4. True S&P 500 earnings will NOT reach the published consensus forecast level.
According to Macro Man’s i/B/E/S spreadsheet, the consensus earnings forecast for 2010 is $77 a share. While 2009 isn’t in the bag yet (after all, we’ve got earnings season around the corner), a total of $55-$60 is likely for the headline earnings figure. The problem, of course, is that the headline figure is a work of fantasy worthy of Tolkien. The chart below shows trailing 12m earnings data on a headline basis, as well as the true earnings figures once all the “one off” turds are added back in. While Macro Man is happy to believe that the amount of turds will be lower in 2010 that it has been over the past 18 months, he wasn’t born yesterday- companies will still massage their figures lie to pimp and pump their share prices. Sorry, Macro Man isn’t buying it. While he’s currently small long equities, he believes that at some point, the small print will matter once again.