7 ms·

This is why I still think we are early on with tech stock corrections. I.e current P/E ratios assume that past earnings are still accurate. Specifically apart

This is why I still think we are early on with tech stock corrections. I.e current P/E ratios assume that past earnings are still accurate. Specifically apart from rising rates I would expect this to eventually hit public company earnings in a big way and hence prompt more layoffs in public/private tech. Last earnings season didn’t see much of an impact. We are a couple of weeks out from earnings, I wonder if this or the next quarter will be where we will see more layoffs and the tech jobs market generally tighten?

spaceman_2020 4y ago
The p/e of most of the big names is still in the 20-25+ range. Way too high, and that's before earnings for the current quarter. In a downturn, an expensive new phone will be the first thing to get cut from consumer shopping budgets. And indiscrimate marketing spend will be the first thing to be cut from business spending.
- nly 4y ago
  Not so sure about that phone. Most people are getting them on credit/contract, so you'll just see contract terms extended and/or made less generous to compensate for higher interest rates and inflation. People will still replace their phones whenever they can because it makes them feel good.
adam_arthur 4y ago
I am expecting a big earnings recession, but it may be next quarter, rather than this one. It's taken a lot longer to play out than I expected, but you can get a decent sense of consumer spending via revolving credit e.g. credit cards. https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/CCLACBW027SBOG You can see how rapidly this has been rising since the covid deleveraging. But we're now back to trend and rates/real prices will be higher. As long as consumers continue to lever up aggressively, earnings will be somewhat supported. But we're about to run into a brick wall with maxed out credit
- htormey 4y ago
  Agreed re this taking longer to play out than expected. My frame of reference is 2008, which felt like it happened really fast. This seems to be more of slow role out in stages. I could totally see this taking another quarter or two before it hits earnings in a big way.
- BadCookie 4y ago
  Do you have any idea why the consumer credit total in this chart doubled practically overnight in March 2010? It looks like a definition change, but I couldn’t find an explanation.

spaceman_2020 4y ago

The p/e of most of the big names is still in the 20-25+ range. Way too high, and that's before earnings for the current quarter. In a downturn, an expensive new phone will be the first thing to get cut from consumer shopping budgets. And indiscrimate marketing spend will be the first thing to be cut from business spending.

nly 4y ago
Not so sure about that phone. Most people are getting them on credit/contract, so you'll just see contract terms extended and/or made less generous to compensate for higher interest rates and inflation. People will still replace their phones whenever they can because it makes them feel good.

adam_arthur 4y ago

I am expecting a big earnings recession, but it may be next quarter, rather than this one. It's taken a lot longer to play out than I expected, but you can get a decent sense of consumer spending via revolving credit e.g. credit cards. https://fred.stlouisfed.org/series/CCLACBW027SBOG https://fred.stlouisfed.org/series/CCLACBW027SBOG You can see how rapidly this has been rising since the covid deleveraging. But we're now back to trend and rates/real prices will be higher. As long as consumers continue to lever up aggressively, earnings will be somewhat supported. But we're about to run into a brick wall with maxed out credit

htormey 4y ago
Agreed re this taking longer to play out than expected. My frame of reference is 2008, which felt like it happened really fast. This seems to be more of slow role out in stages. I could totally see this taking another quarter or two before it hits earnings in a big way.
BadCookie 4y ago
Do you have any idea why the consumer credit total in this chart doubled practically overnight in March 2010? It looks like a definition change, but I couldn’t find an explanation.