Bob Doll: The Market Cannot Go Down; Earnings are Too Good

This was one of those cringeworthy moments in financial television history that I knew when I saw it, I could document it for future use in order to humiliate Bob Doll. While no one here is arguing with the merits of US earnings, I think we could all agree that it is patently absurd to suggest stocks cannot trade down, because earnings are so damned good.

Well, that’s exactly what Bob Doll just said. It’s impossible for stocks to even pullback a mere 5-10% because of the power of earnings, so you might as well mortgage out the house, leverage it up, and buy QQQ.

On the issue of earnings and free cash flow, publicly traded US companies have enjoyed about $1 trillion of free cash flow over the past 12 months, on revenues of $11.2 trillion. Total debt is around $9 trillion, most of it sequestered in the banking space, which is tricky to quantify. The total market capitalization of US companies is a little above $23 trillion. Within the free cash flow matrix, here is the breakdown per sector.

Basic Materials: -$82 billion
Consumer Goods: $100 billion
Financial: $330 billion
Healthcare: $114 billion
Industrials: $79 billion
Services: $164 billion
Technology: $253 billion
Utilities: -$751 million

In short, financials and tech make up more than half of the free cash flow generated by American publicly traded companies.