Unexpectedly Intriguing!
October 11, 2012

Eavesdropping in the comment threads at Slope of Hope....


boopoo - Detour Ahead

Earnings Graph Reminder

http://cdn.socialtrade.com/comsys/imgs/2012-10-08_1242_l4khWG_m.png


COTrader

More important in my opinion.....

http://politicalcalculations.blogspot.com/2012/10/dividends- us-continuing-descent-toward.html#.UHWmdFFRD1A


boopoo - Detour Ahead

Don't Companies cut Divi's after the fact ? " Oh, shit our stock price has been cut in half, we better cut our Divi at the next board meeting"


COTrader

Not the highest quality companies. But for the highest quality companies, forward expectations for dividend growth has flatlined - that tells you they aren't confident enough in future cash flow to grant higher payouts.

If the highest quality companies aren't increasing payouts, lower quality companies will be cutting dividends.

This confirms the weak economic environment. And is why I'm comfortable saying that 1450 on the SPX will remain at the upper bound of this move.

Think the top is in for the Russell 2k.

We'll interject here to note that COTrader is a very sharp observer. Forward expectations for dividend growth at the "highest quality" companies has indeed flatlined - and has for months. Here's the evidence for that, with the highest quality companies being represented by the S&P 500:

Expected Future Trailing Year Dividends per Share for the S&P 500, with Futures as of 10 October 2012

The wild card right now is the Fed's latest quantitative easing exercise, which as best as we can tell right now, hasn't done much to elevate stock prices. We suspect the reason why is because of how the Fed has executed it so far, focusing on purchasing mortgage backed securities as opposed to the outright massive purchases of U.S. Treasuries that characterized previous rounds, which provides a more direct boost to equity prices by lowering long term interest rates.

Still, this flatlining of expected future dividends is a big reason why we've been so bearish regarding the economic outlook for 2013. A relatively healthy stock market would see these values for each future quarter rise over time. For all practical purposes, that hasn't happened in the stock market since the end of the earnings season for 2012-Q1....

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