re: There are some major issues lurking in the US financial markets

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the privacy issues are overblown

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Yes. But they are overblown because...

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the 'election interference'

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Is much, much worse than anywhere here seems to realize is even possible. The known Facebook connections from Peter Thiel to Cambridge Analytica through the Mercers, and ultimately to RIS through Aleksandr Kogan, were already bad enough.

The recent Sheryl Sandberg revelations, and stories about using Definers Public Affairs, have made the situation look even worse. They have obviously stymied a full internal investigation of the depth of RIS support that they allowed to flow through their system, because they already know it's bad and much more serious than what they have previously reported.

Meanwhile the British are already circling in on Arron Banks, whom they know illegally used foreign funding to support the Brexit campaign. Even assuming that the U.K. and U.S. public never care enough to react harshly enough through their elected governments, the EU certainly will, as the pro-Kremlin influence campaigns were not limited to just those two countries. Places like Finland, Poland, and the Baltics, for example, are likely to push the EU to take a harsher stance against Facebook in coming years.

The election interference' backlash will be worldwide. It's going to be a titanic shitshow of absolutely epic proportions.

I dont mean to jump off topic but can someone explain exactly how there was election interference? All they were doing was advertising propaganda correct? I haven't kept up so excuse my ignorance.

What I’m gathering is, there seems to be a few who missed this massive bull run by sitting on the sidelines. They are trying to justify by all academic means possible for them to get that opportunity again.

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...because Facebook showed ads related to pushing a political agenda? Is that at the core of issue?

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No. Of course not. There are problems because (1) there continue to be political ads that are anonymously and untraceably funded (and are thus in violation of campaign finance laws) from foreign hostile intelligence services; (2) there are not just ads, but entire influence operations that revolve around creating false identities, false local community groups, and the repetition of purposely designed misinformation news stories (from those same HoIS); and (3) there have been credible allegations of data exchanges of proprietary voter information to HoIS that have allowed microtargeting to subsequently take place on Facebook's platform, facilitated by very lenient open door policies regarding third party data collection.

Whatever your political views on campaign finance laws, it doesn't take much reflection to see that this could be a huge problem for small vulnerable states like Moldova or Montenegro or Latvia. Google, Facebook, and Twitter already dominate the revenue streams for the journalism industry through the Chartbeat system ( LINK), and given that type of dominance, platforms like Facebook and Twitter are the key forums for political influence operations. Having those types of sensitive operations continue to be anonymous, malicious, and untraceable is simply unacceptable in the given state of the world today. Professional national security experts, with no strong partisan political affiliations one way or the other, understand this to be a very serious problem.

The domestic political implications are another story, but given that we are on the MT board and not the PT board, it should suffice to say that the Zuckerberg/Sandberg performance so far should not give potential investor any good feelings about the organization's instincts for crisis management or political risk management. In fact, the response pursued by management is almost guaranteed to lead to the worst result for shareholder value--an executive team that is consistently behind the news (rather than trying to get ahead of the story), and that has engaged in a cover-up-and-blame-others type of behavior that is sure to lead to a steady drip-drip-drip of bad press far into the future.

But we are getting way off course here in this thread, and none of what I wrote above is closely related to my other points in this thread. It's more of a separate issue on national security and intelligence that I also happen to know a good bit about.

To get back on track, let's get back to something you wrote in an earlier post:

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They have some things to sort out but the ROI of social media ads, led by Facebook and Instagram are going to continue to outpace every other provider.

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But what if outpacing every other provider is no longer good enough to justify current valuations? Facebook (and the FAANG stocks in general) have reached a degree of market saturation that is difficult to keep building upon with similar rates of growth. It varies somewhat (Amazon holding a relatively good strategic growth position, and Apple and Facebook in relatively bad ones), but the general story here has macro implications, because until very recently, FAANG had represented the holdout force most resistant to the larger global bearish momentum trend.

Regarding Instagram, I agree that it has a very strong future growth trajectory, as it's become a platform for hundreds of thousands of microinfluencers to actually earn enough to make a living through their social media accounts. (This is really amazing enough itself to create a whole separate thread.)

Even so, Facebook is sort of boxed in now, and doesn't have very much room to run in terms of user growth or user-eyeball-time growth. The everything-for-more-connectivity-as-a-positive-end-to-itself ethos of the organization (and which served it so well in the past) is now failing it, and its primary remaining bright spot is having a superior employee base from which to launch new types of revenue-creators. That might not make for a very solid future, however, because the platform itself is becoming toxic and may already be going out of style. So Facebook can try to imitate Instagram's stories all it wants, but the likely result will not be equally growing revenue streams, but rather a base of customers that begin to ask themselves, "Why not just pick one over the other?"

In any case, every FAANG stock is now in a bear market, and unlike the dot-com bubble from two decades ago, the overvaluation of U.S. equities is not overly concentrated in the tech sector. This time, it's more evenly distributed across the board.

