The Importance of January 21st
On Thursday, January 21st earnings reports will be released for Google, Goldman Sachs, American Express, and Freeport McMoRan.
Before I dive into the relevancy of those reports, let me say this - I have no idea where those stocks will trade after the report; in fact, for those reading this you shouldn't have any clue either. Nor should it affect, or change, your investment strategy.
What is important is the macro-economic insight those 4 reports may provide. Let's reflect back for a second - This is a balance sheet recession, more specifically, a consumer balance sheet recession. Ok, let's see how consumers are faring. There is no better way than to analyze how consumers are truly managing their debt service. American Express provides just that - an opportunity, within their earnings, to gauge consumer credit. Keep in mind that for the month of December, Amex's credit card losses, the percentage of loans the company does not believe will be paid off, fell to an annual pace of 7.4% from 8.1% one month earlier. Loans at least 30 days delinquent, equal to future loan losses, fell to an annual rate of 3.7% from 3.9% one month earlier. The consumer balance sheet is beginning to repair itself and, with that, a gradual lift in consumer spending will come.
From the Google report, I want to know if the continued improvement in advertising spending is truly back. Are the travel, auto, and leisure companies confident enough to increase their ad budgets?
Many have heard me talk about how well prepared technology companies were for the 2008 "Great Recession." In 2001, they were the culprits of the last recession, when the tech bubble burst. Technology companies learned well from that experience and kept their balance sheets in good order. I believe in the technology upgrade cycle, both for consumers and for enterprises. Looking forward, technology provides many answers to the challenges we face as a nation to accelerate our domestic GDP.
For Goldman Sachs and Freeport Mac, look for simple fundamental improvements. Goldman Sachs provides a glimpse into recovering M&A activity. That's correct - forget about trading revenue. I suspect that the income Goldman derives from underwriting fees may surprise the street and should give all of us confidence that our credit markets are restored to normal functioning levels. Freeport Mac tells the global story. Is the developing world re-opening its wallet to acquire the basic resources needed to build their infrastructure? Is the "standard of living" theme back? The 2000s were the Emerging World decade.