Prieur du Plessis posts the Chart of the Day which shows a 98% decline in real earnings of the S&P since Q3 2007.

This makes it by far the largest decline on record (the data goes back to 1936). “In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative,” said Chart of the Day.

TPC has a good post on Morgan Stanley’s bearish call on the stock market.

In essence, analysts currently expect 2010 record profits in 4 of 10 sectors, record ROE for the S&P 500 and record profit margins.  Just two years out of the worst financial crisis in 75 years and the analysts are calling for all sorts of record setting earnings?  Does that seem far fetched?  It certainly should.

Apparently the tide is turning from setting the very easy-to-beat earnings forecasts of this present earnings quarter to earnings forecasts which will prove impossible to achieve in first quarter 2010 and beyond.

UPDATE: EWT counts are showing the top of the bear market rally is near. With runs like Thursday’s, it can’t be much longer before…
All the rainbows in the sky, start to weep and say goodbye…

Her solution isn’t perfect.  There’s still the possibility (probability), as Rolfe Winkler points out that, with implicit government guarantees, the banks will still take on too much risk.  But limiting the size of banks is a step in the right direction. And making both shareholder AND bondholders take losses is too!  The FED, on the other hand, will never limit the banks in any meaningful way, since it is legally owned by them.

Below is Rolfe’s marked-up copy of the Chairbair’s testimony:Sheila Bair Systemic Rist Testimony 072309

The market is shooting up again this morning. Things must be really looking good.  From today’s Breakfast with Dave:

What’s the stock market pricing in?
Well, the S&P 500 surged 15% in the second quarter and what we did was go back in the history books to see what happens to the economy the very next quarterly typically after such a big bounce and the answer is … just over 3% real GDP growth. So consider that de facto what is being discounted at this time for current quarter growth — it better be a humdinger of an inventory build. Now, for the market to build on such a rapid advance in the current quarter, history again suggests that we would need to see 5½% real GDP growth, which we give near-zero odds of occurring. Hence our call for a sputtering stock market through year-end. Too much growth — and hope — is priced in at this point.

From the CNN transcript of Obama’s press conference last night (ht Corrente):

Now, one of the plans that we talked about is a public option. And part of the reason we want to have a public option is just to help keep the insurance companies honest. If the insurance companies are providing good care — and, as it is, they’re going to be more regulated so that they can’t deny you care because of a pre-existing condition or because you changed jobs or because they’ve decided you’re too sick and not a good risk — you know, with regulation, there’s already going to be some improvement in the insurance industry.

But having a public plan out there that also shows that maybe if you take some of the profit motive out, maybe if you are reducing some of the administrative costs, that you can get an even better deal, that’s going to incentivize the private sector to do even better. And that’s a good thing. That’s a good thing.

So…the proposed regulations of the health insurance oligopoly will not reduce their profits low enough and a public-funded “competitor” needs to be created “to keep the insurance companies honest”. What level of profits are honest and what level are dishonest?  If profits are not allowed to “incentivize”, exactly what will motivate the insurance companies to do better?  Maybe if they are good, the CEO’s can win weekends at one of the President’s dachas somewhere nice.

Ok, ok… we get it- the public plan will provide competition to the insurance companies that makes them cut their prices and drives their profits down.  But why not use the regulation alternative rather than creating a public-owned organization?  This was the main approach used for a half century for the utilities. But of course the arguement for utility deregulation and against utility regulation continues to go back and forth.  There are some examples of publically owned and operated utilities that are “competing” with private ones.  But these are owned by cities and regions, not the Federal government.

Once the Federal government is involved, there is no room for coexistance of public and private alternatives… the Federal government crowds out the private alternative every time.  This is the bottom line. Once the public option gets its “nose under the tent”, it will be time to short the private insurance companies. There is no way they will be allowed to survive.

We’ll miss freedom, especially when we are reminded of what we had. Roy says so:

Finally, irrefutable proof that the Goldman Sachs SLP monopoly at the NYSE is an unfair trading advantage.  And…out of the NYSE’s own mouth, no less.

Obamunism is designed to place a small ruling elite in total control of the American people. The strategy for getting Obamunism in place in America is rooted in a three-pronged approach: (1) using the global warming “emergency” to implement Cap and Trade to control standards of living for the masses; (2) using the financial crisis “emergency” as an excuse to run a deficit so large that the government dominates (through its surrogates) the return on wealth; and… (3) Obamacare, using the health care cost “emergency” as an excuse to appropriate the power to decide which segments of the masses are allowed to live and which must die.  Please read Should Government Determine the Value of Human Life?

Venture capital investment going to start-ups in the U.S. stabilized in the second quarter at $3.7 billion, according to the latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association. This is about a but is 15 percent increase compared to the low point in the first quarter of 2009 (when it was $3.5 billion). However, VC investment is still only about half of what it was during the 2nd quarter of last year when it was at $7.2 billion. Average deal size was also up a little bit to $6 million, from $5.3 million last quarter.

Most of the new investment came from biotech and medical devices, which saw pretty big increases in funding during the quarter to $88 million and $628 million respectively. Clean tech isn’t doing very well compared to a year ago, with only $274 million invested during the second quarter ($911 million a year ago). Internet deals brought in only $524 million in the quarter, down from $593 million the quarter before and $1.7 billion a year ago.

I’m not so sure anyone should be looking at this new data as a real VC investment “rebound”, nor as a so called “green shoot” of the economy. This data only shows money invested by VC firms, but not new money raised. Much of the VC money being invested now was raised well before the crash in the end of 2008. Significant amounts of new money being raised by VC firms might be indicative of some real investor confidence, but I don’t see that happening, especially with the foreseeable tax increases coming. Mark Heesen, president of NVCA, has this to say about fundraising:

Until we see notable upticks in venture fundraising and exit activity — which drive investment levels — we won’t expect considerable increases in the number of deals completed each quarter.