Readings: Commodity charts, Earnings trends, Russia
- Bespoke: Bespoke’s Commodity Snapshot
- Zacks: Seismic Shift in Earnings
. . . there is a serious dichotomy between growth as measured by the median EPS growth rate and as measured by the total net income growth. The median EPS growth rate is fairly healthy, while the total net income reported is sharply below a year ago.
More companies are posting positive surprises than disappointments, although the margin is slightly less than we have seen in the past. It is also clear that there seem to be two markets, with part of the economy continuing to enjoy very robust earnings growth, while other parts, chiefly the Financials, are having a down right awful earnings season.
The S&P 500 as a whole is trading for 15.3x and 12.9x, 2008 and 2009 earnings, respectively. Based on a blend of 67% 2008 earnings and 33% 2009 earnings; that translates to a 6.91% earnings yield, which looks extremely cheap relative to a 3.85% ten year T-note. Even against the AA corporate bond yield of 5.84% it looks attractive. However, the current level of expectations for corporate earnings still implies that profits will stay well above their historical averages as a share of GDP. That would be an exceedingly rare occurrence during a recession.
Russia’s economy is booming for a 10th straight year, buoyed by record oil prices, massive demand for natural resources and soaring domestic consumer demand.
Russia’s nominal gross domestic product soared to $1.7 trillion in 2007 from less than $200 billion in 1999, the first year of the current boom. Until then, Russian gross domestic product had halved since the collapse of the Soviet Union.
U.S. investment bank Goldman Sachs predicts that Russia’s economy will overtake Britain, France and Germany over the next few decades to become the biggest economy in Europe.
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