Negative Retained Earnings on the rise in the technology sector

Negative Retained Earnings on the rise in the technology sector

What does the term Negative retained earnings imply? According to askalot:

Negative retained earnings. When a company records a loss, this too is recorded in retained earnings. If the amount of the loss exceeds the amount of profit previously recorded in the retained earnings account as beginning retained earnings, then a company is said to have negative retained earnings

Tech sector trillion negative earnings

A subscriber sent this chart to us and asked us for our opinion on this negative retained earnings trend. Well, one glaring error we can spot is that this chart has not been adjusted for inflation. Taking the bastardised figures from the Fed, 1000 dollars in 2000 is now worth roughly 1600. The red line should either be brown or purple as it does not represent danger but support.

Former resistance turns into support. 700 billion in 2000 would be the equivalent of 1.12 trillion. In reality, 1K in 2000 is probably worth at least 2K in today’s dollars, if not more. So 1.4 trillion would be a more accurate representation. Then add in the stupidity factor, as there are 10X more morons trading today than in 2000. A more apt figure would fall in the 1.9 to 2.4 trillion ranges. So, we do not view the above as a dangerous development but simply a sign that we should expect more volatility as we head higher.

A similar assessment could be made on the chart below. Much noise is made about margin debt without focussing on interest rates and the Fed’s monetary policies. If you factor these developments into the equation, it’s a waste of time to focus too heavily on margin debt.

finra margin debt and S&P 500

What do you notice when you look at the above chart? Margin debt has been trending upwards. Secondly, we have a new branch (trend line) of the main uptrend line, indicating that margin debt and total U.S. debt will soar to unimaginable levels. What you see today will one day be viewed as sane. The experts today consider margin debt levels of 2000 and 2007 as rational compared to current levels.

If we use the same inflation adjustment factor used above (1K is worth 2K today), then at the minimum, margin debt levels would need to surge past 1 trillion. When stupidity is factored into the equation, margin, debt would need to surge to the 1.45 to 1.74 Trillion ranges before alarm bells are raised.

One should understand something the Fed will not allow the markets to crash for a prolonged period. This is especially true when the trend is positive. This is why we did not panic during the COVID crash of 2020. The trend was positive, so we knew that the crash was engineered, which meant the markets would recoup their losses just as quickly.

Lastly, don’t fall for the rubbish stories out there stating that the Fed is running scared. They are not frightened. They can lay waste to any corporation, or any entity they deem is stepping out of line. They have the power to create new money, and until the masses refuse to embrace Fiat (don’t hold your breath for this day), the Fed is all-powerful.


Other Articles of Interest

The next Bull market

The next Bull Market

As these vaccination programs have gained traction, this divergence has continued to widen. One would assume that individuals would be ...
Read More
Silver to Gold ratio

Silver to Gold Ratio

The Silver to Gold ratio is rising, and it breaks past 95 and tests the 99 to 110 ranges. Silver ...
Read More
Geopolitical Events

Interesting Geopolitical Events

Currency markets and Geopolitical events (usually unpleasant in nature) are intertwined. Some would prefer the more colourful term of currency ...
Read More
Market Rally

Market Rally: Will the Market Rally This Summer

There is too much money out there for it to go anywhere else but the markets (and no matter what ...
Read More
trading zone

The stock market is stuck in a trading zone

The markets will recover as they have always done in the past. Those who panicked and dumped their shares will ...
Read More
Stock Market Trading range

Stock Market Trading range: what’s next?

Until the short term trend reverses course, the markets will be stuck in a trading range. There is a solid ...
Read More
History of financial markets

History of financial markets: The Masses are Doomed

If one studies the history of financial markets, one can clearly state that the masses learn nothing other than repeating ...
Read More
Covid Resistance

Covid Resistance

Covid resistance: The masses are about to push back Covid resistance is about to take hold as in a Covid ...
Read More
does technical analysis work?

Does Technical Analysis work?

Technical Analysis does work to a degree. However, one can’t rely on technical analysis to provide the full picture. Additionally, ...
Read More
good stocks

Good Stocks: Value Stocks Usually Fall under this category

One would assume that individuals would be happy to invest in companies with solid fundamentals. One example among many companies ...
Read More
Negative Retained Earnings on the rise in the technology sector

Negative Retained Earnings on the rise in the technology sector

What does the term Negative retained earnings imply? According to askalot: Negative retained earnings. When a company records a loss, ...
Read More
Market Volatility

Market Volatility: To Dance or Not to?

This pattern of rising Market volatility will continue until the MACD’s (in the weekly charts posted below) undergo a bullish ...
Read More
Fed Tapering

Fed Tapering: To Party or not to Party?

The COVID narrative is about to end. This last stage is akin to a selling climax before a bottom takes ...
Read More
market sentiment

Market Sentiment: Is Turning too bullish

September has, in part, lived up to its name as being one of the worst months of the year. While ...
Read More
Federal Reserve bank of New York

Federal Reserve bank of New York; What’s their Mission?

Like every other Federal reserve bank, they have on a mission only; Inflate the money supply or die trying. The ...
Read More
Reflation Rebuttal

Reflation Rebuttal?

Notice a trend here; the herd always needs something to fret about. The media understands this, so they churn out ...
Read More
margin debt out of control

Margin Debt: Is it out of control?

Once the Dow challenges 33,000 or the Nasdaq trades past 14.5K, it will move to the “low level” mode. Market ...
Read More
Stock Market Cycles

Stock Market Cycles: When to buy & when to sit

90% of traders/investors assume there are only two stages in the markets, buy and sell. There is a time to ...
Read More
Stock Market History and Market Crashes

Stock Market History and Market Crashes

History is clear on this topic; the masses never learn. From the Tulip mania to the Coronavirus Pandemic crash, nothing ...
Read More

Stock Market Fear Index: The Crowd is still nervous

If fear starts to seep in, remember this. We have a very aggressive Fed, and their only purpose now is ...
Read More
US stock market

Can the US Stock Market & US dollar Trade-in Tandem?

Yes, they can, foreigners looking for stability will move money into the US stock market, they win on both ends, ...
Read More