The third quarter for 2016 finally comes to an end and it will be interesting to note how companies have performed. Most companies have had falling earnings for a few quarters now, but the stock buybacks have kept the stock prices buoyant, portraying a better than actual EPS number. However, the buybacks appear to have peaked and slowed down a bit according to research from FactSet. This, and when you consider that the earnings numbers put forward by companies do not even conform to standard accounting practices just stinks of an massive con in the equity markets. Income Surfer has already brought our attention to this fact last quarter, so I will point you to the post “This Quarter Has Been Adjusted” instead of repeating it all here. Whether this will translate to the fireworks we’ve been expecting now or will we have to wait a few more months? I have no idea…but I remain hopeful that the market will provide some great opportunities in the coming weeks/months.
On the central banks front, its business as usual. Lots of circular reasoning and lost credibility from the Broken Fed as they fail to raise rates again while passing hawkish and dovish comments every other day. In Yellen-Wonderland things appear to be awesome. Current expectations remain that the Fed will raise the rates in December (based on bond market probability matrix). Other central bankers are going the other way, most of them cutting interest rates as the economies are anemic. All eyes will be on the central banks to get a glimpse of future expectation.
I continue to watch from the sidelines and hoard cash waiting for the fat pitches. I am the least bit interested in staying fully invested here and make a measly 1% or 2%. I continue liquidating more of my riskier assets and purchase hard assets instead – which should provide some shelter and see benefit during the coming downturn.