Hmmm - Looks like the books are cooked a bit - don'tcha think?
Wednesday, April 22, 2009
Statistical Norm?
How far off can GAAP and Operating earnings be you might ask? I think the nearby charts speak for themselves. These charts summarize the difference between the actual GAAP earnings and "operating" earnings from 1988 to present. Anomaly perhaps?
Hmmm - Looks like the books are cooked a bit - don'tcha think?
Hmmm - Looks like the books are cooked a bit - don'tcha think?
Monday, April 20, 2009
WSJ Publishes Comics
All right - apparently - the WSJ Money and Investing section now prints Comics. You haven't seen it? Look no farther than the chart for the S&P (usually around C-4) and the "trailing earnings" and you will have a laugh. Yeah Yeah Yeah - you don't get it, how about this - the WSJ printed 13.09 yesterday and it should be 18.43... A one-off event? Sorry - not only do they know about the error - they continue to print it.
Hey WSJ and Birinyi - I used my 10 year old son to calculate this for me:
Previous 4 quarters (operating) = $45.16
Current Price (as of yesterday) = 832.39
Trailing P/E (832.39/45.16) = 18.43
Need some background? I sent the following to a well known blogger to spark some interest in the erroneous data being published by the WSJ.
I have been tracking the S&P trailing P/E for years via the WSJ. At the beginning of 09 I realized my math and the math of the WSJ seemed to be different. The WSJ publishes the chart of the S&P on Tues/Thu/Sat from Birinyi Associates that shows the trailing p/e. The chart is normally on page C4 during the week and B4 in the Saturday edition.
Prior to calling the WSJ in early April, the most current chart is Thursday - April 2 and shows a trailing p/e of 12.43 with a price of 811.08. Those of us with a little brain power actually go to the S&P website and use Mr. Silverblatts weekly update during earning season to see how earnings are progressing. What was clearly listed on the S&P website during that week was the following "operating earnings" for the previous 4 quarters:
> Q4-08 $-0.09 (1st negative in history btw)
> Q3-08 $15.96
> Q2-08 $17.02
> Q1-08 $16.62
>
Now - we all know the definition of trailing p/e - meaning "previous 4 quarters." But here is the dilemma - those 4 quarters add to $49.49. So, a smart man might have used the price of 811.08 (from their chart) and divide that by 49.49 to achieve a trailing P/E of 16.39 which just so happens, matched what S&P puts out for free on the internet. This isn't "exactly" correct since we were three months in the future, but, the most current.
>
What isn't so clear - and why I called the WSJ - is how in the world they are arriving at 12.43 trailing p/e that was posted that day. Well, after spending nearly 2 weeks with phone tags and leaving messages, I reach a New Jersey office that does the Money and Investing section for the WSJ. This is the part that I am not making up - I spoke with a person and after multiple lengthy conversations trying to show them that the number was incorrect, they essentially said that they stick by Birinyi's numbers and those are the most current numbers Birinyi has available.
>
A day later, I had an epiphany - and figured out how on earth the calculation could be so off. It was worse than I thought, simply by adding the 4 quarters ending in September (adding Q4-07 $15.22) and not the most current quarter of $-.09, suddenly nets $64.82 in operating earnings. Now the calculation makes sense, price 811.08 divided by 64.82 is $12.51 - strikingly close to Birinyi's calculation of 12.43...
This is simply egregious and reprehensible - using current price and comparing latest earnings from 6 mos ago to arrive at a "cheap" valuation for the S&P.
>
After learning of this - I again spoke with the same person for about an hour explaining in detail how the WSJ was publishing not only incorrect data, but data that was 6 mos old! Not only did they agree and understand the calculation - they also had the audacity to simply repeat ad nauseum that they stick by Birinyi and their calculations. After a thorough tongue lashing, I educated this person that there is only one moment in time where P/E can be "accurately" reported - and that is after the quarter ends and use that price of the index in the calculations. Which, for Q4-08 is 18.25 - not anywhere close to 12.43...
