bizzXceleration: Performance, Value and Profit

The chart shows what we think is going on, with the usual caveat about my technical skills to be noted. We've talked about the three steps on the down staircase before as we keep recycling the first stage of Kubler-Ross (denial). You may now officially accuse us thereof. Looking a the chart you see where the 3rd step was up, for a change. After the Fed saved the world for St. Paddy and UBS wrote-off, re-capped and fired for April Fool's it still looked like it was going to break down. Now that Citi has wrote-off, looks for new cap and is firing bigtime all's well with the world. And oh yeah Google took us all to the moon. That last is so wrong we don't know what to say but not for the reasons you think. It was so bubblicious it was due but blaming it on a technical change in managing the clickthru and charge process was silly. That's both what analysts are for and what they explained back in Jan. and Feb. In other words they should never have been dinged on making their business run better but nobody was listening. Now we'll have to see how the rest of the earnings play out. Since all the econ news was bad and the credit markets may be tightening back up again....

Fascinating as Spock would say. Or was it "markets are so irrational" ? But read the newsclips for a broader view and some thought-provoking ones. And just to add a couple of clarifying observations on the stairsteps ~ Mar30th it looked like the next one was down as well. Then it looked like we might be consolidating into a sideways band while we waited for more clarity on the economy and earnings; or at least wider acceptence. But the underlying s.t. sentiment is oh, please I deserve a runup...pretty please...this is a bottome. Call it a Clinton market... :)

Now that's funny that is on several levels (thanks Larry).

READINGS 

Goldman Strategist Says U.S. Earnings Are `Awful,' Will Pull Down S&P 500 will drop as companies slash forecasts for the rest of 2008. ``Early signs are awful,'' a team led by David Kostin, Goldman's New York-based U.S. investment strategist, wrote in a report today. ``We expect generally disappointing results and a swath of lowered profit guidance that will drive the Standard & Poor's 500 Index lower in coming weeks.'' Kostin, 44, said last month that the S&P 500 may fall to 1,160 in the ``near term'' before rebounding to 1,380 by December, making Kostin among the most bearish Wall Street strategists tracked by Bloomberg. His year-end forecast implies a 6 percent annual decline, the biggest drop predicted by Goldman, which outmaneuvered competitors last year by profiting from the mortgage-backed securities market's slump, since Bloomberg began tracking the data in 2000. Goldman said worst-than-expected earnings from General Electric Co. and Alcoa Inc. are a harbinger of more to come. Analysts have reduced expectations for S&P 500 earnings growth during the second half of 2008 ``only slightly'' even after cutting first-quarter projections by 17 percent, Kostin wrote. Forecasts for a ``speedy recovery'' in profits are too optimistic, and stocks will drop when investors start viewing estimates with ``appropriate skepticism,'' he wrote. Analysts surveyed by Bloomberg have cut their projections for first-quarter earnings at S&P 500 companies every week since Jan. 4. They now predict a 12.3 percent drop, compared with an estimate for an increase of 4.7 percent at the start of 2008. Analysts are currently estimating 2008 profit growth of 11 percent for S&P 500 companies, down from 15 percent at the start of the year, according to Bloomberg data. The index has declined 15 percent since reaching a record in October.

Crisis to Affect Markets for a Decade: JP Morgan The financial crisis will affect market structure and pricing for at least a decade and lead to greater regulatory powers for central banks in areas at the centre of the turmoil, analysts at JP Morgan said. "Market participants and regulators will focus intensely on controlling the risks that were at the core of the crisis," analysts led by Jan Loeys and Margaret Cannella wrote in a note on Monday. These risks include lending standards in mortgages, leverage in the funding of securitized products, and the use of short-term financing for illiquid long-term assets outside of the regulated banking sector. This will change behavior for market participants "for at least a decade," they wrote, in line with fallout from previous crises. He noted, for instance, that global equity markets remained extremely cheap on all risk measures even five to six years after the end of the dotcom crash. As a result of these changes in behavior, banks will become "bigger, safer and somewhat less profitable" as they will retain more assets on balance sheet, the analysts wrote. Securitization will be reduced, and no longer rely on short-term funding structures that assumed liquidity as a given, although it will survive, they said. Meanwhile, premia for term, liquidity and credit risk will be higher on average over the next cycle, they said.

Visions of 1998 The derivatives industry is facing many of the same problems as when it was dealing with the Long-Term Capital Management blow-up of a decade ago, only on a larger scale, a leading banker said Wednesday. Paul Calello, Credit Suisse's chief executive for investment banking and a participant when the Federal Reserve Bank of New York helped engineer a bailout of hedge fund LTCM, told a conference that the industry -- long a foe off direct regulation -- needs to ramp up electronic trading as well as measure accurately the size and risks of trades. In addition, the $2.3 trillion derivatives industry should consider creating a clearinghouse, he said. "Some of the same issues faced us then as we faced last month," Calello said of the industry. "Interoperability of the system then was worse, but it was also smaller. "The risk of interconnected, correlated counterparties was no different, but also smaller, and the risks and results of a default were impossible to quantify."