One of the things I am fond of pointing out is that it seems like nobody in high finance or the central banks learned anything from the great crisis of 2008. The very same excesses that created the prior crises are being committed again.
I know…maybe this time it will turn out differently.
Back in 2007, one of the things that signaled the top of the equity market, if one knew where to look, was the vast increase in share buybacks by corporations. One possible reason for this (besides the fact that sometimes corporations have the worst sense of timing) is that late in the cycle, opportunities for good organic growth run out, and the seemingly best use of corporate money is to buy back the shares.
Assuming the point is to drive up earnings per share, which every corporate executive is heavily incentivized to do.
Once again we find that corporate earnings growth is dwindling at the same that corporate share buybacks are spiking. We've seen this movie before.
Here's the earnings information:
Earnings Guidance Hasn't Been This Ugly In Years
"For Q4 2013, 94 companies have issued negative EPS guidance while 13 companies have issued positive EPS guidance," said FactSet's John Butters in a research note today.
"If 94 is the final number of companies issuing negative EPS guidance for the quarter, it will mark the highest number of companies issuing negative EPS guidance since FactSet began tracking guidance data in 2006… If 13 is the final number of companies issuing positive EPS guidance, it will tie the mark for the lowest number of companies issuing positive EPS guidance for a quarter since FactSet began tracking guidance data in 2006."
(Source)
What the chart above is showing us is that even as earnings guidance has been steadily getting more and more negative, the stock market has been powering higher and higher. I know that fundamentals do not really matter as much as they used to (or so the current thinking goes), but eventually fundamentals always matter.
by cmartenson 
