{"id":46215,"date":"2014-01-13T05:34:52","date_gmt":"2014-01-13T10:34:52","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=46215"},"modified":"2014-01-13T05:34:52","modified_gmt":"2014-01-13T10:34:52","slug":"warning-cheesepocalypse-is-upon-us","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2014\/01\/13\/warning-cheesepocalypse-is-upon-us\/","title":{"rendered":"Warning: Cheesepocalypse is Upon Us!"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> \"Warning:<\/p>\n

Analysts and economists can’t resist fretting over the potentially terrifying impact of the Fed’s taper, which begins this month. I’m here to tell you that a more dire crisis is unfolding – an imminent shortage of everyday Americans’ most beloved commodity.<\/p>\n

“We want you to hear directly from us that it’s true,” reads Velveeta’s official Tumblr page. “We are experiencing a temporary scarcity of our nation’s most precious commodity: Liquid Gold.”<\/p>\n

At the start of the NFL playoffs? Say it isn’t so!<\/p>\n

Sadly, it is<\/em> so, my fellow Wall Street Daily<\/em> readers.<\/p>\n

Kraft<\/strong> (KRFT<\/a>) blames the shortage on “a combination of minor manufacturing challenges.”<\/p>\n

After last year’s hysteria over a potential shortage of chicken wings, you’d think companies providing the most popular football-season food items would take precautions. Apparently not.<\/p>\n

While Kraft swears that it’s a “short-term issue,” I wouldn’t trust them. If you’re having a Super Bowl party, stock up!<\/p>\n

Now, as far as what impact the appropriately dubbed “Cheesepocalypse” will have on Kraft’s overall business and stock price, I can’t tell you. Not until February 13. That’s when the company is slated to report fourth-quarter results.<\/p>\n

And that brings us to the next issue I want to address today – earnings. Because this time around, there are two things we should be extremely concerned about as the reporting activity kicks into high gear…<\/p>\n

Where it’s At<\/strong><\/b><\/p>\n

Forget having \u201ctwo turntables and a microphone\u201d like the Beck song suggests. When companies start reporting earnings en masse in a few weeks, earnings growth is \u201cwhere it\u2019s at.\u201d<\/p>\n

\"\" Why? Because stock prices ultimately follow earnings. But lately, they’ve been advancing on the backs of multiple expansions. So investors are paying more and more for the same penny of earnings.<\/p>\n

Case in point: In the last 12 months, the price-to-earnings (P\/E) ratio on the S&P 500 Index expanded almost 20% – from 14.7 to 17.3.<\/p>\n

That’s not a sustainable situation. When P\/E ratios soar uncontrollably, the end of the bull market is nigh.<\/p>\n

Now, there are two ways to keep multiple expansions in check. Either the denominator in the calculation (earnings) increases or the numerator (prices) decreases.<\/p>\n

It goes without saying, of course, that we want the former to happen. After all, declining prices are only good for short sellers.<\/p>\n

With that in mind, here’s what’s troubling me…<\/p>\n

At the end of September 2013, analysts estimated that S&P 500 companies would grow earnings by 9.6% in the fourth quarter.<\/p>\n

Over time, analysts always <\/em>revise those estimates downward as they get more data. In fact, during the last five years, the average decline in estimates has been 5.8%, according to FactSet’s latest Earnings Insight<\/em> report.<\/p>\n

However, this go-round, they didn’t lower expectations as much as usual. They now expect fourth-quarter earnings to grow by 6.3% – a drop of only 3.3%.<\/p>\n

That means either the underlying data driving their calculations strengthened – or analysts are way too optimistic.<\/p>\n

If it’s the latter, the stage could be set for major disappointments. Investors don’t tend to take kindly to companies reporting lower-than-expected profit growth.<\/p>\n

So, like I said before, companies better bring it when it comes to reporting growth results. Otherwise, stock prices could start dropping – quickly.<\/p>\n

Why So Glum, Chum?<\/strong><\/b><\/p>\n

Guidance promises to be another critical factor this earnings season.<\/p>\n

Why? Because an obvious disconnect currently exists between the underlying economic data and company outlooks…<\/p>\n

You see, the latest economic reports, most notably the recent GDP figures, point to an economy that’s accelerating. And more economic activity on the horizon should<\/em> translate into more sales and profits for companies.<\/p>\n

However, the overwhelming majority of S&P 500 companies that provided guidance so far don’t reflect such a reality. Of the 107 companies in the S&P 500 that have issued fourth-quarter earnings guidance, 88% issued negative guidance.<\/p>\n

Granted, companies love to underpromise and overdeliver. Hence, the five-year average percentage for negative guidance of 64%, according to FactSet. But we’re talking about an abnormally high level of pessimism right now.<\/p>\n

If companies don’t start issuing upbeat guidance, there could be trouble on the horizon that has yet to show up in the economic data.<\/p>\n

Bottom line: It’s common for bull markets to climb proverbial “walls of worry.” But at this stage in the bull market, slowing growth and overly negative outlooks aren’t worries we can simply overlook.<\/p>\n

So keep an eye on the data. Because the implications could be far more disastrous than a Cheesepocalypse.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

The post Warning: Cheesepocalypse is Upon Us!<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

Article By WallStreetDaily.com<\/u><\/a><\/p>\n

Original Article: Warning: Cheesepocalypse is Upon Us!<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Analysts and economists can’t resist fretting over the potentially terrifying impact of the Fed’s taper, which begins this month. I’m here to tell you that a more dire crisis is unfolding – an imminent shortage of everyday Americans’ most beloved commodity. “We want you to hear directly from us that it’s true,” reads … <\/p>\n

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