Thursday, October 13, 2016

QE really helped corporate profits


The money created by QE went to the banks (their prime dealers) and because it was used to buy more Treasuries, the money was spent into the economy by the federal government.  The newly created money ends up as profits less any household savings along the way.  Profits are savings.

Now that QE is ended, corporate profits suffer.


See FRED chart: {click to enlarge}


QE 3 was implemented because earnings per share stopped growing, buy-backs and all the other advantages notwithstanding.   The chart above takes into consideration corporate income taxes.

S&P 500 earnings per share:

                 quarter            quarter         last 4 quarters
                 ending            earnings

06/30/16 23.28 86.92
03/31/16 21.72 86.44
12/31/15 18.70 86.53
09/30/15 23.22 90.66
06/30/15 22.80 94.91
03/31/15 21.81 99.25
12/31/14 22.83 102.31
09/30/14 27.47 105.96
06/30/14 27.14 103.12
03/31/14 24.87 100.85
12/31/13 26.48 100.20
09/30/13 24.63 94.37
06/30/13 24.87 90.95
03/31/13 24.22 87.70
12/31/12 20.65 86.51
QE3 09/30/12 21.21 86.50
06/30/12 21.62 87.92
03/31/12 23.03 88.54
12/31/11 20.64 86.95
09/30/11 22.63 86.98
06/30/11 22.24 83.87
03/31/11 21.44 81.31
12/31/10 20.67 77.35
09/30/10 19.52 71.86
06/30/10 19.68 67.10
03/31/10 17.48 60.93

I think this is really bad.

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