The foundation of a bull market is earnings. This is where we stand now. Bear markets don’t usually look like this. The bullet points copied screwy. It is easier to read them in the link.

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Key Metrics Media Questions/Requests media_request@factset.com ? Earnings Scorecard: For Q3 2018 (with 96% of the companies in the S&P 500 reporting actual results for the quarter), 78% of S&P 500 companies have reported a positive EPS surprise and 61% have reported a positive sales surprise. ? Earnings Growth: For Q3 2018, the blended earnings growth rate for the S&P 500 is 25.9%. If 25.9% is the actual growth rate for the quarter, it will mark the highest earnings growth since Q3 2010. ? Earnings Revisions: On September 30, the estimated earnings growth rate for Q3 2018 was 19.3%. All eleven sectors have higher growth rates today (compared to September 30) due to positive EPS surprises and upward revisions to EPS estimates. ? Earnings Guidance: For Q4 2018, 67 S&P 500 companies have issued negative EPS guidance and 30 S&P 500 companies have issued positive EPS guidance. ? Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.1. This P/E ratio is below the 5-year average (16.4) but above the 10-year average (14.5).

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LINK

Forward guidance is almost completely unreliable, and the main chart in your link is very misleading.

Here's EPS for the S&P 500 in the books: LINK.

Here's EPS for the S&P 500 based on forward estimates: LINK.

Do you really think EPS for the S&P 500 will hit 160 for 2019? It will not hit 160. It will not even be close.

It was 112 last year ( LINK), compared to 102 in 2006, and that was below where forward estimates had been. The first 3 quarters of 2018 have been very good, and yes, I admit they took me by surprise. But you can't trust typical Wall Street guidance for corporations that extrapolates that kind of growth into 2019. It won't happen.

Sorry. That was my fault for not explaining what I meant.

Forward guidance is almost completely unreliable in terms of performing fundamental valuations of stocks.

Obviously, it exists because it serves a valuable purpose as information for a particular corporations. But corporate earnings growth rates for the S&P 500 have a notoriously poor correlation to near-term stock market performance.

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We can argue this or that about the numbers but the bottom line is earnings were good and beat expectations.

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But that's not the bottom line at all. Earnings beat expectations so far for 2017 and 2018. So what? If the market was wildly overvalued to start with, then it's still wildly overvalued now.

Having corporate earnings beat expectations for a few quarters is no guarantee at all against an oncoming compression of P/E ratios, or a sudden unexpected downward revision of forward earnings guidance, or both. In fact, it has very little to do with any of it.

There are all kinds of complications for EPS related to corporate buybacks, debt leverage, accounting, etc. But corporate revenues are a more stable statistic. And corporate gross value added (GVA) is even better. That's what really matters here for people interested in long-term fundamental valuations.

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I was shocked at the correlation for 2017 and 2018 YTD.

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I think you were just misreading the YCharts. The forward estimate link was only meant for forward estimates. Theoretically, the correlation for past numbers should be 100%, but maybe someone didn't update the historical numbers, or maybe they were the last versions of estimates right before the final numbers came in.

Forward estimates are constantly changing, so if you're doing an analysis of how reliable they are (just in terms of accuracy, not in terms of valuation, which as I explained above is a bad idea), you need a more holistic analysis across time.

For example, here's something I downloaded from the summer of 2016 for annual S&P 500 earnings estimate for the year 2016:

3-31-2015 --> $135.03
6-30-2015 --> $132.36
9-30-2015 --> $129.37
12-31-2015 --> $125.56
3-31-2016 --> $118.12
6-30-2016 --> $114.31
Current (did I download this in July 2016?) --> $110.58

Actual = $99.04 (although there may be some discrepancy in GAAP versus pro-forma accounting that I didn't catch, since this kind of stuff always seems to have annoying complications)

If you want to download the most recent version of this time-varying evolution of forward S&P 500 earnings estimates, you can find it here under 'Index Earnings': LINK. The Excel filename is 'sp-500-eps-est'.

That version will show you forward guidance for 2018 that actually rose about 10% from the summer of 2017 to the summer of 2018, and very high guidance for 2019 (with the first data point at 3/31/2018).

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Anyway, for me the news of the day is that Deutsche Bank finally broke below the infamous $10/share barrier. That was a commonly-cited warning threshold from a couple of years back when I started that " Deutsche Bank Litigation / Bailout Watch" thread in September 2016.

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Speak of the devil: " German police raid Deutsche Bank offices on money laundering allegations; shares fall 3.4%."

If DB goes into bankruptcy, those people implicated in the Panama Papers are going to be so incredibly fricked. This is going to be very enjoyable to watch if it happens.

So where do you see the SP500 will be at the end of the year?

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But any predictions within a month's time is more about fun speculation and guessing games than anything else.

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While it is fun, I disagree. Serious money can be made in these opportunities. The Bulls will take take out the 2800 resistance level and then it’s on to all time highs.

Longer term, this bull market has more life than you think.