- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Laouchez: Leadership in Financial Services — Missing in Action?
- Kuntz: Finding Opportunity in Emerging Markets
- Busch: How to Trade the Euro on an Outside Reversal
- Dunkelberg: The Real Banking Crisis - They're Too Big to Manage
- Greek Exit a Worse Mistake Than Adoption of Euro
- Tamminen: Waste Not, Want Not
- Morici: The Eclipse of American Banking
- Will This Decade Be More Grim Than the 1930s?
MOST SHARED
- Greece to Leave Euro Zone on June 18: Wealth Manager
- European Firms Plan for Greek Unrest and Euro Exit
- Banks Recapitalization Is a 'Necessary Evil': Strategist
- Euro Rallies as Greece's Pro-Bailout Parties Gain Favor
- Italy 2-Year Borrowing Costs at Peak Since December
- Blair Says Feared Provoking British Media Wrath
- Europe’s Stronger Powers Must Reveal Plans: Ex-BoE Official
- Oil and Gas Sectors Power Aveva Profit Lift
- Newedge to Leave Greek Stock Market
- How Boaz Weinstein and Hedge Funds Outsmarted JPMorgan
- A New Look at the ‘New Poor’
- Six Pack: Beer Buzz of the Week
- Greek Exit Could Trigger 50% Fall in Euro Stocks: Analyst
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Big Stock Upside for Hudson City Deal: Analyst
- 5 High-Yield Stocks Ready to Boost Dividends
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Option Bulls Take Another Shot on Idenix
- European Companies Plan for Greek Unrest and Euro Exit
- Public Pensions Faulted for Bets on Rosy Returns
- Will the Euro Misery Give Rise to Another Soros?
- Greece to Leave Euro Zone on June 18: Wealth Manager
- Italy 2-Year Borrowing Costs at Peak Since December
- Euro Bond Wins Supporters, but Details Remain Vague
- German, UK Bond Yields Will Go Even Lower
- Labor Board Member Resigns Over Leak to GOP Allies
- Banks Recapitalization Is a 'Necessary Evil': Strategist
RSS FEED
CNBC Guest Blog
Text Size 
Busch: The String of Good News is Over For Now
For the last 4 weeks, we've had a series of earnings releases and economic numbers that had upside surprises and helped increase investor confidence in equities and in currency risk trades. Remember, the party started when Citigroup and Wells said they were having good quarters. Then we had Ben Bernanke say they would not let any major financial institution fail The Fed then announced a quantitative easing program. We had better than expected housing sales and prices. Lastly, we had China say they were seeing good growth from their stimulus spending.
But this financial/economic "green shoot" growth has run it's course for now. Here's why.
Of the S&P 500 companies that have reported earrings, 67 percent have beaten estimates. Great news, except the levels were very low to beat. Bloomberg reports that analysts expect profits to decline through September, dropping 34% in Q1 and 33% in Q2. The guidance that companies are providing for the future is extremely cautious. The dramatic drops in industrial production globally strongly suggests that the cost cutting by companies is not over.
On top of this, we have the outbreak of Swine Flu or North American Flu that is spreading rapidly throughout the world. The World Health Organization late yesterday raised their alert level one notch to 4 which means the germ has moved from animal-to-human transmission to human-to-human transmission. It is still not at the pandemic level, but clearly health officials are very concerned over the developments.
Let's not get our hair on fire about the Swine flu, but during the Bird flu scare WHO ran a study on a full blown pandemic with 70 million people dying. They said $3 trillion in the global economy would be lost and a global recession would ensue. Since we're already in a similar global economic state now, the markets are getting jittery about any situation that could take us down this road.
Another road we don't want to travel is upon us with the bank stress test imbroglio. Could there be a better example of the government making a mess of things? This is why most of us free-market capitalists get fired up when big brother steps in to fix things in the economy. As I've been warning, we have our first official leaks of who needs more capital and it's Citigroup and BofA according to the WSJ. "The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said."
The truly humorous aspect of the article is that the government officials say that banks directed to raise more capital shouldn't be be viewed as insolvent.....like that's going to help.
Lastly, we're getting to economic data that's going to be more mixed and remind the market that housing remains a serious problem for the financial sector. Today, we had S&P CS Home Price Index for February come out at -18.63% and they revised down January to -19.0%. Yes, the February was slightly better than expected. However, the overall point is that home prices continue to decline and this makes the real estate loans (toxic assets) on the banks books worth less. Even if prices decline at a slower rate, they are still declining and banks still need to reduce the value of these assets and raise capital to offset them.
Markets are always about expectations prior to reality. Right now, we've had the expectations greatly reduced for the economy and for earnings. Therefore, it's not too difficult to beat them. This has happened. The newsflow now has shifted to a darker reality.
Let's see how far we retrace.
Check out these stories:
- Slideshow: Biggest Holders of US Gov't Debt
- Slideshow: Companies at Greatest Risk for Default
- Slideshow: World's Biggest Debtor Nations
- Slideshow: Largest IPOs In US History
- Slideshow: What Does $1 Trillion Look Like?
- Read What Other Guests Are Saying Now On CNBC.com ________________________
 |
Data is a real-time snapshot *Data is delayed at least 15 minutes
