American CEOs Sum Up The Economic Outlook: "Softness, Stagnant, Cautious, Challenging"

Tyler Durden's picture

Since May, CEO confidence among America's largest companies had stagnated - even as stocks did what they do and rise, rise, rise. That changed when Bullard (now explained as "misunderstood" by the market) set fire to stocks with his QE4 hints and Plunge Protection Team rescue. However, the last 2 weeks have seen a noticable collapse once again in CEO confidence, according to Bloomberg's Orange Book index, even as stocks reach new higher all-time-er highs. As Bloomberg's Rich Yamarone notes, recent earnings calls highlight the headwinds companies face: Executives cite “softness in consumer spending,” a “challenging” climate, “fairly stagnant economy,” and “cautious” optimism. Currency valuations are front and center.

 

Quite a drop from the kneejerk exuberane after Bullard...

 

As these CEOs suggest:

Harley-Davidson [HOG] Earnings Call 10/21/14: “Foreign currency exchange was $11.5 million unfavorable for the quarter. This was driven by significant weakening of our key currencies within the third quarter. The euro, yen, Brazilian real and Australian dollar devalued an average of approximately 7 percent from the beginning to the end of the quarter. This resulted in an unfavorable revaluation of foreign-denominated assets on the balance sheet.”

 

McDonald’s [MCD] Earnings Call 10/21/14: “For 2014, we see continued pressure in the fourth quarter, reflecting on the factors that were impacting the third quarter. The biggest factor driving the U.S. decline vis-à-vis the decline in the second quarter was less pricing. And so we would expect less pricing to still be a factor in the fourth quarter as well as the 3 percent commodity increase. Those were the two biggest factors driving this quarter and, as best we see it now, will impact the fourth quarter as well.”

 

Brinker International [EAT] Earnings Call 10/21/14: “Our franchise business, our U.S. com sales were up 1.7 percent. Domestic Chili's franchises continue to align with our sales-driving initiatives and deliver a consistent Chili's experience for our guests. Our international franchise comp sales were down 0.5 percent, driven by soft sales in Puerto Rico. The economy there is struggling right now.”  

 

Coca-Cola [KO] Earnings Call 10/21/14: “We continue to face a challenging macro environment, more challenging than was expected when we started the year. In many of our key emerging markets, we see deteriorating economic environments, coupled with the continued softness in consumer spending in the U.S. and particularly in Japan and Europe. This is placing strong pressure on the short-term performance of our business.”

 

Kimberly-Clark [KMB] Earnings Call 10/21/14: “In the quarter, we had negative away-from-home price in KCP in North America, and so we’re seeing some price erosion on the low end of that business, and so any net price gain has been pretty minimal at this point in time. And I think we’re seeing a fairly stagnant economy is probably not helping much on that front.”

 

A.O. Smith [AOS] Earnings Call 10/21/14: “We are cautiously optimistic about the developing recovery in U.S. housing and the strength in demand for commercial water heaters, driven by replacement and retrofit activity. We successfully implemented a mid single-digit price increase for wholesale water heaters in May, related to higher steel prices and inflation of other costs.”

 

Illinois Tool Works [ITW] Earnings Call 10/21/14: “Our Construction business in North America [has] been bouncing around. Quarter-to-quarter, it's up a little, down a little, and I think we're still waiting for some traction overall. There's a fair amount of good progress we're making inside the business on the margin front, but from an overall demand standpoint, I think we're still not seeing any consistent trends, whether it's housing starts or commercial construction activity.”

Source: Bloomberg

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KnuckleDragger-X's picture

Shit isn't happening and isn't likely to happen. It would be interesting to find out how many corporations are forting up to ride the storm out and how many will play the game to the bitter end.

ebworthen's picture

American CEO's:  "We're going to be doing buy-backs hand over fist then selling our stock options to cash out.  Capital expenditure?  Investing in employees and R&D?  Dream on sheep, go bleat at the sheep dogs for all the good it does you."

doctor10's picture

what they describe as an "economic outlook" is really a relationship with Congress, the White House and several dozen "regulatory agencies"

yrbmegr's picture

Goldman wants us to think things are getting better for wage earners.  Why?

10mm's picture

Viagra. Oh that's right, stimulus failed.

jarana's picture

Viagra could make go vertical CEO confidence too, as ocurred in october 2104.

All is chemistry.

homiegot's picture

I think they are really describing their mistresses.

Yen Cross's picture

   Where's Jamie Dimon? I want to send that destroyer a dradle full of Polonium-210.

starman's picture

Ok it's my fault I don't eat at  Chili's or at Mc D's , dont drink Cola and sold my Harley to a sucker. 

One Eyed Jack's picture

I also have divorced myself from much of consumer culture to reduce my exposure to this diseased economy.

I don't eat at restaurants. Buy some necessities, raise or grow the rest. I don't support Hollywood, (don't go to the movies, and no cable.) and drive an 11 year old car by choice.

I quit flying too, now I drive where ever I'm going. I have to travel through. Illinois I will take the most direct route and to avoid spending any money in that state.

holdbuysell's picture

Why did CEO confidence spike around Bullard's comments? Reflexivity?

KnuckleDragger-X's picture

Yeah, pretty much, when the ship is sinking you look for anything that floats to hold on to.

sun tzu's picture

They had visions of helicopters full of cash headed their way then woke up and realized it was more jawboning. The markets are still daydreaming while the house is on fire.

