{"id":20037,"date":"2016-04-19T20:47:13","date_gmt":"2016-04-20T01:47:13","guid":{"rendered":"http:\/\/olduvai.ca\/?p=20037"},"modified":"2016-04-19T20:47:13","modified_gmt":"2016-04-20T01:47:13","slug":"a-wall-street-witches-brew-hockey-sticks-and-financial-engineering-games","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=20037","title":{"rendered":"A Wall Street Witches Brew\u2014\u2014Hockey Sticks And Financial Engineering Games"},"content":{"rendered":"
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A Wall Street Witches Brew\u2014\u2014Hockey Sticks And Financial Engineering Games<\/a><\/h3>\n<\/header>\n
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In a nearby post\u00a0Jeff Snider makes a clean kill of the sell side\u00a0hockey stick. Just 22 months ago (June 2014), Wall Street projected GAAP earnings of\u00a0$144.60<\/strong>\u00a0<\/em>per share for the S&P 500 in 2015.<\/p>\n

Needless to say, that was off by a country mile. In fact, it was too high by\u00a067%<\/strong><\/em>, but the instructive\u00a0tale lies in the process of getting there.<\/p>\n

Since 2013 actual results and 10K filings were long done by June 2014, you have to say that the street was virtually wallowing in hopium.\u00a0To wit, the above\u00a02015 estimates embodied a two-year gain of\u00a045%<\/strong><\/em>\u00a0from the actual figure of\u00a0$100.20\u00a0<\/strong><\/em>per share for 2013.<\/p>\n

And so it went. By March 2015 the consensus estimate had been lowered sharply\u00a0to\u00a0$111.34\u00a0<\/em><\/strong>per share because the fond hopes of the prior June had not quite worked out. In fact, GAAP results for 2014 had come in at only\u00a0$102.31<\/strong>\u00a0<\/em>per share, meaning a tiny gain of just\u00a02.1%<\/strong>\u00a0for the year and an impossible hole to fill with respect to the two-year gain of\u00a045%.<\/strong><\/em><\/p>\n

Worse still, this December 2014 LTM\u00a0reported\u00a0figure was not just way short of the mark; it actually represented a reversal of direction. The post-crisis earnings recovery had already peaked at$106 per share<\/strong>\u00a0<\/em>in the September 2014 LTM period and was\u00a0now down nearly 4%.<\/p>\n

But no matter. The consensus estimate of $111.34 for 2015 made\u00a0midway through the year represented\u00a0a gain of nearly 9% over 2014.\u00a0As per usual, of\u00a0course,\u00a0that was all back-loaded to the second half. The actual\u00a0Q1 2015\u00a0GAAP profit of $25.81 was already in and represented a 6% decline\u00a0from prior year.<\/p>\n

But on Wall Street the hockey stick springs eternal.\u00a0By the time of the September consensus estimate, first\u00a0half earnings were already\u00a0down by 17%. But\u00a0the consensus assumed a stick save in the final quarter. Earnings per share were now projected.at $95.06 per share, representing a full year drop of just 7%.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A Wall Street Witches Brew\u2014\u2014Hockey Sticks And Financial Engineering Games In a nearby post\u00a0Jeff Snider makes a clean kill of the sell side\u00a0hockey stick. Just 22 months ago (June 2014), Wall Street projected GAAP earnings of\u00a0$144.60\u00a0per share for the S&P 500 in 2015. Needless to say, that was off by a country mile. In fact, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5979,2120,4803,4405,13535,860],"class_list":["post-20037","post","type-post","status-publish","format-standard","hentry","category-economics","tag-contracorner","tag-david-stockman","tag-financial-engineering","tag-gaap","tag-non-gaap","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20037","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20037"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20037\/revisions"}],"predecessor-version":[{"id":20038,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20037\/revisions\/20038"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}