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Right on Point Regarding Caterpillar
My suspicions regarding CAT were right on point last year.
Unfortunately, the suspiciously engineered "feeling" bear market rally
made it very difficult to profit from being right. I still have an OTM
position on them. Let's see what comes of it.
From CNBC:
Caterpillar Fourth Quarter
Revenue Falls Short
Caterpillar reported fourth
quarter earnings that beat Street estimates on Tuesday, but fell short
on revenue, sending shares lower in pre-market trading.Sales
reached $7.90 billion, below expectations of $8.11 billion and down
from $12.92 billion a year ago.Caterpillar expects 2010 sales
and revenues to be up 10 to 25 percent from 2009, and profit is
expected to be about $2.50 per share at the midpoint of the sales and
revenues range.The company said it
continues to see signs of economic improvement, particularly in China
and most developing countries. If the China situation is
as I suspect, this will be pulled back significantly. See
Follow Up to the China Short Thesis Debate.
They also see signs of improvement in North America, Europe
and Japan, but these economies remain weak and have not rebounded as
quickly as developing countries. I see the possibility of
re-weakening here as well coming from CEE.Caterpillar also sees a marked increase in demand
for mining equipment—a result of continued strong commodity prices and
growing confidence in economic recovery, and also an improvement in
sales of aftermarket service parts, which is usually an early indicator
of growing demand for machines and engines. China is
supporting commodity demand now. If they do pullback, so will commodity
demand and pricing, at least in the near to medium term.
For
more on Global Macro, see
The Butterfly is released!
For
more on CAT, see:
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I'm in construction and when I talked to Cat guys in 2007 and 2008, they kept telling me they were making up for the loss of construction sales globally by sales in Ag and Mining due to bump in Ag at the time and bubble in commodities. The mining stuff drop off the face of the earth on Nov 2008 but came back this spring. If commodities deflate again they are done, Ag is done, CRE is going to crush constructon...rebuilding the US interstate highways from scratch will not save them. Also, Cat is seeing betteer competition from more fuel efficient Volvo equipment etc, so as commodities high, their competition looks better, if commodities down, they lose marcoreconomically...
They had a cruel 2008...it was their best year ever, they couldn't make enought, but the end of 2008 was the biggest whipsaw they went from years of order backlogs to almost nothing.
Thanks for that straight analysis from the field!
China's bubble is already showing signs if a huge implosion, depending on them at this stage is pretty naive methinks.
the inventory of used cat equipment up for sale, at a huge discount to new equipment, is staggering, and will be the first equipment to sell, when the demand is there. the new cat equipment, that meets the new emission standards, is much more expensive, than the older models. they make heavy equipment, but their stock is lighter than air.
CAT has been way overpriced, still is after today.
Switching gears, Reggie described the current valuations of banks as INSANE the other day. I've thought about this for a bit and I think "insane" is an understatement. really. On the banks, I think we are witnessing one of the great ponzi schemes by the banks and their analsyts in collusion with one another to convince everybody that all is okay and there is no risk and only upside to purchasing bank common equity.
in particular, the actions of the regionals of late is particularly hysterical.
yeah, but I'm going broke waiting for the market on banks to get rational....Banks seem to have more ability to avoid fundamentals than oil prices..
Thanks Reggie and JR.
As Walmart rises, so America falls.
As China rises, so America falls.
As Goldman breathes, so America falls.
November needs to duplicate Massachusetts. Throw out all incumbents that voted for Bernanke and the crooked banksters.
This is not populism, this is true Patriotism. Eliminate Enemies, both foreign and domestic.
Oh, for one honest politician....
Thanks Reggie and JR.
As Walmart rises, so America falls.
As China rises, so America falls.
As Goldman breathes, so America falls.
November needs to duplicate Massachusetts. Throw out all incumbents that voted for Bernanke and the crooked banksters.
This is not populism, this is true Patriotism. Eliminate Enemies, both foreign and domestic.
Oh, for one honest politician....
Wow Reggie you are so smart, so great, such a voice of reason. You are #1. You are so worthy.
Your work is so great, you have so much hope and change to offer to the financial markets.
--KissKiss
Man is the only animal that fouls his own nest. Case in Point: U.S.-based corporations leaving behind empty storefronts and unemployed workers in America while mining the frontiers of the Middle East and Asia. Interesting how breaking things and rebuilding them in Iraq has perhaps slowed down for Caterpillar, but fortunately, for CAT, China now beckons.
Factory store malls and shopping malls featuring Costco, Target, Home Depot and other national chains show no outward signs of recession--and whether you’re in Portland, Maine, or Portland, Oregon, the only thing that’s different is the snow. This is not the same with stores made up primarily of local businesses, of course.
Yesterday, in a major mall on Main Street, I counted 14 empty stores out of 48 (29 percent) in an area comprised primarily of California small businesses vibrant just three years ago in this high traffic area across from rodeo grounds.
Nearby, in a higher-end mall of local coastal shops, I came across this letter posted by the owners on the closed doors of an attractive health and skin fitness center, where empty windows browed with attractive awnings stared blankly, where the corner of the vast and handsome hardwood and carpeted floor was stacked with expensive exercise equipment ready for the moving van:
“With a heavy heart we regret to inform you that *____ Health & Fitness will be closing the doors on December 31, 2009. The club can no longer sustain the deficit that the *____ location creates. When embarking on this endeavor in September 2005 we immediately began to make capital improvements with equipment and in the esthetics of the club…
“The state of the economy has had a great impact on the club, and has made our combined efforts (with its *_____ club) financially impossible… Given the state of our economy we would ask you to please continue to search out and shop your local grocer, café, restaurant and tradesman. The very thing that brings tourists to our quaint community is in dire need of our communities’ support; we hope that you would please make all effort to shop local when at all possible.”
Next door stare the vacant, elegantly browed eyes of *______ Floors, shut after a decade of servicing the community with hardwood flooring and handmade oriental carpets rugs from Tibet…
What’s the difference between business-as-usual national chain malls and local business malls? Why it’s Fed money and Fed policy! Who got their loans re-floated, who’s in the taxpayer bailout pipeline? It’s a secret: Fed policy.
One can almost still feel the anguish of thousands of long ago English small businessmen steamrolled by the government-East India company partnership and the rush for empire.
Benjamin Disraeli, who was the prime minister of Britain, wrote a novel titled Coningsby (London 1844) extolling how wonderful it would be if the world had more Rothschilds—described by The Jewish Encyclopedia as "an ideal portrait" of the Rothschild Empire whereby Disraeli characterizes Nathan (in conjunction with his four brothers) as "the lord and master of the money markets of the world, and of course virtually lord and master of everything else. He literally held the revenues of southern Italy in pawn, and monarchs and ministers of all countries courted his advice and were guided by his suggestions."