The case of the missing revenue

[Joanne98]

NEW YORK (Reuters) - This may be the middle of the U.S. earnings season, but it's definitely not the middle of revenue season.

Investors have bid stocks higher during this quarterly reporting season as corporate America counters falling revenue by cutting costs to boost profits.

The S&P 500 is up 11 percent since July 10.

But the rally may not last in the next busy week of corporate results if there are more Microsoft-sized revenue disappointments.

The software giant posted in-line profits for its most recent quarter on Thursday, but quarterly revenue fell 17 percent, some $1 billion below analysts' estimates, prompting one analyst to call it "the case of the missing revenue."

Microsoft (MSFT.O) traded down 8.3 percent Friday, and took the shine off a rally on Wall Street that had pushed the Dow industrials above 9000 for the first time since January.

The result was a stark reminder that the current pattern of higher earnings based on trimming costs cannot be sustained indefinitely.

"Once again, we have a situation where the vast majority of companies are beating bottom-line estimates but doing it through continued cost reductions," said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto.

"This is as much of a faith-based rally as you're going to see. The extent of the cost reductions are impressive, but it's not a bottomless pit -- the problem is that the day you get rid of all of your employees, you're not in business anymore.

http://www.reuters.com/article/ousiv/idUSTRE56N62120090724

[xchrom]

1. they should wonder more where The Peoples revenue is. nt

[DJ13]

2. The "estimates" these companies "beat" are part of the con game

When the power brokers (Goldman, Bear) want the markets to go higher so they can lighten their exposure to risk the estimates are deliberately moved lower (pretty much industry wide since no one dares to challenge the big institutions) to insure the headlines can claim things are great. (such as now)

It works in reverse too.

If they want to buy they elevate estimates to a level that the companies cant beat.

[kenny blankenship]

3. Awesome. DJIA driven unemployment surge ahead.

Got to keep those executive stock options lookin sweet.

Meanwhile, who will buy the product?

[notesdev]

4. The missing revenue

comes from all the debt-fueled consumption that can no longer be sustained. We're watching all the fake "economic growth" (which was really debt growth) evaporate.

[Warpy]

5. How long is it going to take these bozos

to figure out revenues are going to suck as long as disappearing jobs and depressed wages mean that customers aren't out there to buy their stuff?

These guys wear designer suits and Bruno Magli shoes and get paid the big bucks and I'm really starting to wonder why.

[AdHocSolver]

7. The crooks know what they are doing. They earned their designer suits.

The big question is: When is the rest of the country going to understand the scam and stop falling for this con game?

As long as the government gives them bailout money to prop up the buying and selling of their stock shares, the company itself can go out of business. The company is irrelevant.

Forget economics, econometrics, statistics, balance sheets, income statements. None of that will help you understand what is going on.

Instead, get yourself a copy of Mel Brooks movie "The Producers". It is hilarious. It will tell you ALL YOU NEED TO KNOW to understand what is going on today.

[AdHocSolver]

6. The stock market is being propped up by the taxpayer bailout money.

As long as the government goes into debt to give bailout money to these crooks, this giant Ponzi scheme will continue.

It will end when the U.S. stops pumping money into the Ponzi scheme. Company A gets bailout money which it uses to buy company B's stock, which, in turn, uses the infusion of capital to buy company C's stock, which, in turn, uses its infusion of capital to buy company A's stock.

The money just circulates among the stock shares, they boost each other's stock price, and they can fire all of their workers, close their businesses, and as long as the stocks keep trading, go on indefinitely.

The concept that the stock market drives the economy is pure supply-side economic FICTION.

Demand drives the REAL economy, and when everyone is jobless, there will be NO demand, and the REAL economy will collapse, and stay collapsed, until jobs are created, and people have income to spend.

To sustain a recovery, a large numbers of those jobs must be in manufacturing, so that when people buy goods, the money stays in the U.S. to pay other Americans, and does not merely sail out of the country to China.