Despite a slight hiccup yesterday, the stock market continues to roll on.  I had thought that perhaps yesterday was a signal that the earnings charade was over.  About halfway through this reporting season, about 80% of all companies reported has “beat” earnings expectations of analysts.  Nineteen per cent have “met” expectations and only one per cent fell below.  As each report on the majors has come out, stocks dutifully rallied as if this was great news.  CNBC trots out every talking head they can get their hands on to keep pumping up this bull market.  

Not one single time have I heard anyone ask the obvious question.  Are the earnings really that good or are the analysts really really bad.  Basically, analysts have missed projections 80% of the time.  That sounds like a huge failure rate.  So why would anyone listen to them?  Because it’s part of the game.  The analysts who estimate various stock earnings are doing so because they are in the universe of stocks they analyze and recommend buy-sell-hold.  In over 90% of the cases, Wall Street analysts have “buy” recommendations on the stocks they follow.  There is no money for Wall Street or their analysts in following “sell” recommendations.  This means the analysts are rewarded for intentionally under-estimating earnings.  By putting out forecasts they know their companies will exceed, they are assured that the stocks will rally following that news.  This means that since they have a “buy” on the stocks, they will be rewarded for their tremendous stock-selection acumen.  This is nothing but pure fraud but one that goes rewarded not punished. 

You think I’m being too conspiracy-theorist?  Okay, then all of Wall Street’s analysts are stupid.  You can’t have it both ways with an 80% fail rate.  Either these analysts are liars or just plain stupid.  Take your pick.   

 More Fraud News 

While we’re on the subject of fraud there’s this.  The home tax credit bill extension is still a work-in-process, but a House subcommittee is holding hearings on how the program has worked so far.  Today’s testimony unfortunately centers on the fraud already unearthed in just a sampling of tax filings.  Fraud has included credit claims from those who already owned a home, investors claiming multiple new “primary” residences under various name combinations, those who never bought a home, and several children as young as four years old!  Now that’s an independent kid.  I can only imagine your surprise that there is fraud in a program that involves free government money.  But this testimony is not likely to derail the lobbying money train that is behind this bill.  

Shameful Politics – As Usual 

Weekly Jobless Claims certainly should have gotten some attention, but it doesn’t seem to have done much.  Claims were expected to remain at 515k, with the chance of a lower number due to the partial holiday last week.  But, new claims rose to 531k.  That isn’t a huge jump, but it isn’t welcome.  There is a bill in Congress to extend benefits in states in which the unemployment rate is over 8.5%, but a small band of Republicans in the Senate are stalling the bill.  They want to attach certain riders to the bill that the Democrats don’t want.  I guess these guys want to see pictures of breadlines on the front pages of their local newspapers.  That’s how close we’re getting.  Benefits are running out for about 300k people each month at this time, and the number will be escalating rapidly with each passing month.  Congress needs to find some other, less immediate issue to use to play out their silly games.