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A jobless recovery is where the earnings of major corporations "grow" as their revenues decrease. It is where the earnings increases are made by focusing on operating efficiencies while revenues decrease. It is where the economic data says that the economy is in the tank but "its going to get better" next year. Its where income and earnings statements tell the reader that things are getting better but in the fine print say our outlook my be affected negatively by a bad global economy.
Intel says: Ongoing uncertainty in global economic conditions poses a risk to the overall economy as consumers and businesses may defer purchases in response to tighter credit and negative financial news, which could negatively affect product demand and other related matters. Consequently, demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence; customer acceptance of Intel's and competitors' products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers.
Intel's result that were reported as " better than expected". The Non-GAAP Results (excluding the EC Fine) Q2 2009 vs. Q2 2008 vs. Q1 2009 Revenue $8.0 billion down $1.4 billion. This was a drop of 15% but the operating efficiencies produced income of 1.45 billion (Excluding the effects of the European Commission fine of 1.45 billion), the company had non-GAAP operating income of $1.4 billion, net income of $1.0 billion and EPS of 18 cents. On a GAAP-basis, the company reported an operating loss of $12 million, a net loss of $398 million and a loss per share of 7 cents.
If you read on it says: -- Capital spending: Expected to be $4.7 billion plus or minus $200 million, down from $5.2 billion in 2008. Why are they cutting capital spending. It is all part of the jobless recovery. It makes for a better bottom line.
Look at these headlines:
After Intel's [INTC 18.26 -0.24 (-1.3%) ] big beat earlier in the week, the pressure was on IBM [IBM 113.92 3.28 (+2.96%) ] to beat, and beat big, and the company answered. Big.
So big, in fact, that the $2.32 the company reported, beating the Street by 30 cents, was the biggest beat in IBM's history!
The company also reported $3.1 billion in net income, up 12 percent; the gross margin of 45.5 percent means IBM has increased margins in 19 of the past 20 quarters.
Some other color: IBM closed 17 Services deals on the quarter north of $100 million each so if there's a concern out there of an IT or enterprise spending slowdown, it doesn't appear that IBM is necessarily feeling the pain. Sure, revenue was $23.25 billion, which was a little below the Street consensus of $23.58 billion, but the company's ability to translate topline to increased bottom line continues to impress.
Better still for investors, and something that should resonate through all of tech tomorrow: IBM raised full year EPS guidance to $9.70 from the $9.20 it anticipated a quarter ago.
Mike Holland at Holland & Co. says, "Big Blue blockbuster. I expected good numbers. I was shocked by how good these were."
Look at IBM's revenues in the report:Second-quarter net income was $3.1 billion compared with $2.8 billion in the second quarter of 2008, an increase of 12 percent. Total revenues for the second quarter of 2009 of $23.3 billion decreased 13 percent (7 percent, adjusting for currency) from the second quarter of 2008.
RD&E expense of $1.4 billion decreased 14 percent compared with the year-ago period.
From a geographic perspective, the Americas' second-quarter revenues were $9.9 billion, a decrease of 9 percent (7 percent, adjusting for currency) from the 2008 period. Revenues from Europe/Middle East/Africa were $7.9 billion, down 20 percent (7 percent, adjusting for currency). Asia-Pacific revenues decreased 7 percent (5 percent, adjusting for currency) to $4.9 billion. OEM revenues were $537 million, down 24 percent compared with the 2008 second quarter. Revenues from the company's growth markets organization decreased 11 percent (up 1 percent, adjusting for currency) and represented 18 percent of geographic revenues.
The weighted-average number of diluted common shares outstanding in the second-quarter 2009 was 1.34 billion compared with 1.40 billion shares in the same period of 2008. As of June 30, 2009, there were 1.31 billion basic common shares outstanding. So I guess they bought some stock back which also helps prop up the earnings
The headlines were about the increases in earnings. The stocks of INTC and IBM "surged" as they blew away earnings.
Oh Looky here Bank of Amer has blow out earnings..What a surprise
CHARLOTTE, N.C., July 17, 2009 /PRNewswire via COMTEX/ -- Bank of America Corporation today reported second-quarter 2009 net income of $3.2 billion. After deducting preferred dividends of $805 million, including $713 million paid to the U.S. government, diluted earnings per share were $0.33.
Bank of America finished the second quarter with its strongest capital position in recent memory, with a Tier 1 Capital ratio of 11.93 percent as well as a leading liquidity position among global banks.
Remember all the :experts" have just told us over the last 3 weeks that Bank of America was a buy and now here is the great earnings report.
I don't know about you but just 6 months ago it got 25 billion it TARP mony and just 4 weeks ago it sold tons of common stock and now it has blow out earning? Hey what was the 25 billion for? Eaither they really need it or they stole 25 billion from Uncle Sam. Well it was both, but these earning reports are great works of fiction. That's right I am tell you that this is all a bald faced lie.
This is a jobless recovery:
It is about earnings increasing as revenues and jobs disappear.
It is about cutting spending to increase the bottom line.
It is about buying back your stock to increase the earnings per share number.
It is about the Fed chairman saying the economy is getting better and Merrill Lynch saying the recession is over
It is about setting up a rally by showing the viewers on CNBC that were are forming a short term head and shoulders top.
It is about creating a short squeeze in options expiration's week.
It is about refocusing the attention on "better than expected earnings" just after horrible economic numbers were released.
The message is what does a lousy economy mean to stocks. The answer is nothing. It means nothing because the corporations can make money under any circumstances.
I will tell you that that message is designed to take our attention away from the real problem. It is like taking blood pressure medication but continuing to eat fatty foods. The heart of the problem is the health of the consumer because the consumer is 80% of the economy and the consumer's balance sheet is in bad shape.
You can only "increase" earnings so much by cutting and increasing operation efficiencies. The bottom line is that someone has to buy something to make it all work. The something is a long way off.
That is what they mean by a jobless recovery. They are cutting faster than they were before and earnings are getting better on a relative basis. Cutting does not solve the problem. Consumers are cutting too. They are spending less than they were in the first quarter and their income statements are improving on a relative basis. They are going under slower than they were before because they have changed they way they spend. They are cutting out the fun and expensive things they used to do when their houses were going up.
Over the last few months housing prices have rebounded because the speculator has returned. Flipping houses has returned but at a lower level. The problem is that incomes are still falling and the jobless rate is still going up. To support higher prices you need higher income. This is not happening and is a long way off. They have not solved the problem. The economy and job creation and increasing income is the only thing that will get us going again. I do think that real estate is bottoming because the affordability index is at 50% but I don't think the bounce is going to be as much as people think.
. What we have here is a "earnings" rally brought on by cutting expenses and not increasing income. Think about your own situation if your income continues to fall at some point their is no where to cut. They experts all are aware of this and are all gaming the market with the Fed and the banks. That is what they mean by a jobless recovery.
No new trades this week still looking for a place to add to shorts. I am very very bearish after this rally. I have multiple targets and am close to pulling the trigger. I am guessing that we rally out of expiration next week and I hope we take out the May highs.
The beat goes on ....Mikey
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