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Where We've Been , Where We Are Going ----It's All About Earnings !

Jul. 30, 2013 12:31 PM ETSPY, DIA, QQQ
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Portfolio Strategy, Long/Short Equity, Dividend Investing, Special Situations

Seeking Alpha Analyst Since 2010

INDEPENDENT Financial Adviser / Professional Investor- with over 35 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice, and Experience to produce Portfolios focused on achieving positive returns. Last year I launched my Marketplace Service, "The SAVVY Investor", and it's been well received with positive reviews. I've been part of the SA family since 2013 and correctly called the bull market for over 8+ years now. 

MORE IMPORTANTLY, I recognized the change to the BEAR MARKET trend in February '22. 

Since then investors that followed my NEW ERA investment strategy have been able to survive and profit in this BEAR market. Winning advice that is well documented, helping investors to avoid the pitfalls and traps that wreak havoc on a portfolio with a focus on Income and Capital Preservation.

I manage the capital of only a handful of families and I see it as my number one job to protect their financial security. They don’t pay me to sell them investment products, beat an index, abandon true investing for mindless diversification or follow the Wall Street lemmings down the primrose path. I manage their money exactly as I manage my own so I don’t take any risk at all unless I strongly believe it is worth taking. I invite you to join the family of satisfied members and join the "SAVVY Investor".

While I remain bullish over the long term as I believe we are currently in a secular bull market, some of my recent commentary has been suggesting a more cautious approach to the markets. I have numerous indicators (mostly technical ) along with what I feel maybe a negative "sentiment" background brewing to support my views.

In addition to those "market "indicators" ,part of my cautious stance is attributed to what I now view as a transition period where we may see replays of the "headline" stories that tend to shake the markets. Enter the DC crowd as we will now get more rhetoric & posturing from both sides on the debt ceiling , impacts of sequestration and the like. More chatter about Europe, China and now Japan will add to the "noise" that may grab the headlines. Of course no naysayer argument will be complete without mentioning the Fed and using the "tapering" word to make their case.

We have just witnessed a n1ce 18% or so gain in the S & P this year making new highs in the process. It should be noted a more than a 25% gain since we last heard the Media & naysayers spouting their "headline noise" from last Oct-- Dec 2012. Remember the tax hikes, debt ceiling ,sequestration, that took the markets to their Nov. lows?

All of which presented a nice buying opportunity. Not the "doomsday" scenario from the talk that was pervasive.

What does all of this have to do with earnings and the markets ? I have inserted a simple chart which tells the story of what earnings mean to the markets.

(click to enlarge)

On a yearly basis you can see that earnings have gone up from $51 in early 2009 to $105 as of the first quarter in 2013. In other words, from the depths of the financial crisis, earnings are up an incredible 106%. That helps to put in perspective how much things have improved over the past four years.

While we are about halfway thru this latest earnings season, the results indicate that a majority are beating the estimate numbers. (I will assess the entire quarter' as reported when it is complete. )

More importantly the overall "guidance" projected by the reporting CEO's for the second half of this year is positive. Now recent reports are indicating that the S&P 500 forward earnings estimates rose to yet another record high of $118.26 per share last week. The 2014 estimates are $123-125. Its early and we will have to "see" how this plays out , but keep this in mind if & when we get whipsawed around by all of the "negatives" . Earnings drive the market ..

The bottom line: we have a choice ; choose to get caught up in the "noise" of the daily, weekly headlines, or stay the course ,concentrate on earnings and subsequent price action.

The past results are a clear indication of what strategy will prevail in the future. The chart above clearly indicates that.

I continue to selectively view opportunities in individual issues as they are presented. The "call writing" strategy is currently doing well garnering a 4% return per month since they were posted here on SA. I continue to 'like" that strategy especially if we see a market that may be consolidating. If I am wrong here and the market simply sells off 5% , consolidates,then moves higher , portfolios are still positioned well to reap those gains.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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