Economics

Tom Keene Talks to UBS's Jonathan Golub

Tom talks with Jonathan Golub, chief U.S. equity strategist for UBS, about Apple, S&P 500 earnings, and volatility in 2012

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By Tom Keene

February 10, 2012 at 2:22 AM UTC

This article is for subscribers only.

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This article is part of the February 13, 2012 issue of businessweek.

In a recent essay you state that without Apple’s earnings we go from earnings growth in the mid-teens for the market to 2 percent. Apple is that big a deal?
Apple obfuscates the fact that the underlying trend in earnings is really weak. You have also had stronger growth outside the U.S. and high oil prices—both of which are good for S&P profits—plus a weaker dollar. Those things overstated how strong the profit trend was.

So what in the economy was Apple masking?
You had about 2 percent economic growth, and yet you had 16 percent or 17 percent earnings growth. How did you get that earnings growth? It cannot just be cost-cutting by companies, because the earnings are just too good. If you take away that one name [Apple], you get greater clarity on the fact that earnings are moving much closer with the direction of the economy.