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3.3% economic growth last quarter (pg. 5)
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| jerZ07002 |
| quote: | Originally posted by Krypton
This is a bottom up analysis. I could care less about macroeconomic trends. Those are practically impossible to predict. But company financial statements, that is solid fact, and very dependable data with which to make predictions. Macro economic predictions are wrong much more than they are right. And with the international nature of today's business, now you have to predict macro on an epic global scale. Are you seriously going to tell me I, or you, can predict this with any practical accuracy at all? I don't believe it's predictable outside general beliefs of uptrend/downtrend, so I see no point in considering a macro prediction in my model. I don't like it being called "fake" either. Took me two days to run this, and years to develop the model itself.
Notice how my model predicts a -11% profit decrease. I consider that much more an accurate prediction than say, oh, inflation is going to be this %, or I expect unemployment to starts declining to this level, or the Fed is going to do this or that.. |
have you ever heard of a restatement? i work with accountants, financial statements are NOT always solid data, many times the numbers are simply plugs. I wouldn't consider financial statements much more solid than general economic data used to formulate economic trends. To add to that, past performance isn't always the best indicator of future performance. Since financial statements only tell a past story, it's likely not to be the best way of telling the future. |
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| Krypton |
| quote: | Originally posted by jerZ07002
have you ever heard of a restatement? i work with accountants, financial statements are NOT always solid data, many times the numbers are simply plugs. I wouldn't consider financial statements much more solid than general economic data used to formulate economic trends. To add to that, past performance isn't always the best indicator of future performance. Since financial statements only tell a past story, it's likely not to be the best way of telling the future. |
I don't see how things such as unemployment numbers or inflation should be incorporated into my predictions of profit growth. Financial statements may entail some plugs, but for the most part, they are single most important piece of data to analyze the company with. I certainly don't believe most companies are cooking up numbers, if that's what your implying they do on a regularly basis. The most important numbers, revenue, net income, operating cash flow are hard to cook up, and if net income is manipulated, which I know happens, than cash flow will f*ck them over on that. You can show positive net income but still have negative cash flow. These things are solid in my opinion. You can deduce a BS financial statement from a good one. How can on deduce whether the inflation numbers are correct? Especially when their goal is to paint a rosier picture of reality by not including food or fuel prices. Inflation at 3%? Give me a break...
And making predictions of the future entails using data from the past. Of course past performance is not a guaranteer of future performance. Stock analysis is an artform, not a science. I work with probabilities rather than definites. Past performance is the basis of making predictions of the future, it's like that in weather forecasting, sports forecasting, etc. If past performance is good, then it can be assumed, that the probability of future good performance is high. No doubt there is a chance of the minority probability beating the likiest probability. But when I have excellent stocks, perhaps 3 of them are no going to do good, even though their past performance is great. I certainly pay attention to things like that.. |
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| atbell |
| quote: | Originally posted by Krypton
I don't see how things such as unemployment numbers or inflation should be incorporated into my predictions of profit growth.
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Unemployment is an indication of how strong the economy is, fewer people with jobs means fewer customers for any company that you are analysing. Changes in unemployment would also give you an indication of how you could expect profits to deviate from past data.
Inflation is important for profit growth, especially if you are aware of where it is occuring. General inflation without matched wage rises is going to cut consumer disposable income significantly. Inflation of base materials will cut the profitability of a company by making thier costs higher.
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Financial statements may entail some plugs, but for the most part, they are single most important piece of data to analyze the company with.
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It all depends. If you want to find the healthiest rat on a sinking ship then company specifics are great and you'll pick the one mostl likely to swim longest before drownding. Another strategy would be to inspect the ship first then see which rats look like they might be worth pairing with.
I'd also be very wary of management and marketing / sales. Either of these can scuttle a company quickly and won't always show up in thier profitability. All it takes is one gamble for the company to losse it all.
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The most important numbers, revenue, net income, operating cash flow are hard to cook up, and if net income is manipulated, which I know happens, than cash flow will f*ck them over on that. You can show positive net income but still have negative cash flow. These things are solid in my opinion.
