Société Générale's Albert Edwards Has To A Greater Extent Than Or Less Troubling Data He Reluctantly Shares

From ZeroHedge: 

Albert Edwards Spots An "Astounding" Difference Between "As Reported" And Stock Market Profits

Touching on a betoken nosotros addressed over the weekend when looking at real, "as reported" vs non-GAAP, "adjusted" profits, inwards his latest complaint Albert Edwards makes the next observation: the latest surprisingly hapless capex/investment gene of Q3 gross domestic product is an ominous sign for both the U.S. increment as well as corporate profits, as well as comes at the worst possible fourth dimension for the the U.S. economy: only equally the beneficial tailwinds from Trump's financial stimulus fade, as well as larn headwinds.

As Edwards explains referring to the latest Q3 gross domestic product print, "despite extremely high levels of corporate optimism on the dorsum of Trump’s financial reforms, business investment (including inventories) has non been a substitution driver of the stronger economy, equally it contributed less than 1pp to the 3% gross domestic product yoy growth."

Furthermore, as well as tape work concern confidence aside, Edwards argues that "the subdued stair of work concern investment is what you lot would await given the surprisingly moderate underlying profits uplift, as shown yesteryear the BEA National Income Accounts (NIA) measures of profits."

But how does this strangely subdued stair out of NIA Whole Economy "as reported" profits foursquare amongst the close tape adjusted earnings increment (as S&P corporations study on a non-GAAP basis) as well as the booming stock marketplace measures?

"Not much it appears" Edwards responds rhetorically, as well as adds that if 1 looks at a wider Definition than the domestic non-financial net turn a profit serial shown inwards the left-hand nautical chart below, things are no different. In fact, "they are genuinely worse. In the right-hand nautical chart for example, nosotros compare NIA Whole Economy national (ie including profits from abroad) pre-tax profits (as reported) amongst yoy increment inwards stock marketplace profits." And equally the SocGen strategist exclaims, "The recent departure of the 2 serial is astounding. "

To last sure, financial purists may notice a semantic flaw amongst this comparison, as well as Edwards is quick to preempt it:

Both the 2 NIA Whole Economic serial shown higher upward inwards ruby are pre-tax measures of profits. Despite taxes existence slashed, it is yet reasonable to focus on this pre-tax stair out equally this Definition in all probability best explains increment inwards domestic work concern investment. But sure enough on the right-hand nautical chart higher upward I am comparing apples as well as pears (although both are as-reported as well as the pre-tax stair out is telling us something useful almost the underlying profits performance).

To address this divergence, Edwards hence shows the grade of both pre- as well as post-tax national Whole Economic Profits on a reported basis in the nautical chart below....

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