Singing the earnings song…
Each year, in January, April, July, and October, most
publicly-traded companies announce their corporate earnings results. These
announcements can have a dramatic effect on companies’ share prices – and
markets – especially when companies don’t meet analysts’ expectations.
The way a company’s share price moves after an
earnings announcement can strike a discordant note. For instance, a company can
have a great quarter, but if it earns a few pennies per share less than
expected, its share price may tumble. Likewise, a company can be in dire
straits, but if it produces a few cents more than expected, its share price may
climb.
Last week’s earnings song was a bit melancholy. By the
end of the week, about one-fifth of the companies in the Standard & Poor’s
500 Index had submitted their reports and earnings were on track to grow by
about 1.5 percent year-to-year. That’s a bit lower than the 4.1 percent
earnings growth analysts had expected, but it was in positive territory.
Unfortunately, as The
Wall Street Journal pointed out, financial companies have exceptionally easy
year-to-year comparisons. When they were pulled out of the mix, earnings hit a
low note: down by almost 3 percent from last year, according to FactSet. That’s
worse than analysts expected at the start of the quarter.
Earnings were weak relative to expectations, but the
S&P 500 still finished higher for the week.
That may be because of the soothing refrain offered by Ben Bernanke
(monetary policy will remain accommodative… monetary policy will remain
accommodative). The important thing to remember is the Fed’s definition of
accommodative monetary policy doesn’t necessarily mean maintaining its
quantitative easing program.
there’s been
an innovation in measuring innovation. Innovation is one of those things. It’s
hard to fully describe, but it can be awfully important to countries and
economies.
In recent years,
there have been some remarkable innovations, such as car sharing and the
Oakland A’s use of sabermetrics; and some less remarkable ones, such as airline
baggage fees and the detachable dog sack (which allowed Fido to ride in a cloth
carrier attached to the outside of the car).
In March, panelists
at the Wharton Economic Summit 2013 discussed the concept of innovation. Although
they didn’t all define it in the same way, they suggested innovation is using
something new or known in a different way, different time, or a different place;
essential for companies to grow; useful; transformative; an approach that
addresses a major want or need; not always easy to spot.
It’s clear
innovation means different things to different people. Cornell University,
INSEAD, and the World Intellectual Property Organization, which collaborate on
the Global Innovation Index, said their benchmark, “recognizes the key role of
innovation as a driver of economic growth and prosperity, and adopts an
inclusive, horizontal vision of innovation applicable to both developed and
emerging economies.”
They refined the
index for 2013. According to The
Economist:
“Instead of
objectively counting the inputs and outputs, it relies on nuance. For example,
rather than ranking overall education, it looks at the top three universities,
since elite institutions may be more important than the average. Instead of
counting each patent, it tracks only those filed in at least three countries,
which suggests it is a more valuable technology. And, rather than look at
scientific journal articles en masse, the index includes how often they are actually
cited.”
So,
using these innovative metrics, which countries rank the highest in innovation?
Among rich countries, the United States, Britain, and Germany are one, two, and
three. In middle income countries, China, Brazil, and Russia take top honors.
Weekly Focus – Think
About It
“Health
is the greatest gift, contentment the greatest wealth, faithfulness the best
relationship.”
--Siddhartha Gautama, also known as Buddha
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