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Nothing is hard to cook. The compliance people are ... well people. It only takes a pair of people to cook things, one to give money the other to take it.
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You can deduce a BS financial statement from a good one. How can on deduce whether the inflation numbers are correct? Especially when their goal is to paint a rosier picture of reality by not including food or fuel prices. Inflation at 3%? Give me a break...
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It's exactly the same, companies have the goal of painting a rosier picture of reality as much as a government does. You can deduce good numbers from bad ones with some reading. One way is to be aware of the global economy and trade paterns, the other is to cross check with the media and others interested in things like GDP. Due dilligence has to be applied to both decisions based on financial statements and economic conditions.
I think part of your confusion here might be that you look at 3% inflation and are thinking about it as an exact number. It's not, it is an indicator, kind of a centerpoint about which the over all inflation is most likely to appear.
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And making predictions of the future entails using data from the past. Of course past performance is not a guaranteer of future performance. Stock analysis is an artform, not a science. I work with probabilities rather than definites. Past performance is the basis of making predictions of the future, it's like that in weather forecasting, sports forecasting, etc. If past performance is good, then it can be assumed, that the probability of future good performance is high. No doubt there is a chance of the minority probability beating the likiest probability. But when I have excellent stocks, perhaps 3 of them are no going to do good, even though their past performance is great. I certainly pay attention to things like that.. |
Again this is no different then economic forcasting. The future is uncertain, it is an art form not a science, it works with probabilities not definates, and it uses the past to help predict the future.
The major difference is the terminology that is used. |
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| Krypton |
| quote: | Originally posted by atbell
Unemployment is an indication of how strong the economy is, fewer people with jobs means fewer customers for any company that you are analysing. Changes in unemployment would also give you an indication of how you could expect profits to deviate from past data.
Inflation is important for profit growth, especially if you are aware of where it is occuring. General inflation without matched wage rises is going to cut consumer disposable income significantly. Inflation of base materials will cut the profitability of a company by making thier costs higher. |
I understand that, but I can't develop a formula that says, "If unemployment reaches this level, the company's valuation will gain/loss this amount." If inflation rises 2%, this company's valuation rises 3%. I can't make those kinds of judgments. So it's not worth my time trying.
| quote: | | It all depends. If you want to find the healthiest rat on a sinking ship then company specifics are great and you'll pick the one mostl likely to swim longest before drownding. Another strategy would be to inspect the ship first then see which rats look like they might be worth pairing with. |
You're right. Sector analysis is as far up the chain as I go. I even posted my sector analysis in the Marketocracy thread on several occassions.
| quote: | | Nothing is hard to cook. The compliance people are ... well people. It only takes a pair of people to cook things, one to give money the other to take it. |
If it's like that, then it's not even worth looking at financial statements. We should all just be day traders watching charts all day and drawing trend lines. There is a standard public companies are required to follow (GAAP). If they don't they can be delisted or prosecuted by the SEC. Dow Jones companies especially must be careful with what they report with so much visibility on their part. Do you seriously believe huge public companies are cooking up their books that any analysis is pointless?
| quote: | | It's exactly the same, companies have the goal of painting a rosier picture of reality as much as a government does. You can deduce good numbers from bad ones with some reading. One way is to be aware of the global economy and trade paterns, the other is to cross check with the media and others interested in things like GDP. Due dilligence has to be applied to both decisions based on financial statements and economic conditions. |
As I said, macro-economic trends/predictions are hardly a measure useful enough for fundamental analysis of a company. I can't calculate a intrinsic value based on inflation, GDP, or unemployment numbers.
| quote: | | I think part of your confusion here might be that you look at 3% inflation and are thinking about it as an exact number. It's not, it is an indicator, kind of a centerpoint about which the over all inflation is most likely to appear. |
I don't find the inflation data useful in any kind of fundamental analysis. As I said, I can't place a valuation based on macro-economic trends. Even predicting macro-economic trends is pretty close to impossible. |
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| atbell |
| quote: | Originally posted by Krypton
If it's like that, then it's not even worth looking at financial statements. We should all just be day traders watching charts all day and drawing trend lines. There is a standard public companies are required to follow (GAAP). If they don't they can be delisted or prosecuted by the SEC. Dow Jones companies especially must be careful with what they report with so much visibility on their part. Do you seriously believe huge public companies are cooking up their books that any analysis is pointless?
