PALO ALTO, Calif. (CNN/Money) -
The funny things about macro-market data is how little anyone pays attention to it on the way up and how confusing it all becomes on the way down.
Take the glaring discrepancy between second-quarter earnings growth rates calculated recently by two organizations that mine the data for fun and profit, Standard & Poor's and First Call.
As reported in last weekend's New York Times, New York-based S&P reckons that average operating earnings for most of the S&P 500 index (that is, those that have reported) grew 29.7 percent in the second quarter. Up the highway at Boston-based First Call, profits were up a paltry 0.9 percent.
What gives?
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Are there any good stock ideas?
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Methodology is the short answer. S&P pretty much looks at reported operating earnings, subtracting out one-time nastiness. The subtraction exercise isn't a bad practice, on the face of it, because the goal is to compare apples to apples. First Call goes a step further, figuring earnings the way the consensus of Wall Street analysts figure them. So if most analysts for a given company were all to exclude the same line item (one-time layoff costs, for example), First Call would follow suit.
With such disparate results, the questions arise as to who's right. The better question, however, is: Do these numbers even matter? Folks in the trenches -- traders and portfolio managers -- answer with a resounding NO.
"People in my shoes buy stocks, not economies," says a trader with a major Wall Street firm who's had a banner year by being negative. Think about that for a second. The media and market gurus (like Abby Joseph Cohen, Tom Galvin and many others) spill a lot of ink talking about "the market." And they put a lot of energy into deciding if the market is over- or undervalued, if companies in the S&P 500 index are growing and more or fewer companies are meeting or exceeding expectations.
Meantime, serious investors are doing their homework one company at a time. These investors don't really care if a company made a "number" by excluding a one-time event. They care if a company is generating cash and if its management is making good decisions and if the company is well positioned for the future.
Did the S&P 500 barely grow or grow robustly in the second quarter? Who cares?
What the SEC does and doesn't do
I wrote recently that the Securities and Exchange Commission has supposedly been investigating Enron for months and yet there have been no indictments. Swiftly came a letter from a an old pal of mine who now works for the SEC, reminding me that indictment is a job done by the Justice Department, namely U.S. attorneys, not the SEC. To which I say: Details, details. But seriously, check out a trenchant report in the new issue of FORTUNE on just what is taking the Feds so long and when the next shoe is likely to drop.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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