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James Bianco, Bianco Research president, on the factors impacting today’s markets and this season’s earnings reports.
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Thanks a lot.
-- even with earnings driving stocks higher today -- first guest says that this earnings season isn't going to be all that cut especially if you exclude apple joining us now Jim Bianco president be -- researching Janet would be nice it would be different world if we excluded apple from.
All of our act calculations out there the markets would be lower in -- -- major indices would be lower.
What makes it less optimistic about this earnings season when we've seen at least preliminary indication that they are not half bad.
Well I -- because we beat expectations have been beaten down so much.
That we're looking at earnings probably coming in about 2% higher than a year ago that's less than the inflation rate earnings have not -- kept pace.
-- inflation this quarter if the estimates -- to be believed.
If you take apple out of that equation it's less than 1%.
And for the next quarter earnings estimates are getting the same thing kind of in the zero to 2% range there's no more earnings -- growth anymore they're used to be a lot.
But it's off pretty much gone -- -- moment.
But still we're seeing this disconnect Jan we're seeing this disconnect between the reality that is showing not been hard pressed numbers and then also the performance of the markets which continue.
To trend higher and higher and higher so what is fueling it is at its earnings are driving.
Earnings were never driving this market and have not been driving this market it's been all driven.
By liquidity is often driven by QE3.
By the hope of QE3 by -- -- -- in Europe.
And by the belief that central banks are standing there -- given to more bad days in the market.
And -- we're gonna crank up the QE3 machine all over again and that's what I think it's been driving markets higher around the world has been driving a lot of risk assets higher self.
Earnings have always had a backseat to what's been happening for the last several months and we're seeing more of the same here even today.
-- I -- I happen to agree with you a 100%.
Let's talk about the risk though of -- market debt.
And it they had really enjoys a kind of rally that this market is seeing.
What are the risks because of -- sold so you know -- fantastic except obviously good money pretty machine's just going to overdrive.
Something's gotta be wrong there.
Right well I think one of the big risks in this market is Europe I mean we're impressed by today's rally only because we were asleep if you were up at 2 o'clock in the morning.
The S&P futures were down they were down quite a bit on the idea that today was going to be a down day then.
We had a decent Spanish auction in European markets took off.
And EMI and the US stock market we're right with -- sound familiar I just explain 2003 and that's what we've got all over again we're taking a curious from Europe while we're sleep overnight.
And the market's moving higher so if Europe takes another downturn.
I think that that would be a big negative for this market.
The other downturn that you can worry about would be inflation no I said inflation and everybody rolls arises there's always thinks 15% inflation now.
The Fed said their targets to if you get two and a half to two and three quarters inflation that's too much.
And right now most of the expected numbers of inflation are running slightly above two.
We're not that far away.
From having -- too much inflation relative to defense targets and that could kill QE3 or any talk of it and that would be a big negative for the market as Walt.
And I think you're absolutely right -- I think there's at some point about price and we have to pay for all this money printing it is certainly on the -- on the horizon we haven't seen any yet.
But thank you very much for being with us Jim Bianco of Bianco research.
