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Saturday, December 05, 2009


dividend trend comparison

this is a post too good to lose track of -- hbl at thought offerings is tracking earnings and dividends in comparison to the great depression.

Earnings have dropped more rapidly than during the Great Depression (dramatically so if you count reported rather than operating earnings), but they appear to have begun a recovery much sooner than occurred back then. Trailing 12-month dividends are still falling slightly faster than during the Great Depression, which is particularly remarkable given how much more severe deflation was then compared to now. These trends underscore that contrary to some claims, this is no crisis of confidence!

Since dividend changes tend to lag earnings changes, rising earnings could mean dividends will level out and start increasing soon (and in fact the quarterly fall in dividends from Q2 to Q3 was small). However, if earnings are being over-reported thanks to factors such as relaxed accounting rules or optimistic loan loss assumptions, dividends should ultimately reveal the truth about underlying cash flows.

And while we should all hope that this recovery can be sustained, there is a significant probability (details of which I hope to discuss in a separate post) that this is a temporary upturn in a longer term depression. A renewed fall in GDP, persistent unemployment, and intensifying deflationary pressures would not be good news for any fledgling recovery in earnings and dividends.

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ECRI is now long-term bearish .

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one interesting part about ECRI's comment is what even 9% unemployment implies, rb -- real GDP growth of 4.5% for 2010. that's the implied forecast. i don't see any real chance of that, business cycles be damned.

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Obama the centrist is getting gamed

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thanks for the article

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