Okay. Most third quarter earnings reports are in, and there probably is just one highly technical financial term that sums them up: Zowie!
The list of companies that grew earnings, that beat expectations, that revised financial guidance higher, is so long, it’s almost pointless to list. Ditto the stocks hitting new 52-week and all-time highs. “All of the above” might be the phrase that does it.
And, if you think this is the giddy high, virtually every company also reported growth accelerating into the fourth quarter.
Now, we’ve taken up this space several times recently to urge caution. I’ve written about exogenous events. I’ve written about black swans, those big negative events that cannot be foreseen. I’ve written that a round of profit-taking could start and get out of control. I’ve written that no rally lasts forever, that business cycles have not been repealed, that stock market corrections will still happen. I’ve also reported various measures of value and noted how they are all higher than normal.
And yet, the good news keeps coming—from Las Vegas, from Macau, from the American hinterlands. No typhoons, no hurricanes, no scary headlines about North Korean nukes, no tragic shootings can stay this bull from its appointed climb to new highs.
One of the difficulties for would-be bears is that, although valuations appear to be stretched for a whole bunch of companies, business fundamentals continue to support bullish outlooks, at least among those who tend towards optimism, and that’s nearly everybody, human nature being what it is.
As stated in this space before, revenues are up and accelerating, balance sheets are improving, the economy is strengthening, consumer confidence continues to rise, promotional efforts continue to be rational in almost all markets, inflation has not ignited and the Feds remain friendly.
Further, a case can be made that many individual companies have in place growth plans, and/or profit growth plans, that are producing results and seem credible for the foreseeable future.
So, what’s not to like for investors in this environment?
The answer: complacency.
G Ain’t For Gary
One thing about the casino industry is that it has colorful leaders who are not shy in offering opinions, guys like Sheldon Adelson of Las Vegas Sands, Steve Wynn of Wynn Resorts, Dan Lee of Full House Resorts.
In fact, listening to their quarterly investor conference calls is often as entertaining as they are informative about the prospects of their companies.
Here’s a favorite line from Sheldon Adelson’s latest call:
“My middle initial G. It doesn’t stand for Gary that my parents gave me. It stands for growth.”
Adelson’s proclivity for quips appears to be rubbing off on long-time COO Rob Goldstein.
On the same call, Goldstein was discussing the company’s success in continuing to attract VIP players in Macau even though it is continuing to reduce commissions paid to junket operators who bring in the big-time gamblers.
That process has yet to play itself out Goldstein added, succinctly concluding: “We’ll keep cutting commissions until they stop coming.”
