More Is Always Better Sooner

Shah Gilani Aug 03, 2020

My favorite economic and market postulate is: More is always better sooner.

It’s never been truer.

Another favorite saying of mine is: Nothing matters, and what if it did?

And last but not least: Everything’s good, until it isn’t.

Put them all together and that’s the kind of market we have.

When it comes to “more” I’m talking about earnings, Q2 earnings. You know, the worst quarter in American history, the one where GDP just fell 32.9%? Well, corporate earnings are looking good, as in really good.

Not on an absolute basis, mind you. Lots of companies are reporting crazy bad numbers compared to a year ago. But that doesn’t matter, because, didn’t we all know that was going to happen?

Yes, we did.

What matters is halfway through this earnings season with 63% of S&P 500 companies having reported, 84% of all companies reporting, have beaten consensus estimates for their earnings this quarter, according to FactSet. Remarkably, that’s a record, so far. The actual full-season record is 81% beating, so we’ll see when the reporting’s done if we’re still ahead of that benchmark.

And, as if that’s not “bullish” enough, in Q2 they’re beating by an average of 21.8%. That’s insane, given the one-year average is a beat by 3.7% and the five-year average beat is by 4.7%; and in Q1/2020, 70% beat by 3%.

And if that’s not bullish enough, 69% have beaten revenue estimates!

No wonder we keep climbing every wall of worry. Everything’s better than we thought it would be.


Yeah, right, at least thanks to “averages.” Because big beats belie the underbelly of reality. For example, last week, 280 listed companies reported earnings, about half of them rose while the other half fell, despite their earnings “beats.”

A lot of the bullish buying’s been coming from retail. Where, thank goodness, more was better and absolutely necessary, sooner.

Pandemic Profits, Despite All Odds

I’m talking about pandemic benefits.

Wages and salaries in Q2 plunged $680 billion on an annualized basis, while at the same time personal income soared by $1.386 trillion (annualized), that’s a 32.6% increase in the annual rate of personal income. Meanwhile another 1.434 million people signed up for unemployment benefits last week, that’s the second week in a row where net initial claims increased.

For some realism, the average initial claims number per week has been more than one million for the past 19 weeks. For perspective, the previous all-time record for a single week of initial claims, before the pandemic, was 695,000. And that was a one-time event.

The increase in personal income, thanks to benefits, especially the extra $600 a week that beneficiaries were getting, which just ended, was aided and abetted by the “more is always better sooner” principle applied to the stock market, which added $7 trillion in market value to American wealth in Q2.

Now, if only every American in the averages that get reported could actually spend or pay their rent or mortgage, or go on a spectacular shopping spree, with some of that $7 trillion increase in their “personal income,” we’d be out of this recession in a day.

For those statistics, we can thank the “more is always better sooner” crowd at the Federal Reserve and the Federal government, who together pumped $5 trillion into the U.S. economy in Q2.

Of course, the Federal Reserve’s “more is always better sooner” practice makes perfect principle is evidenced by U.S. monetary growth (M2) soaring 24.9%, this year over last year.

So, yeah, more is always better sooner, which is why the stock market’s been going up.

Which is why it’s going to keep going up.

Because nothing matters, and what it if did?

Because it’s all good, until it isn’t.

I’ll dig deeper into all of this in Wednesday’s Total Wealth, so stay tuned.

I’ll also be going live, with a chat and a Q&A this Tuesday, and all Tuesdays, Thursdays, and Fridays, right here. Tune in at 11:45 a.m. Eastern Time and bring your questions, because I’ll be answering damn near everything that’s asked.

It’s all on at Money Morning‘sMarkets Live, and I hope to see you there!

Until then,

Shah Gilani

One reply on “More Is Always Better Sooner

  1. randya says:

    why dont we just give everybody a million dollars ,then we’ll all be millionaires? We can finally win the war on poverty.

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