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CAT Joins Banks In Betting Future On Fed Generosity And Dollar Debasement
Caterpillar had what was perceived as a blowout quarter even though its Q1 2010 earnings were well below Q1 2009. As Karl Denninger summarizes: "Machinery sales were down 1% from a year ago - but I thought a year ago was the depths of the recession and we have been recovering since? So how do we get a negative year-over-year comparison? Worse, in North America (that's here!) machinery sales were down 15% with dealer inventories half of year ago levels. That is, not only is heavy equipment not selling, dealers don't think it will be in the near future either. So how did we get big increases? Asia, up 40%. Yep, that matters, and it's what drove the results. Engine sales were even worse, off 28%, and even in Asia they were down, in that case 15%." Yet what everyone is focusing on is the projected future so bright, all the sell-side analysts (note, they are called "sell" side) gotta wear shades. One caveat: as CAT itself points out, the future will be so bright only if the Fed and foreign Central banks continue their monetary lunacy. The WSJ recaps the earnings call: "The company raised it outlook for 2010, though revenue declined on
continued weakness in developed economies, especially the U.S. and
Europe. It cited concerns about central banks withdrawing stimulus too
soon." So let's get this straight: the company's actual top line results were worse than a year ago (and after firing everyone, the firm was hard pressed not to report better EPS), and its entire bet on the future, which is what is causing its stock to spike, is purely a function of Ben Bernanke's mood on any given day, or what "Firm Directive" his GS masters may have slipped him that morning. That sounds like a brilliant investment thesis. We will buy two big earth excavators right now and a whole lot of CAT calls to go with that.
Some highlights from Caterpillar’s 2010 Outlook:
- Worldwide economic conditions began to improve in mid-2009, and
recent surveys and economic reports indicate the pace of recovery is
accelerating. We expect that strong recovery in developing countries
will lead to world economic growth of about 3.5% this year. - Credit demand remains weak in developed economies because
businesses have relied on cash flows to finance initial recoveries in
investment or have not yet increased investments. Limited data suggest
increased credit growth in developing economies; bank lending in Brazil
and China has been increasing at double-digit percentage rates. - A few countries tightened economic policies but others further
lowered interest rates. Overall, economic policies remain some of the
most accommodative in history and should support stronger future growth. - Our major concern is that central banks in the developed economies
will be premature in withdrawing stimulus, causing another downturn.
However, with the year almost one-third finished and no significant
actions yet taken, we view the risk of a downturn starting this year as
low. In addition, high unemployment may limit central banks’ decisions
to tighten policies. - Developing economies should grow more than 6% this year, benefiting
from growth-oriented economic policies, a recovery in world trade and
favorable commodity prices. - We expect developing economies will be able to sustain rapid economic growth this year.
- Recoveries in developed economies started slowly, but recent data
suggest growth should improve throughout 2010. However, we expect
developed economies in total to grow slightly less than 2.5%, not
enough to recoup output lost in 2009.
When you have industrial companies joining the steep yield curve chorus in F minor sung by the Vikrams and the Blankfeins of the world, you know that the entire economy, and all profits, are based on nothing more than one-time fiscal and monetary stimuli. We ask why bet on these secondary derivatives of the Fed's psychopathology? When will Goldman finally IPO the Federal Reserve (its "related party" status would be very much disclosed in the Risk Factors of course - we don't want Goldman to get in hot water with the regulators over this particular action) just so America can finally bet directly on Bernanke's primary "asset", even if that asset is about $2.5 trillion in Treasuries and Mortgages whose worth is getting increasingly more dubious with each passing day.
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Great--CAT layoffs are 37,000 last year. They call back 700 workers. Over the last 5 years CAT high stock price was 80! The peak of the boom! They recorded $5.50 in earnings for the year. Now today CAT is at 71--predicting 2.50 to 3.25 in earnings--put a 20 mult( which is high!!-should be 15 to 17 like the SP) If they hit the every top end you got 65!! But earnings are not even close to 9.5 billion at the top end of 2008...Please.. first positive quarter in seven.. But please do not short it...shorts do not work period...the world doesn't see it yet...but longs sell those covered calls...at least..
