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  • nasty_slapper nasty_slapper Oct 23, 2009 3:26 PM Flag

    You are being deceived

    Earnings (Profits): What Is Happening?
    Gary North

    Oct. 23, 2009

    Headlines declare a rise in corporate earnings is expected. Here is a typical report, from Money/CNN.

    Stocks rally on earnings optimism

    Better-than-expected results from Travelers, AT&T, McDonald's and 3M push the Dow past 10,000 again, sparking a bigger rally.

    NEW YORK ( -- Blue chips led a bigger stock market rally Thursday, as better-than-expected results from four components pushed the Dow industrials above 10,000 again and reassured investors about the ongoing corporate reporting period.

    At the end of the story, buried, we read this:

    So far, 167 companies, or 33% of the S&P 500, have reported results. Profits are currently on track to have fallen 19.2% versus a year earlier, according to the latest from Thomson Reuters. Revenue is expected to have dropped over 10% from a year ago.
    Profits are 19% lower than in 2008. Do you recall how well the economy was doing a year ago? Not well. It was almost a year into the worst recession in our era. Profits were tanking. It's worse today.

    The story ends with this bit of irrelevant news.

    Other company news: Microsoft (MSFT, Fortune 500) launched the newest version of its operating system, Windows 7. The tech behemoth, a Dow component, is hoping that users who have been running XP for years will switch to the new system -- and forgive it for the disappointing performance of Windows Vista in 2007.

    Microsoft reports quarterly results Friday.

    The truth of what has happened to profits was buried as securely as possible -- not in the last paragraph, where someone might skim down to read it.

    The media are doing whatever they can to hype the recovery. There is no recovery in corporate profits.

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