>
I repeatedly told this person that yahoos like me having been reading their paper for years and watching this number. I told them that the average trailing earnings since 1936 has been $15.80 (for Actual BTW - not operating) and that if we were indeed at 12.43 - I would consider that cheap and begin to employ money back into equities. I let this person know that I moved to bonds back in 2006 and am still there, but as soon as I see trailing earnings (by my calculations) get close to 10, I will move back into equities.
>
The travesty in all this - is that they recognize the data is in error, admit the calculation is wrong, yet standby and do nothing. In fact, they use Birinyi's methods for the Russell and Nasdaq, to which I told this person, "good, now I know those indexes are wrong as well."
>
Below is the S&P reference - free to all - from Mr Silverblatt and S&P.
>
> http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
>
My only desire is to educate the populace - that the WSJ not only publishes incorrect data, but stands by it. And, in doing so, seems content to literally make us all dumber for reading their paper.
So, on a whim - I send off the following to Birinyi Associates -
Hello,
I am not sure who to discuss this with at Birinyi - but I have a concern about the trailing earnings that is reported in the Wall Street Journal from Birinyi Associates on page C-4 for the Sat/Tue/Thu editions. I have been following this trailing earnings number for years and recently noticed the severe dislocation between my calculations and yours.
The data seems to not only be inaccurate, it seems to be extremely outdated.
The footnote simply states "trailing earnings" without providing a disclaimer of operating vs actual. Additionally - the only way I can make the most current calculation come close is by dividing current price by the summation of the 4 quarters ending Sept 08.
The correct calculation can only be "official" once the data comes in and the price is used at the end of the quarter. For Q408, the trailing "operating earnings" would have been $18.25 based on earnings of $49.49. Your calculations appear to be way off at 12.77 unless one uses the current price as of Sat @ 842.5 and divide by earnings for the 4 quarters ending Q308 of $64.82. Only then can the calculation of 12.77 be somewhat plausible mathematically.
But, since this does not meet the definition of "trailing earnings," I can only surmise that your data is off somewhere.
Please forward to who needs to address this as I think this might be somewhat of an embarrassment for Birinyi Associates.
If I have performed the calculations in error - please advise.
Thanks for your time in addressing this issue.
To which they replied:
Thank you for your message. I certainly understand your confusion. Long ago when WSJ asked us to provide this data we had a conversation about exactly what to provide (as reported or operational). WSJ asked us to provide P/E figures based on operating earnings. Specifically provide P/E data based on trailing 12 month diluted EPS from continuing operations.
However, we have been in recent conversation with WSJ about converting to ‘as reported data’, as we feel this is a more appropriate figure to use. Just recently we started sending them both sets of figures each week (operating and as reported). Obviously today they are still using operational data, but that may change soon.
Thank you for your message.
Draw your own conclusions to why the WSJ continues to print this data in error. Since this whole thing started, the final numbers are out and the actual trailing earnings for the S&P during Q4-08 is operating 18.24 and GAAP of 60.70. The previous 4 quarters earnings are Operating $49.51 and GAAP $14.88.
The real news is that since 1936 - the highest GAAP, or actual trailing earnings was 46.50 back in 2001. We all know where the market went after that! Now, Q4-08 just printed 60.70 and Q1-09 may print 119, Q2 @ 127. and Q3 at 1936...
The last print I saw from the WSJ was... roll the drums... 13.09... Crazy!
Hey WSJ and Birinyi - I used my 10 year old son to calculate this for me:
Previous 4 quarters (operating) = $45.16
Current Price (as of yesterday) = 832.39
Trailing P/E (832.39/45.16) = 18.43
Need some background? I sent the following to a well known blogger to spark some interest in the erroneous data being published by the WSJ.