GACK! <the sound of tearing hair>
I have a holding with them from that's older than my teenage son! I have to sell this zombie and take a cap gains hit for the privilege!
My....last...stock...holding..........EVER!!!
Put another way CAT is trading within 20% of its all time high of $87 in July of 07
Jobs program bitches. Mark to whatever.
"bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage. "
We are totally in the "Dependence" stage.. next up, Bondage. Iceland is in Bondage and Greece is up next ..but at least they are putting up a fight.
This big long ass twisted story is all about economic incentives.
But the housing market has bottomed.
Complete lunacy!
fantastic post by Karl and ZH
its ludicrous isn't it? investors cheering the slow motion sales wreck
I've seen nothing done by Bernanke and our government that would suggest CAT is wrong in their assumptions.
They will need lots of new bulldozers for all the excess houses soon. lulz
C'mon now its only at 22 times projected earnings. Surely they can grow into that valuation.
Welcome to Bubble Economy 3.0
CAT is no monopoly. There's a lot of companies that make big machines to move dirt. Komatsu comes to mind. There's only so much dirt that needs to be pushed around at any one time. Although much of Chinas economy is based on construction of empty apartment buildings and the cities to house them.
I wonder what Caterpillar is going to do, now that they've shown China how to build their products. Do they really think the Chinese Communist Fascists are going to protect their patents ??
Somebody might need some of those bulldozers if the other volcano blows up. I bet that's part of their business plan that they're not publicizing.
It is insanity.......run, run as fast as you can away from this place.
I just put in an order for more gold !!!!
This is what makes me think the top is near.
CNBC is stopping .0001 percent short of lying while hyping all these earnings,
as if they are blowouts with their misleading headlines.
They cherry pick the ERs, all upbeat stuff gets hyped as economic nirvana, and
buried in the article after you click on the phony headline, is the bad stuff.
Its getting to the point that the bad stuff basically contradicts the headline!
If you read carefully they qualify the beat as excluding one time charges, etc.
They carefully whitewash things that are cause for concern with some excuse
that implies the bad things were transitory and of course things will get better
even though the management has reduced forecasts, etc.
You would expect a CEO being interviewed to see their crappy ER thru rose colered
glasses, but damn, a headline that screams blowout while the article shows that the ER
was not even really a beat and is in fact cause for concern is quite another.
Im not saying they are outright lying, but they are getting as close to the brink as they can,imo.
Pehaps its no coincidence they are pushing weed every day (after of course being propaganda puppets for the war on drugs in the day) by running stories about "medical" marijuanha.
A major bong hit of some killer hydro wouuld sure help
ease the cognitive dissonance any remotely intelligent reader would surely
experience trying to associate CNBC headlines with the underlying article.
Thats just from their own highly spun articles. In order to associate the headlines
with financial reality, they would have to push for legal herion.
Take a deep breath, you're normal, and you're right: CNBC is a 24/7 propaganda machine that challenges the meaning of the term "sentient" every single minute of every hour that it is on. Unbelieveable.
Nirvana had it right: Smells Like Team Spirit.
So, more evidence that the business community thinks the world and the economy revolve around central bankers. The takeover is complete. Now it's time for the revolution (it will NOT be televised on CNBS).
http://3.bp.blogspot.com/_fKeKEf4ylyU/SxaW6TXJ2II/AAAAAAAAAVw/xezJWcYYS6...
Guess which one we are?
Why even make anything anymore? Just set up a giant casino and let that decide who eats and who starves.
Anyone ever read "Passage Through Armageddon?" It's about Russia and the Eastern front during WWI. The stories of the greed, incompetence, and corruption in the Imperial government and military are just jaw-dropping. What I continually ask myself is, "How did the revolution not happen SOONER?" And, on my latest reading, I suddenly noticed that it's beginning to remind me a lot of what I read here and at Mish's.
this isn't the only company that I've noticed this for.
I don't know... seems somewhat reasonable.... CAT lays off workers & decreases inventory in US, where business is flat and not improving. However, CAT's Asia business is booming [Asia is where the money]. As dollar goes down CAT's profits go up. Buying CAT is actually an easy way to take money out of the US, and send it to countries that have money.