“When did the future switch from being a promise to being a threat?”

– Chuck Palahniuk

Good Morning,

As much as we had suggested a rest was in the offing, well it simply has not appeared yet. And the averages roll onward.

The changes unfolding around us all make very little sense to the masses. Shutdowns, closures, distancing, pandemic, vaccinations, government orders, work stoppage, fun stoppage and complete industry stand-downs all thrown together. And yet – records set.

I remain amazed at how simple, yet all encompassing, it has become – like a ghost in the night, drifting on the wind and transforming every single business on Earth. We expressed this for years as Generation Y prepared to launch their end of The Barbell Economy®.

The good news?

It’s an uphill battle for years to come – with lots of sharp turns and gaping crevices to overcome along the way. The change will be dizzying at times – and for the Boomers on the other end of the Barbell, well it won’t make a lot of sense – often.

However, that discomfort and seeming “unfairness” will not stop this wave of change from rolling across the entire landscape, over and over again. The 4th Revolution is upon us as we witness digitalization remake every business model, wherever possible. Let’s face it, if a pandemic and global government shutdown cannot stop the economy – or this transformation – what will?

Earnings Powering Onward

The earnings season for Q4 “ends” officially this week with Walmart. It does not really end mind you – it is just that all the important names reporting will end with Walmart this week. And then? Well every 20-something analysts assistant and video montage producer will focus on the “terrible” potential bad news coming for Q1, 2021.

Please do keep in mind that the comps for the next three quarters will be ridiculously easy to beat – Q2 and Q3 ahead especially. The look backs will be the pit of the virus shutdown.

How are we doing now?

…excellent – read ’em and reap.

This first chart above reminds you that as we come to the end of the Q4 reporting season, we have now seen actual growth in YOY readings for both Revenues and Earnings.

In essence, this suggests that the pace of growth and transformation has permitted reporting companies to collectively beat earnings from one year ago – pre pandemic.

So if everyone felt so great as 2019 ended, why so terrified now?

More in the data below.

Your snapshot above shows how the various reporting statements from companies about Q1 expectations have driven dramatic increases in expectations since early December. If we get the normal “hook”, we will see these expectations fall again before the Q1 ’21 reporting season begins – and then beat.

In dollar terms, the steady pace of improvement is just as impressive given the reality we are all living through today:

In mid-summer last year, the crack team of analysts on Wall Street expected $1.3 Trillion in net earnings (more on tax returns themselves). Today, that number is already 25%+ higher.

While this is certainly a strong uptrend – and supported by price action in the markets, surprising most – the trends and underlying forces at play strongly point to significant room for further positive revisions as the overall macro backdrop stabilizes and gets clearer, particularly in the second half of the year. Remember, the comps on Q2 and Q3 will be shockers.

The best antidote right now? A setback somewhere between here and there to create a new spring-load effect. I wish I had complete confidence it would happen and I’d sure like to see it unfold. But, let’s face it – I have been wrong since October on that front for sure.

Friends, this is a strong, very young bull market. It will have many twists and turns. Pray for a correction and understand that those events are good for the strength and upside surprises afterward – even though they stink going through them.

One More Point on Sentiment

The sentiment process continues to ebb and flow as money begins to come off the sidelines. I love the headlines:

“$58 Billion Floods Into Global Stocks as Frenzied Buyers Flock to Market”

LMAO – this is $58 Billion out of nearly $19 Trillion in the rainy decade fund of the US consumer. Less than a drop in the bucket.

What can we expect going forward? Corrections will be ugly, scary, steep – and quick – the latter characteristic being the new main surprise. AI trading will make it even tougher to react to – so the main lesson to be learned? Don’t react.

Here is my point:

Notice two things, three really: 63 is the reading on Friday’s close (it was 55 in the morning chop), 70 a week ago and 58 (very close to current readings) a year ago.

Let’s go to the chart:

The red star is one year ago. The crowd feels just a tiny bit better than back on that date – when the markets were over 16% lower than they are now.

The green star is one week ago. The crowd feels worse than they did a week ago when prices were 1.23% lower.

The lesson – emotions will become more and more fearful as prices rise. We have covered this often – altitude sickness is real in markets. The higher they rise, the scarier they feel as the nightmare drop can be bigger…and bigger…and bigger as time marches forward.

Scary? You bet it is…that’s why so few take the ride.

In Closing

It is understandably difficult and a bit of a mind-game to get your arms wrapped around all of this good news when the media is pouring bad news into your life with a double-barrel firehose.

Sadly, this dichotomy is unlikely to end anytime soon and the stats above prove it for you.

We must all remain diligent and prepared to always stand tall against the storms. Standing apart from the crowd permits one to always be ready to do what most will not.

The last of the Q4 numbers are just ahead.

Corrections and setbacks serve a role – they build your value for the next run – and we are unlikely to get very many of them in the years ahead.

Even when they hurt in the near-term, they create the gains of the long-term.

Next Steps!

Stay focused on what many will not see. Think above the clouds. Try hard to not get lost in the fog. See the horizon which is far beyond – and vastly more beneficial – than the headlines.

Many storms will still arrive on our shores – and then they will pass.

It is our job to help you remain focused on your pathway. We are more excited about that today than ever before.

  • The future is brighter than currently perceived.
  • The Decades of Disruption ahead carry massive opportunity…

For the prepared, patient and focused long-term investor.

Buckle up and pull that harness tight…this ride is just getting started.

You’re missing out!

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