Replies to post #119518 on Zeev's Turnips Patch-No Politics (ZEEV)

[otraque]

Nice chart! As i scan, i am focusing most squarely on the 2003Q1E, in my cynicism of the Street, i see this one as a potential classic of manipulated low balling, the closer they got to the Quarter the more they dropped their estimates so when earnings started coming in they could get a increased amount of "they beat the Street, things look great!!!"
As we back scan, we see their 12/26/2002 estimates for this Quarter were about just right; but THEN they drop down them hard----i no more trust the Street than Lucy holding a football for Peanuts, and trusting she will not pull the football away:) They dropped it from 12.5 area to 11.9 and then flattened to 12.00 by week of 4/17/2003 but came in at about 12.50(a WS standard trick).
Now on 4/4/2002 they were saying 2003 would total 63, now they have beat that DOWN to 53.70.
Now these are pro-forma figures WHICH S&P do NOT themselves recognize as a valid measure but ONLY that which they publish as available data, and while thet (S&P) stand behind GAAP and i, myself, personally think CORE the best measure(but am not FIXATED on that notion).
But i don't mean to be rude, i promise:) But i am a strong believer that there exist no sound reasoning for using Pro-Forma, i consider it a "plague on our house". This is such a deep view of mine Culmus, i can't back up on it without my being dishonestly agree-able.
I won't get in depth regards Buffet's scorn of Pro-Forma AND also the "forward earnings" system, but touch on it.
Buffet talks about the good old days when we had ONE earnings system.
We must get back to one , and only one earnings measure and i support the fantasy dream of of International Standard for earnings.
But at minimum, until Pro-Forma is outlawed; we are in a murky fog and actually know zilch( except a solid notion we are getting "flim-flammed")
Buffet himself says by today's standards he himself, with all his expertise and assistants, finds it hard to pin down what anyone company is actually worth, what actually is it's fair value.(he remains in saying, that with but a few, very few exceptions; he sees no reason to be in the market)
So, he rightfully, says; what chance does the public have at knowing what actually is a fair value for a stock.
GAAP itself surely is not a solid system, but it is at least better than Pro-Forma.
The great danger is, that since the boom, and we have gotten deeply into a shill game of "where is the ball with the real earnings"(the worse part, none of balls contain the real earenings:) that has led to , and is one of the major causes of our massive bubble, and we are quite frankly caught in surfing on top of once again a re-cresting tidal wave that never was able to just crash and die, and through accounting witchery we are trying to talk ourselves out of that fact--desperate to avoid reality, is my opinion.
This is why i think we are Not finished the last event, the final recognition, the point where hopelessness sets in, and realization they is no way out except to get the hell out of the market, at which point we bottom out, and have genuine undervaluation, and then we will recycle up, but in doing so, we will also be passing laws to reform the system that got us here in the first place.( but 50/70 years later the system will most likely again have become corrupted, such is human nature and the cycle of Boom and Bust).
But i agree with others that the final chapter, the denouement, so to speak, regards SPX and DOW may not occur until 2006 and Nasdaq 2005.( there is god argument for 2013, but heck i will be 72 then and won't care:)
So in the interim we need survive on are wits and adaptability and play the waves inside the Greater Wave the best we can.
But the average LTBH investor, they need a miracle, as come 2005/2006 i feel they will be devastated as the final chapter in "The Devil Takes the HindMost" is completed.
A simple look at the Nikkei shows a classic cycle.
http://stockcharts.com/def/servlet/SC.web?c=$NIKK,uu[f,a]daclyyay[d19900105,20030505][pb50!b200][vc6... and yes, i feel if our goverment relentlessly props like Japan, we will may not hit bottom until at least 2013.
Regards Japan itself, i am not sure, have they hit there last bottom; could be--but i have NOT contemplated it enough, by any means. GodfreyDaniel/Max

[ardent jd]

Culmus

The implied growth rate in the Barra model is a historical number, rather than one based on analysts' expectations. Here is how Barra describes it:

"The capitalization-weighted average of the individual constituent growth rates. The individual company growth rate is the 60 month average of the historical EPS growth, a function of return on equity and retention rate."

Because it is a rolling 5-year number, it will lag badly. If you look at the long-term ROE chart, there has been an upward trend coincident with the great bull market dating back to 1983. However, ROE peaked around the same time as the market, and has rolled over sharply. Interestingly, ROA does not show the same long-term uptrend as ROE, implying that corporate leveraging was a major driver in higher ROE and stock prices. That game is now over, as I think you have pointed out before. So...a different interpretation but the same conclusion.