diverged massively from large-cap since May. They’re down 24% while large-caps are down only 12%. This is the classic sign that the dumb money is pouring in and the smart money is leaving.


Then there’s a classic head and shoulders topping pattern that was initially broken last Friday, January 15, when the S&P 500 moved below 1,880 (next stop is 1,595). I sent Boom & Bust subscribers an alert about this 30 minutes after the markets opened, telling them what is likely to happen next.

Few analysts are talking about this head and shoulders pattern… but even fewer are talking about the 800-pound gorilla in the room…

That is: earnings.

Sales have been down for S&P 500 companies for the last three quarters. They’ll almost certainly be down for the 4th quarter now that retail sales for December came in down 0.1%.

Look at this client survey from Citi Research, one of those few analyst groups along with us and our resident Forensic Accountant, John Del Vecchio, who are pointing to the gorilla.

As you can see, the number one risk – by far – is earnings, at 24.5%. Next, at 15.5%, is geopolitical risk, which I’ve been talking about for years now. My 35-Year Geopolitical Cycle is one of the four in my hierarchy of cycles which allow me to forecast with such accuracy. For me, that and China are the two biggest red flags on my radar, presenting the highest risk to us.

And, thanks to John, earnings became another of those red flags when he joined us to launch his service, Forensic Investor.

Other red flags flapping in the wind right now are the dollar and government policy management missteps in the shape of the Fed raising rates too fast. In particular, here’s one that’s particularly worrisome to me (if you’re a sensitive reader, now would be the time to stop and move on with your day)…

Look at how debt is diverging above a broader measure of earnings (EBITDA, which is earnings before interest, tax, depreciation and amortization).

Debt has gone stark raving mad. Actually, borrowers and lenders have gone stark raving mad, sending debt levels into the stratosphere, but let’s not split hairs. Insane is insane. And we have zero interest rate policies (ZIRP) to thank for the big balloon of bowling balls about to rip open and drop onto our heads.

The last time debt exceeded earnings was in the 2001 recession due to weakening earnings.

More importantly, we didn’t see a surge in debt versus earnings in the 2008/2009 top or recession. That’s because companies had to pay real interest rates back then. That was when the Fed was tightening, as they normally do in the late stages of a boom.

Since late 2014, however, debt has ballooned out of all proportions while earnings have flattened and even started to decline. And we haven’t even entered the next recession yet!

When you look at quarterly earnings instead of EBITDA, it’s even worse...

Normal S&P 500 earnings per share are expected to drop for the second straight quarter in Q4.

All of this is a sure sign that the stock bubble is over and that we’re heading into a recession. John believes we’re in for an even steeper drop in earnings ahead. I 100% agree.

John’s actually preparing an online exclusive called “Earnings Exposed,” which will broadcast on January 28. He’s asked that we get the word out to as many people as we can so they can watch when this airs in a few weeks’ time.

During this exclusive, which will initially broadcast at 4 p.m. Eastern Time – don’t worry, we’ll send you a reminder with a link that will take you to the online exclusive – John‘s going to uncover the real reason this earning’s season has turned out so poorly (as he knew it would), and he’s going to show you what’s going to happen next. There will be a rebroadcast at 8 p.m. for anyone who can’t watch the first airing.

To watch it though, you’ve got to sign up, so do so here now… when you click on this link, it will automatically sign you up. You won’t need to do anything else except watch out for the confirmation email we’ll send to you.

In the meantime, get on your safety jackets because this roller coaster ride is just getting started.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2016 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife