Sunday, November 11, 2012
Time For Post-Harvest & Post-Election Yogi.
If you voted for Romney then you just got hosed in the stock market because Wall Street hates Obama. Wall Street was exacting its revenge. Wall Street decided to sell-off to voice it's "collective displeasure." It was the Ghost of Business Past showing everyone that Mitt Romney was a better choice.
But if you voted for Obama, the market went in the crapper last week because the Greek Parliament can't agree on the Troika's austerity measures and those are a requirement for additional bailout funds which when disbursed this month will bail out nothing. The funds will pay interest on the Greek debt. It wont go into any programs and wont buy a single new job. That's why the market dropped. Everyone loves the President and he now has a mandate from the people.
Oh phuleeze you right and left wing nut cases! Get off your self-interested dogmatic partisan gum-flapping ..... (that sentence is proof I went to college). You think investors would sell out of disappointment? Wall Street might be peeved after the President made the greedy bunch into scape goats for all that is wrong in America, but don't forget they are a greedy bunch.
Traders sell because they see opportunity and profit, not because they want to voice their displeasure. Post-election traders can focus on the expected tax plan. Tax rates will go up under the President's plans. Anyone with a gain in the stock market might be inclined to take the gain this year rather than waiting. Certainly the Eurozone problems play a role as well. In fact, where is there good news right now? I believe the most concerning thing with the haze of wall-to-wall election coverage over, is really business and the economy itself. While we've been glued to CNN, Fox, and MSNBC, the Wall Street types have been researching and watching the US Economy. And frankly, its probably doing worse than you thought.
James Carville; the Yogi of the Democratic Party. Public companies normally do a good job of forecasting. They already know where they are trending when they announce earnings about a month after quarter end. Then they sandbag the analysts: under-sell so they can over-deliver.
When the number of revenue misses are as high as they were in Q3, there is something going on that is surprising public companies in a very small window of time. But even more concerning than bottom line earning misses to me, is the number of top-line revenue misses as noted in the chart to the left. Sales growth in our domestic companies is now not keeping up with inflation, and less than a third of companies hit their sales number in Q3. How can there be that many misses when there is about a 60 day window of the unknown? That's a problem.
Why is this all important to the wine business? I like to say sales are the potential to make profits. Declining revenue means declining earnings unless you cut costs like workers salaries. Forecast profits are the fuel that feeds hiring. Hiring fuels the salaries that buy wine. We are now entering a holding pattern on new hires unless we see growth from somewhere and frankly, if you look at the world right now, all the world economies are flattening, including the US which is showing GDP under 2% and is perilously close to entering a second recession. Will we? I'm not predicting that because in my mind, it aint over until the fat lady sings.