Great bit of research from Bespoke Investment Group that shows how crazy things are getting in the markets thus far in 2009. So far, there are 15 stocks up 100% or more and 73 stocks that are up 50% or more. Below they list the top performing stocks thus far in 2009.
(click to enlarge)Before presenting Goldman Sachs' earnings release below, I want to touch on something we'll be witnessing in the coming weeks. Yesterday on twitter, I was joking that Goldman Sachs does everything with an implicitly silent "biiiatch!" at the end of every statement/action/filing/etc. (Definition/use of of "biiiatch" here). The headlines yesterday were "Blowout Earnings" and "Goldman Secondary Offering" and yadda yadda. Those headlines obviously didn't contain Goldman's sweet new tagline. So, just imagine a bunch of old bankers coming out and saying "Goldman Sachs biiiatch!" ... "Blowout Earnings biiiatch!" ... "Secondary offering at insane prices biiiatch!" It's cool though, we let it slide because after all, they're Goldman Sachs (GS) and they do what they want. This implicitly silent tagline let's them puff out their chest and show just how much better they are than everyone else.
But all joking aside, this earnings season will be littered with absolute dominance and absolute disaster. And, by dominance, we of course mean beating estimates by way of government help/intervention, accounting tricks, and other fun loopholes. *Cough* Wells Fargo (WFC) *Cough*. If you missed their tomfoolery, Wells Fargo basically came out and announced earnings that seem outright impossible given that they were getting their ass handed to them just a few quarters ago. This anomaly was made possible by various accounting sidesteps referenced in the article linked above. Yet, there seems to be no mention of the fact that they might need billions of dollars. Curiously enough, KBW comes out yesterday and claims that Wells Fargo (WFC) might need up to $50 billion in order to cover loan losses and pay back the government.
Wow, but they just came out and killed their numbers... why would they ever need that much money?!? /End sarcasm.
We bring this point up because in a normal world, earnings season is a field of land mines. Yet, given the circumstances specific to this past quarter, the field of mines has now quadrupled in size. So, you are now more likely than ever to step on a mine. There are two categories of companies reporting this earnings go-round: Firstly, there are those with accounting sidesteps and government ties due to help/intervention. Secondly, there are those without any of that... i.e. the rest of the companies reporting. The harsh reality is that both categories are equally as scary for different reasons.
Companies who "beat" estimates and "profit" all of a sudden will do so because of abnormalities unique to their reporting situation. Many of the financials will appear to "dominate" their numbers, when in reality they have only masked them by putting pretty flowers around them. So, this datapoint becomes essentially useless in gauging just how far along (or far behind) we are in this mess. Should we buy them now because they're doing "just great" with an asterisk next to their name? Should we sell them because they've rallied so much already? The reactions will be interesting to gauge. But, thus far, most companies in this category have been bid up. The problem with earnings season is you have just as much of a shot at hitting a land mine that instead of showering you with dollar bills, rips your face off.
There will also be companies out there who have not had as much government intervention and are lacking in the ability to mask their true faces. Those companies will miss earnings, will lower guidance, and will warn about impending doom. They will paint pictures of reality as they drop 30% in a single day. So, as you can see, we have some polar outcomes here. The companies who have been at the center of a lot of the crisis (financials, etc) are benefiting from their ability to sweep things under the carpet by way of the government or accounting changes. The companies that are not so fortunate, however, will not have such luck when it comes to reporting their earnings. So, while the tide (read: herd) rolls in directions that make absolute zero sense, you have to respect them. Because, if you don't, you'll be mauled. (Case in point: Financials spiking 20-30% off crazy earnings announcements). The problem with all this is that we're still left wondering, "What's changed?"
We're simply here to kick off what we have already deemed the Q1 '09 Earnings Season Clusterf*ck. You will most likely be deceived, tricked, and possibly even lied to. But, it's cool, because everyone is all of a sudden profitable out of NOWHERE. We just want to tell our readers not to place too much weight or emphasis on this earnings season simply because if the earnings already reported are any indication, this past quarter took place in Candyland, not recessionary America. So, keep on your toes and don't put on any big positions before these releases... you'll have better luck at blackjack or baccarat. As a matter of fact, Vegas & Atlantic City desperately need your money right now. So, go there and kill two birds with one stone: get better odds and help save the American past-time known as gambling.
The point of all this is merely a precautionary tale. Earnings of Q1 will be polar... to say the least. Just keep that all in mind as you are hit with a progressive barrage of earnings. In the end, it will be pretty clear who is being realistic and who is toying around in Candyland, accomplishing not much of anything. We're trying to take steps of progress forward. Unfortunately, we're most likely stepping sidways or even backwards.
To those destitute yet admirable companies that will tell it like it is (only to see your stock plummet instantaneously): we salute you. No, seriously. We are being 100% honest when we say thank you for providing some transparency to the macro environment and thank you for keeping it real. It has to get worse before it can get better.
And, on that final note: Let the games begin... Hiyo!
*Disclaimer I: Due to the recent Goldman Sachs legal tirade against a blogger, we are inserting this disclaimer to say that we have no affiliation with Goldman Sachs whatsoever. All 'taglines' in this article are fictional, are created solely by us, and are by no means a representation of Goldman's official slogan, mission, values, etc, etc, etc, etc. Everything in this post (well, mostly everything) is a satire and witty in nature. Please take this into account as you digest this delectably delicious derision.
