Sic Semper Tyrannis

More statistiganda, highlighted by Roubini, in his modestly-titled blog post "Corporate Earnings Growing 17% in Q3? No Way! Rather Slowing Sharply to At Most 8.5%" :

Rosenberg shows that the 17% earnings growth figure for Q3 is meaningless and misleading - compared to Q3 GDP growth of 1.6% - for several reasons: it is a year-on-year growth measure while GDP is a quarter-on-quarter annualized measure; it is distorted by the fact that in Q3 of 2005 earnings fell because of the Katrina effect; it is distorted as it is a earnings per share (EPS) measure; it does not correct for seasonality. Once Rosenberg appropriately adjust the data, actual seasonally-adjusted annualized growth of rate of earnings in Q3 was only 8.5% not 17%. And if you were to make an inflation adjustment, real earnings would be growing even less than 8.5%. Not only is earnings growth much lower than the 17% headline figure but it['s] path in the last few quarters is showing a sharp deceleration: in Q4 of 2005 annualized earnings growth was almost about 19%; it decelerated to about 16% in Q1 of 2006 and to about 14% in Q2; and it has now sharply fallen to 8.5% growth in Q3. This is a very sharp deceleration of earnings growth that is very consistent with the sharp deceleration of the economy in 2006.

Oh, so like, the opposite of what is being trumpeted is actually happening. Interesting!

Roubini also has the point:

... note also that, among the S&P500 firms, a large fraction of the earnings growth in 2006 has come from energy firms and financial sectors firms; outside these two sectors earnings growth is significantly lower. Moreover, given the recent sharp downward revisions of profits in national income accounts for Q1 and Q2, it must be the case that earnings growth outside the S&P500 companies is even worse than that of the ex-energy and financial earnings of the S&P500 firms.

Ah, yes. Wall Street is always happy to take advantage of commodities when they can be used to make the overall corporate bottom line look better. And there's nothing like using your own earnings (i.e. the financial sector's) as a justification for buying into the market -- so the financial sector can be inflated more.