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Who's making big bucks?

by Laurent GUERBY Tue Aug 29th, 2006 at 03:41:07 PM EST

Barry Ritholtz of The Big Picture fame cites some interesting WSJ bits

    So, it was a good quarter for earnings, right? Not necessarily, if you look at the entire spectrum of publicly traded companies. Sure, the S&P 500, with more than 97% of companies reported, has posted earnings growth of about 13%, marking yet another quarter of double-digit earnings growth. However, looking further down, the picture isn't quite as positive.

    The Wall Street Journal's industry-by-industry quarterly earnings page (available here) shows that, with more than 3,700 companies reporting, net income growth on a year-over-year basis was up 12% in the second quarter, compared to 19% year-over-year growth in the first quarter (with more than 4,100 companies considered).

    However, the growth in the first quarter was much broader than in the second, when energy and financials ruled the roost. Energy companies have recorded 50% growth in net income, while financials grew by 19%. Exclude those two groups, and net income is down 1.1%, in part due to significant dropoffs in basic materials (down 12%), consumer goods (off 11%), health care (37% lower) and technology ( down 4%), and a 13% decline in telecommunications.

    It didn't look this way in the first quarter. While it is true that energy and financials rocked there too (up 44% and 13%, respectively), when taking those out, net income for the remaining companies rose 17%.

    This pattern doesn't hold with the companies in the S&P 500. All of S&P's 10 main sectors are showing income growth on a year-over-year basis in the second quarter, according to Thomson First Call; health care and technology are the laggards, with 9% growth.

    "When you look at the S&P 500, bottom line, it's not bad, and across the entire spectrum it's an up quarter," said Vinny Catalano, president of Blue Marble Research. "But when you get into the mid- and small-cap issues, as these data show, you really had a collapse...second-tier issues have deteriorated." (emphasis added).

Wow, remove energy and banking, and company income are down in the second quarter. If that's doesn't show where the money is...

And Nouriel Roubini is spanking some bulls real hard :).

Bulls, not bears... ;)

Just one quote from the Roubini piece:

Stephen Roach, chief economist at Morgan Stanley, added: "America's housing bubble finally appears to be bursting." He said a post-housing bubble shakeout could take at least two percentage points off the overall US gross domestic product growth rate.
by afew (afew(a in a circle)eurotrib_dot_com) on Tue Aug 29th, 2006 at 04:03:43 PM EST
Woops, fixed.
by Laurent GUERBY on Tue Aug 29th, 2006 at 04:17:54 PM EST
[ Parent ]
If the housing bubble really goes up in a way similar to the dotcom bubble the impact could be very pervasive. A lot of ordinary people would be left holding the bag with defaults on mortgages.
by Richard Lyon (rllyon@gmail.com) on Tue Aug 29th, 2006 at 05:13:30 PM EST
[ Parent ]
Dean Baker pointed me to the wonderful Federal Reserve site and it's marvellous Z1 Flow of Funds report (PDF).

Now I can answer questions about private plus public debt for the USA, and it's not pretty.

For Q1 2006, estimated outstanding 27.1 trillions USD of total domestic non financial debt composed of 43.6% household (11.8T), 31.7% business (8.6T), 24.7% (6.7T) government (local, state and federal). USA estimated 2006 GDP is 13.0 trillions USD.

Public debt is thus only one quarter of the outstanding debt.

All debts are growing at double digit rate in Q1 2006.

by Laurent GUERBY on Tue Aug 29th, 2006 at 04:30:35 PM EST

You can't be me, I'm taken
by Sven Triloqvist on Tue Aug 29th, 2006 at 05:28:46 PM EST
[ Parent ]
One, I'm glad I don't own a house (that isn't paid off), and two, thanks for linking me to Nouriel Roubini's blog, which I had not heard of before.

you are the media you consume.

by MillMan (millguy at gmail) on Tue Aug 29th, 2006 at 06:15:37 PM EST

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