Strategy Note /
Global

An (Earnings) Bridge Over Troubled Waters

  • Nice to see some green on the screen - best 3 day run since May - things feel better, act better, tape looks better.

  • Could Crypto's collapse be the last shoe to drop? Could the ARKK, Apple, TSLA, Netflix lift be the start of something?

  • High nominal growth supports earnings which provides a bridge till we get peak inflation which should be almost upon us.

Jay Pelosky
Jay Pelosky

TPW Founder & Global Strategist

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TPW Advisory
22 July 2022
Published byTPW Advisory

Boy, I have to say it feels pretty good. To finally see some green on the screen, a green screen that stays for more than a day or two (best 3 day run since May & working on a 4th as I write). It feels like it has been ages since such has occurred. 

 

June was unrelenting and a very tough month for most long only investors. As such one is and should be, rightly skeptical of the sustainability of this most recent up move (SPY up 10%, Nasdaq up 13% from recent low). But something feels different as I noted to several buddies late Tuesday… things feel better, act better, charts look better, the news flow is not so one sidededly negative. One begins to wonder if the Crypto collapse (Terra, Luna, Celsius etc.) was the last shoe to drop & the ARKK, Apple, Netflix, Tesla jump the start of something new?

 

This week’s BofA Fund Manager Survey report helped provide that different feel. Titled “The Full Capitulation”, it went into great detail as to how bearish the investment community was, worse even than the GFC or 2001.  It noted that investors’ global growth & profit expectations were at ATLs, that investors had the highest cash levels since 9/11 & a risk exposure level below (below!!) that seen during Lehman’s implosion in 2008. 

 

Laid out with such clarity – it was one of their better efforts - with lots of chart support it struck me that if the community is so one sidedly on the side of the boat that says we are heading into another 2008 then I most definitely want to be on the other side.

 

There is no way we are going into anything remotely resembling 2008 – there is no comparison – banks just reported – they are stuffed with regulatory cash, are making billions, have a 12% ROE, enjoying their best loan growth in ages & a rising NIM for the 1st time in forever and selling at roughly BV (vs the 1.6x such a ROE would imply according to Ironsides Macro).