Did we expect anything different?

Posted by Ray on October 15, 2009 under Main | Be the First to Comment

I was just looking at Google’s earnings and, not surprisingly, the firm realized some pretty strong FX gains as compared to a year ago. Below you can see Google’s presentation and you can see that their growth, on page 4, has been in the international market which is not surprising. You can then see on page 9 that the firm made a nice profit this year compared to last year thanks to Helicopter Ben and his weak strong dollar policies.

Ladies and gentlemen, when the economy is tanking and you have government supporting GDP growth and you know everyone is skeptical about this “recovery” and they want proof what better way than to show that proof through better corporate earnings? As a central banker how can you do that? Take down the dollar in a world that is intertwined and you get magical earnings. You then twist the arm of the FASB to make sure that the accounting rules don’t go against your plans and you have more of the same bogus or phony economy that we have had since Greenspan started his war on the dollar.

How long can this façade continue? I honestly do not know, but I do not it cannot last forever. Eventually real life catches up with everyone, just like in the Wizard of Oz or The Matrix it cannot continue forever. Either there will be a point where Ben will lose control over the dollar devaluation process, a very likely scenario, or people will start to wake up from the CNBC induced coma and realize that markets do not go straight up and capitalism means it is OK to make money in the market when it goes both up and down.

I can only look at the data, all the data not just the cherry picked headline data that the media shows you. The data does not support the current market levels. I am not even sure the liquidity excuse, which I even use, supports the current market levels. I do know that fund flows show that the average investor is not buying stocks, they are buying bonds and foreign stocks. I know the money on the sideline argument is a bunch of bull because that argument has been used for 15 years and people tend to forget that cash is an asset class. Furthermore, money markets lost money to short-term government funds because that’s where you could get the most yield for the least amount of risk.

So, watching better than expected earnings is somewhat surprising as I figured we would see more revenue misses, but earnings season is just getting started so we will see. When we examine regional banks I think there will be a better picture of what is going on out there. Not only that, but since this was a credit recession I am not at all surprised that tech firms are doing OK, but tech companies are still more of an Asia story than a US story, again, look at page 4 of Google and Intel’s geographic break down of sales. America is getting better, but we are not in a V shaped recovery by any stretch of the imagination.