*Disclaimer II (herein referred to as 'Disclaimer of the Disclaimer'): Please also note that while the aforementioned Disclaimer I is serious in nature, this aptly named Disclaimer of the Disclaimer is in and of itself a mockery of the Goldman Sachs proceedings referenced above as the 'legal tirade.' Those responsible for the sackings have been... well, sacked.
Market Folly biiiatch!
And now to the afore-promised and obligatory relevant content: Goldman Sachs' Q1 2009 Earnings Release:
Goldman Sachs Q1 2009 Earnings - Free Legal Forms
Just wanted to give everyone one last (and I'm sure dreadful) reminder that taxes are due Wednesday this week (the 15th), so take advantage of the Free TurboTax offer. Don't forget to also make contributions to your IRA/Roth IRA as well.
And, to end on a sarcastic note, make sure you also file to be a bank holding company so you can be bailed out!
Noted short-seller and hedge fund manager Doug Kass has recently published his annual list of Surprises for the coming year over on TheStreet.com. What's interesting is that he has been getting better over time in terms of accuracy. One third of his surprises came true in 2003, nearly 50% of them were true in 2004, nearly 50% were true for 2007, and 60% of his 2008 surprise predictions came true. Now that we're in 2009, we thought it was appropriate to highlight some of the major ones.
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Old, leveraged media implode. The worlds of leverage and old media collide in a massive flameout of previous leveraged deals. Univision and Clear Channel go bankrupt. The New York Times (NYT) teeters financially.
State and municipal imbalances and deficits mushroom. The municipal bond market seizes up in the face of poor fiscal management, revenue shortfalls and rising budgets at state and local levels. Municipal bond yields spike higher. A new Municipal TARP totaling $2 trillion is introduced in the year's second half.
Mutual fund redemptions from 2008 reverse into inflows in 2009. The mutual fund industry does not suffer the same fate as the hedge fund industry. In fact, a renaissance of interest in mutual funds (especially of a passive/indexed kind) develops. Fidelity is the largest employer of the graduating classes (May 2009) at the Wharton and Harvard Business Schools; it goes public in late 2009 in the year's largest IPO. Shares of T. Rowe Price (TROW) and AllianceBernstein (AB) enjoy sharp price gains in the new year. Bill Miller retires from active fund management at Legg Mason (LM).
The hedge fund and fund of funds industries do not recover in 2009. The Madoff fraud, poor hedge fund performance and renewed controversy regarding private equity marks (particularly among a number of high-profile colleges like Harvard and Yale) prove to be a short-term death knell to the alternative investments industry. As well, the gating of redemption requests disaffects high net worth, pension plan, endowment and University investors to both traditional hedge funds and to private equity (which suffers from a series of questionable and subjective marking of private equity deal pricings at several leading funds). Three of the 10 largest hedge funds close their doors as numerous hedge funds reduce their fee structures in order to retain investors. Faced with an increasingly uncertain investor base, several big hedge funds merge with like-sized competitors in a quickening hedge fund industry consolidation. By year-end, the number of hedge funds is down by well over 50%.
Capital spending disappoints further. Despite an improving economy, large-scale capital spending projects continue to be delayed in favor of maintenance spending. Technology shares continue to lag badly, and Advanced Micro Devices (AMD) files bankruptcy.
The U.S. stock market rises by close to 20% in the year's first half. Housing-related stocks (title insurance, home remodeling, mortgage servicers and REITs) exhibit outsized and market-leading gains during the January-to-June interval. Heavily shorted retail and financial stocks also advance smartly. The year's first-half market rise of about 20% is surprisingly orderly throughout the six-month period, as volatility moves back down to pre-2008 levels, but rising domestic interest rates, still weak European economies and a halt to China's economic growth limit the stock market's progress in the back half of the year.
A second quarter "growth scare" bursts the bubble in the government bond market. The yield on the 10-year U.S. Treasury note moves steadily higher from 2.10% at year-end to over 3.50% by early fall, putting a ceiling on the first-half recovery in the U.S. stock market, which is range-bound for the remainder of the year, settling up by approximately 20% for the 12-month period ending Dec. 31, 2009. Foreign central banks, faced with worsening domestic economies, begin to shy away from U.S. Treasury auctions and continue to diversify their reserve assets. By year-end, the U.S. dollar represents less than 60% of worldwide reserve assets, down from 2008's year-end at 62% and down from 70% only five years ago. China's 2008 economic growth proves to be greatly exaggerated as unemployment surprisingly rises in early 2009 and the rate of growth in China's real GDP moves towards zero by the second quarter. Unlike more developed countries, the absence of a social safety net turns China's fiscal economic policy inward and aggressively so. Importantly, China not only is no longer a natural buyer of U.S. Treasuries but it is forced to dip into it's piggy bank of foreign reserves, adding significant upside pressure to U.S. note and bond yields.
Commodities markets remain subdued. Despite an improving domestic economy, a further erosion in the Western European and Chinese economies weighs on the world's commodities markets. Gold never reaches $1,000 an ounce and trades at $500 an ounce at some point during the year. (Gold-related shares are among 2009's worst stock market performers.) The price of crude oil briefly rallies early in the year after a step up in the violence in the Middle East but trades in a broad $25 to $65 range for all of 2009 as President Obama successfully introduces aggressive and meaningful legislation aimed at reducing our reliance on imported oil. The price of gasoline briefly breaches $1.00 a gallon sometime in the year. The U.S. dollar outperforms most of the world's currencies as the U.S. regains its place as an economic and political powerhouse.
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We at Market Folly just wanted to wish everyone a Happy New Year. Hopefully this year will be slightly less volatile than 2008! Cheers!
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