The stock market – specifically the S&P 500 and the Dow have become important propaganda tools of Fed/US Government. After all, a rising stock market means that investors are “discounting” future economic and earnings growth, right? As long as the stock market keeps hitting new records, any negative economic reports have to be invalid.
Of course, like everything else that hits the mainstream headlines these days, 90% of the time the opposite is the truth. We can call this “Bernays’ Theorem.” If you don’t know who Edward Bernays is, please use Google to look him up.
Corporate earnings have become mindblowingly fraudulent, which means that a fraudulent stock market is “discounting” fraudulent corporate earnings reports.
As an example, Microsoft reported earnings yesterday. But companies can’t just report traditional GAAP earnings statements. We get a highly unreliable version of GAAP that has been liberalized over the past 20 years to enable companies to distort the true earnings “snapshot,” enabling the presentation of reported net income that exceeds actual net income.
But the policy deciders didn’t just stop with that bastardization of quarterly earnings reports. They now permit companies to report “non-GAAP” numbers. The literal translation of “non-GAAP” is, “if all this good stuff happened that didn’t really happen and might never happen, this what our earnings might look like.” “Non-GAAP” is a complete fairy-tale.
So yesterday MSFT reports “GAAP” numbers, which we already know are distorted, in which its Fiscal Q4 operating income declined nearly 7% from FY Q4 2015. Even worse, giving MSFT the benefit if using “non-GAAP” to compare against GAAP, MSFT’s net income plunged 38%. The source of the decline in operating income was “revenue deferrals.” Huh? “Non-GAAP” allows MSFT to pretend the revenue deferrals never occurred. This revenue that may or may not ever hit MSFT’s top line.
MSFT’s GAAP numbers missed the Street consensus expectations badly. And yet through the magic of make-believe numbers, MSFT was able to smooth out any non-existing economic revenue and net income to that enables investors to act as if MSFT’s FY 4th quarter numbers were something they were not.
The Fed propaganda part: MSFT is being attributed for driving the Dow and SPX to a new record close. MSFT’s earings miss is now magically being reported as a “beat.” Beat this.
Why was my colleague, Scott,” left speechless? Because despite GAAP revenue and operating that declined measurably for its fiscal Q4 – AND revenues year over year declined nearly 9% – the stock spiked up 5.3% today. It’s inexplicable OTHER than the fact that the Fed is juicing the stock market in order to obscure the truth. click to enlarge graphic
Intel also has engineered a similar “beat”. What is going in the markets is not trading, it is like a psycho killer appearing at the windows of every home in town and flashing an evil grin as if to say “this is what I will do, what the heck are you gonna do about it?”. It is a shame that MSM, instead of questioning the questionable reporting of results and dangerously over priced stock market, is merrily singing the same tune that the Fed is singing. In 16 years of following the stock markets, I have never seen a more distorted market as I see now. Really, “this time is different”. We are seeing a Weimar Republic style of inflation on the stock markets, engineered by the central banks. Bad news makes this market go up, fake good news makes it go up even more! And the Brexit dip lasted all of 2 days! Even if things are going swimmingly well as alleged by the banksters, a normal market would have pulled back, consolidated and then gone higher. But what we have is a manipulated market which only goes up and may never go down ever.
“But what we have is a manipulated market which only goes up and may never go down ever.”
It’s going to go down eventually. Yes they may “goose it” with QE, and stock buy-backs, and Fed buying of the broad indices. To the extent they do not allow a “correction”, to that extent we will see ever-faster loss of buying power of the fiat currency of your choice…OK the dollar.
Deflation and inflation…I have seen differing definitions or uses of those words. Suffice it to say the things people need the most…they will cost a lot more currency units in the future.
for them to drive the pedal to the metal…9 days …tells me panic & something really,really bad is a foot…it’s over…chinese retail investors my ass….
A rising stock market is necessary for national security and beyond the scope of us plebes.
This is never going to end!
Super Mario hinting at public backstop for banks.
Bonuses on the upside, bailouts and bonuses on the down
I am so sick of this. I keep thinking that one day I am going to read that sanity is making a come-back. …..
Now that we are taking software … to propose this idea… fiat $$$ in incompatible with
free markets …when the two are combined you have all manner of unknown consequences… you have combined two things that you should never do… we did that in 1971 on the Nixon gold default…we have been living with the consequences of a pure fiat $$$ …up to now we lived /traded on the past… that ended in Aug 2015 % zero bound…now leveraged debt will all the corps one at a time … weakest first…
If they do not lie… we will all know most of the companies and corps are dead now…
they think infinite currency injection will work- a substitute for labor and honest work…
it might for a very short while , but …it will not… at least in the long run…
Fiat currency is incompatible with capitalism & free markets …full stop. That is why IMHO the economy will collapse soon …