I have been tracking the S&P trailing P/E for years via the WSJ. At the beginning of 09 I realized my math and the math of the WSJ seemed to be different. The WSJ publishes the chart of the S&P on Tues/Thu/Sat from Birinyi Associates that shows the trailing p/e. The chart is normally on page C4 during the week and B4 in the Saturday edition.
Prior to calling the WSJ in early April, the most current chart is Thursday - April 2 and shows a trailing p/e of 12.43 with a price of 811.08. Those of us with a little brain power actually go to the S&P website and use Mr. Silverblatts weekly update during earning season to see how earnings are progressing. What was clearly listed on the S&P website during that week was the following "operating earnings" for the previous 4 quarters:
> Q4-08 $-0.09 (1st negative in history btw)
> Q3-08 $15.96
> Q2-08 $17.02
> Q1-08 $16.62
>
Now - we all know the definition of trailing p/e - meaning "previous 4 quarters." But here is the dilemma - those 4 quarters add to $49.49. So, a smart man might have used the price of 811.08 (from their chart) and divide that by 49.49 to achieve a trailing P/E of 16.39 which just so happens, matched what S&P puts out for free on the internet. This isn't "exactly" correct since we were three months in the future, but, the most current.
>
What isn't so clear - and why I called the WSJ - is how in the world they are arriving at 12.43 trailing p/e that was posted that day. Well, after spending nearly 2 weeks with phone tags and leaving messages, I reach a New Jersey office that does the Money and Investing section for the WSJ. This is the part that I am not making up - I spoke with a person and after multiple lengthy conversations trying to show them that the number was incorrect, they essentially said that they stick by Birinyi's numbers and those are the most current numbers Birinyi has available.
>
A day later, I had an epiphany - and figured out how on earth the calculation could be so off. It was worse than I thought, simply by adding the 4 quarters ending in September (adding Q4-07 $15.22) and not the most current quarter of $-.09, suddenly nets $64.82 in operating earnings. Now the calculation makes sense, price 811.08 divided by 64.82 is $12.51 - strikingly close to Birinyi's calculation of 12.43...
This is simply egregious and reprehensible - using current price and comparing latest earnings from 6 mos ago to arrive at a "cheap" valuation for the S&P.
>
After learning of this - I again spoke with the same person for about an hour explaining in detail how the WSJ was publishing not only incorrect data, but data that was 6 mos old! Not only did they agree and understand the calculation - they also had the audacity to simply repeat ad nauseum that they stick by Birinyi and their calculations. After a thorough tongue lashing, I educated this person that there is only one moment in time where P/E can be "accurately" reported - and that is after the quarter ends and use that price of the index in the calculations. Which, for Q4-08 is 18.25 - not anywhere close to 12.43...
>
I repeatedly told this person that yahoos like me having been reading their paper for years and watching this number. I told them that the average trailing earnings since 1936 has been $15.80 (for Actual BTW - not operating) and that if we were indeed at 12.43 - I would consider that cheap and begin to employ money back into equities. I let this person know that I moved to bonds back in 2006 and am still there, but as soon as I see trailing earnings (by my calculations) get close to 10, I will move back into equities.
>
The travesty in all this - is that they recognize the data is in error, admit the calculation is wrong, yet standby and do nothing. In fact, they use Birinyi's methods for the Russell and Nasdaq, to which I told this person, "good, now I know those indexes are wrong as well."
>
Below is the S&P reference - free to all - from Mr Silverblatt and S&P.
>
> http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
>
My only desire is to educate the populace - that the WSJ not only publishes incorrect data, but stands by it. And, in doing so, seems content to literally make us all dumber for reading their paper.
So, on a whim - I send off the following to Birinyi Associates -
Hello,
I am not sure who to discuss this with at Birinyi - but I have a concern about the trailing earnings that is reported in the Wall Street Journal from Birinyi Associates on page C-4 for the Sat/Tue/Thu editions. I have been following this trailing earnings number for years and recently noticed the severe dislocation between my calculations and yours.
The data seems to not only be inaccurate, it seems to be extremely outdated.
