“E” Season Again

Companies are now reporting their third quarter earnings results.  It is still early and only a small smattering of earnings have come in, but a few observations can be made:

1. For most firms, there is no slowdown yet.
2. Increased costs are being passed on in higher prices.
3. Profit margins are being maintained.
4. The upper-end consumer is doing just fine.
5. Higher interest rates are a boon for the banks. They are earning more on loans but not paying out nearly as much for deposits.
6. Some management teams raise concerns about future business, but without much evidence in the near-term.
7. Supply chains have improved. Excuses here for poor performance are ringing hollow.
8. Any excuse for raising prices. Some firms are really capitalizing on the current business environment.
9. Almost no one believes this can last!

That last point helps explain the negative bias among companies and investors alike. Only more time will dispel this sentiment. The Bull has often written that businesses are usually very good at adapting to change. That is what good managements are paid to do.  We are all slowly adapting to higher interest rates. Whether we do it without a serious recession remains to be seen.  However, it is certainly possible. In the meantime, the pervasive fear is providing opportunities for the investor willing to look through the current backdrop. Stay steady my friends.

The Lonely Bull