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I think that this is probably more common then you might first beleive. Financial numbers in the corporate sector are just as sketchy as they are in the public sector. It's not just a contious effort to hide mass scale deficiencies but more the sum of small errors which just happen in large organizations.
It's not so much pointless as limited in about the same way as any other analysis is limited. |
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| Krypton |
| If it's so bad, then mergers & acquisitions, fundamental analysis, analysts ratings, etc. are pointless. Yea a company may try to project as much positive as possible, but it is very very difficult to hide losses without doing something illegal. The way you imagine it, GM shouldn't have such horrible statements, but they do, and they don't hide it. I've looked at hundreds of horrible stocks who can't and haven't hid their losses. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
If it's so bad, then mergers & acquisitions, fundamental analysis, analysts ratings, etc. are pointless. Yea a company may try to project as much positive as possible, but it is very very difficult to hide losses without doing something illegal. The way you imagine it, GM shouldn't have such horrible statements, but they do, and they don't hide it. I've looked at hundreds of horrible stocks who can't and haven't hid their losses. |
you need to get into the legal/accounting world for a bit. I've seen audits where the numbers had no support and they couldn't be tied anywhere. Essentially, the comptrollers word was the basis for deciding the numbers were correct. It's much more prevalent than you think - although certainly not on an Enron scale. It's not like people are purposefully trying to cheat anyone, sometimes they just have no idea what the hell is going on with their own numbers. |
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| Krypton |
| quote: | Originally posted by jerZ07002
you need to get into the legal/accounting world for a bit. I've seen audits where the numbers had no support and they couldn't be tied anywhere. Essentially, the comptrollers word was the basis for deciding the numbers were correct. It's much more prevalent than you think - although certainly not on an Enron scale. It's not like people are purposefully trying to cheat anyone, sometimes they just have no idea what the hell is going on with their own numbers. |
I'm not denying that. I guess we I just have a different view of the economy. I still think the stock market is the single most indicative indicator of the economy's strength. Not GDP figures and all that crap. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
I'm not denying that. I guess we I just have a different view of the economy. I still think the stock market is the single most indicative indicator of the economy's strength. Not GDP figures and all that crap. |
fair enough - all you can do is express your opinion and the basis for it. |
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| Lebezniatnikov |
| quote: | US jobless rate near 5-year high
The unemployment rate in the US is at its highest level in nearly five years after a higher-than-expected 84,000 jobs were lost last month.
The jobless rate has risen to 6.1%, the highest since December 2003, adding to concern about the US economy and its ability to stave off a recession.
In a further blow, the Labor Department revised upwards job loss figures for each of the past two months.
The Federal Reserve said earlier this week economic activity remained "weak".
Worse than thought
The number of jobs lost last month was significantly higher than the 75,000 forecast by economists.
All sectors of the economy were affected with manufacturing worst hit, shedding 61,000 jobs.
The labour market has worsened noticeably in recent months, reflected by the fact that it is now apparent that more jobs were lost in June and July than was previously thought.
Revised figures show that in June, 100,000 jobs were lost while in July 60,000 jobs disappeared. This was up from the 51,000 figure initially forecast for both months.
Employers have now reduced their payrolls for eight straight months, with the dramatic downturn in the housing market and the credit crunch hurting all sectors of the economy.
"This is more convincing evidence that the economy is still in trouble," said Gary Thayer, senior economist at Wachovia Securities.
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http://news.bbc.co.uk/2/hi/business/7600379.stm |
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| MisterOpus1 |
I dunno, but it looks aweful fishy to me. Seems like that damn country is STEALING OUR JOBS!
Well thank goodness we've got Sarah Palin as a potential VP. With her work in Alaska and having Canada as a neighbor, that foreign policy experience will come in handy when we finally decide to INVADE!!!!!!!
USA! USA! USA!!!!!!! |
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