The footnote simply states "trailing earnings" without providing a disclaimer of operating vs actual. Additionally - the only way I can make the most current calculation come close is by dividing current price by the summation of the 4 quarters ending Sept 08.
The correct calculation can only be "official" once the data comes in and the price is used at the end of the quarter. For Q408, the trailing "operating earnings" would have been $18.25 based on earnings of $49.49. Your calculations appear to be way off at 12.77 unless one uses the current price as of Sat @ 842.5 and divide by earnings for the 4 quarters ending Q308 of $64.82. Only then can the calculation of 12.77 be somewhat plausible mathematically.
But, since this does not meet the definition of "trailing earnings," I can only surmise that your data is off somewhere.
Please forward to who needs to address this as I think this might be somewhat of an embarrassment for Birinyi Associates.
If I have performed the calculations in error - please advise.
Thanks for your time in addressing this issue.
To which they replied:
Thank you for your message. I certainly understand your confusion. Long ago when WSJ asked us to provide this data we had a conversation about exactly what to provide (as reported or operational). WSJ asked us to provide P/E figures based on operating earnings. Specifically provide P/E data based on trailing 12 month diluted EPS from continuing operations.
However, we have been in recent conversation with WSJ about converting to ‘as reported data’, as we feel this is a more appropriate figure to use. Just recently we started sending them both sets of figures each week (operating and as reported). Obviously today they are still using operational data, but that may change soon.
Thank you for your message.
Draw your own conclusions to why the WSJ continues to print this data in error. Since this whole thing started, the final numbers are out and the actual trailing earnings for the S&P during Q4-08 is operating 18.24 and GAAP of 60.70. The previous 4 quarters earnings are Operating $49.51 and GAAP $14.88.
The real news is that since 1936 - the highest GAAP, or actual trailing earnings was 46.50 back in 2001. We all know where the market went after that! Now, Q4-08 just printed 60.70 and Q1-09 may print 119, Q2 @ 127. and Q3 at 1936...
The last print I saw from the WSJ was... roll the drums... 13.09... Crazy!
Thursday, March 5, 2009
Earnings - Mother's Milk Gone Sour
Yep - Earnings for 4th Qtr 08 look bad. With 98% reported - we are at -.50, the first negative operating earnings since the S&P began tracking in 1988. The GAAP earnings or actual earnings were -20.69... So dividing the current index by the last four quarters nets about a 14 trailing P/E operating and around 39 trailing GAAP P/E (ouch). So - no matter how you cut it - we are going lower. How far - I will stick with the 500 give or take 50...
Keep checking this site during earnings season to get a "feel" for earnings.
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
The government bailouts will fail and the depression will be caused by the automakers going in the tank.
Keep checking this site during earnings season to get a "feel" for earnings.
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
The government bailouts will fail and the depression will be caused by the automakers going in the tank.
Tuesday, February 24, 2009
Where to Now
Question - where will the S&P end this year?
Answer - who cares... Really, I do not give a rip about where the S&P will end this year. Head over to bespoke and look at the idiots making predictions. Now - ask me where will we go DURING the year - and yeah, I care a lot. We are headed lower my friends, possibly much lower.
Current calculations - S&P 770, 12 month trailing earnings = 23... hmmm methinks earnings are in the $33.00 area - so give a 10 multiple and yeah... we are headed lower. I would stand a sell off to the 500 +/- 50 arena recognizing we might head lower before putting some risk money on some calls.
Answer - who cares... Really, I do not give a rip about where the S&P will end this year. Head over to bespoke and look at the idiots making predictions. Now - ask me where will we go DURING the year - and yeah, I care a lot. We are headed lower my friends, possibly much lower.
Current calculations - S&P 770, 12 month trailing earnings = 23... hmmm methinks earnings are in the $33.00 area - so give a 10 multiple and yeah... we are headed lower. I would stand a sell off to the 500 +/- 50 arena recognizing we might head lower before putting some risk money on some calls.
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