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Unsurprising Earnings

July 6, 2011 – 4:58 pm

This morning the non-manufacturing ISM number came in as expected unlike
last week’s manufacturing ISM which showed a strong increase. The conclusion
is that factories are starting to pick back up from the slow patch but
not so much for other parts of the economy. At least not yet.

Earnings season starts to heat up next week. The expectations are for them
to increase by about 14%. There has been a lowering of expectations over
the last couple of months as the economy works its way through the soft
patch so it is possible that the experts lowered their numbers too far.

Over many quarters in a row the actual earnings reports have been
beating their estimates. The percentage of companies doing so is
running about 70%. It will probably do it again. It makes one think
that the fix is in and that soon, if not already, beating earnings expectations
is a given and no longer a surprise when they do so. That will mean
traders and investors will not react to it.

After the era of managed expectations with supposed independent
analysts, didn’t the government force the experts to become independent
from their masters, the Wall Street Bankers? It seems maybe they have found
new masters in the corporations that make up the market because I don’t
see a lot of independent thinking when it comes to earnings estimates.

Good Trading
Steve Peasley

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