Reflections on Earnings Season

Some brief observations
(1)As the season progressed, analysts revised their estimates down so that most companies could still beat the estimate by a penny or two. In a class where the professor dumbs down the test so 75% of the class can bet a B+, only Cs and As have any value.
(2)GE, Starbucks, and a host of others showed that our thesis about exposure to the US consumer is correct. However, subsequent discussion/writings about the events show that in general people expect the consumer to bounce back rather more quickly than we do.
(3)exporters, particularly with food or infrastructure exposure, did well. The big question is whether that will continue through the year or creeping uncertainty, conservatism and caution will dampen growth for a few quarters there as well.

Our expectations is that the US consumer is experiencing a secular, not a cyclical, change. Just as the past 15 years saw a gradual decline in savings and growth in indebtedness, the next 10 will show a return to sanity. Some of this will be wisdom learned from harsh experience, and some will be in the form of methadone treatment applied to addicts. In some cases more like shutting the junkies up in a cell till their bodies stop shaking [ie foreclosure/bankrupcy, car repo, no more unsecured credit cards].