Oldwood's picture

As a small business this is what I have experienced as well. Up a couple of months and then nothing. Hot and cold.

It doesn't seem possible that we can have any sustained economic growth with the debt overhead that exists on every front. The economy seems to be only growing where consumer credit is available. Like saying we can moderate the effects of drug addiction with a regular dose. The Christmas spending season should ramp up the numbers but will only create more debt that can't be paid back. Should end well....

 

stant's picture

That's my experience as well ow.

Escrava Isaura's picture

 

 

Since 1965 the US has grown the debt more than the economy.

These CEO’s were living an illusion. So were we!

 

disabledvet's picture

A very well paid illusion it would seem.

There is a point where CEO's realize they're dead meat if they don't start investing in growth here. Jeff Bezos has probably re-invested more cap ex into Amazon alone than all of IBM for the past 30 years. You'd be a rich man selling options for those buying protection from "imminent doom" from that revenue monster.

Don't even get me started on Apple.

I think Identity Protection is only now entering to the fore of our internet age and with it hundreds of billions of even more in revenue and profits. I also see a huge boom in industrial production coming as General Motors returns to Detroit "with a vengeance." Those numbers don't lie folks. Exports are up massively since the 2008 collapse (40%) yet still represent less than ten percent of the U.S. economy. Deficit is down 700 billion from its high, 180 billion less than projected, and I see nothing to stop that from dropping to zero by next year actually.

All of this has been done "off budget" I might add. Come January that's going to change in a BIG way.

At no time in human history has so much capital formation been created...even World War looks small by comparison as this is unconstrained fiat money doing all this. The only thing I'm waiting for is for the President to announce development of Imperial Walkers, a fleet of Space Destroyers and a Death Star "just because like you...I loved that movie too."

sun tzu's picture

I need some of what your smoking

 

Refuse-Resist's picture

Wife runs her own law firm, doesn't make much money.  Main business is indigent defense.

In this poor county, the cops are working overtime to keep the local .gov funded. Since they can't print money like their big brothers, and their borrowing capacity is limited, they turn to their remaining means of acquiring income. That is by creating new crimes that must be stopped, and adding fines and court costs to these 'crimes'.

 

Checkpoints are excellent revenue harvesting opportunities. Like a seine net across a river, 4th Amendment be damned.

 

They are turning their guns on us.  If you haven't experienced this, believe me you will. Once all other revenue sources start to dry up, like income taxes, property taxes, and sales taxes, as it is here in poorsville, they go for the last remaining source:  your freedom.

 

It's amazing how the poorest people can come up with $$ to avoid incarceration.

 

They know it too.  Point a gun at somebody and they get real nice usually.

 

Radcial Marijuana has it right.  Fraud backed by violence.

 

It starts in your backyard and extends all the way to the Distric of Communists.

 

Welcome to the New America!

 

FUCK YEAH!

 

 

buzzsaw99's picture

optimistic on bonuses, pay raises, and crony crapitalism fueled by fed largesse i'll bet.

sun tzu's picture

The mafia bosses were doing just fine during the Great Depression. Many of them, likeAl Capone, opened up soup kitchens.

Sutton's picture

So therefore " it's the perfect time to use our cash hoard and credit to buy our stock in a market at all time highs". ........( and vest our options).

Atomizer's picture

Adding to list. BMW.

 

Don’t do it. Run, don’t walk away. Stay the fuck away from Telsa. Even if you create a LLC for aftermarket parts, our brand name is tarnished. Ship them off to Fisker and wish them luck. They can blow up together.

http://thenewfisker.com/

 

Thank you!

Atomizer's picture

Sure it will, so will the cost of goods. If that guy wasn't wearing his smart rimmed glasses, we could point him out in facial recognition theft.

yogibear's picture

It has to with the Fed and people like NY Fed head, William Dudley buying the crap out of the market and St Louis Fed head, Bulltard, pumping up stocks whenever thay go down.

Atomizer's picture

All these new 5 million illegals will save the Dow Jones by undermining higher unemployment & increased stock earnings. When there is a will, there’s a way.

sun tzu's picture

They will also save social security and medicare as well as keep the US biotech sector #1 in the world. 

yogibear's picture

"I think we're still waiting for some traction overall. "

With the coming polar votex that's not possible. Like skating on thin ice. Anytime you fall in and drown.

TheRideNeverEnds's picture

CEO Confidence, how quaint.

The only thing that matters is that central banks will continue buying stocks and bonds into perpetuity. What part of they can print an infinite amount of money to buy whatever they want forever don't people understand?

q99x2's picture

Close the boarders. Move Washington D.C. to Somalia.

Refuse-Resist's picture

Rather, send the 'boarders' back from whence they came, and wall off the District of Corruption to protect us from the predators that reside there.

 

Like Escape from NY only new prison should be Dc.

 

The 1000 or so remaining honest people there would have a chance to leave prior to the wall being completed of course. They could either relocate to one of the neighboring Peoples Republiks on the East Coast or head west if they're more liberty minded.

AdvancingTime's picture

 In addition to manipulation by the government-financial complex other forces are converging to further distort and disconnect Wall Street from the American economy. Why American equities continue to rise is very important, more is at force here than the usual causes which might include a pre-election and post-election rally. This is more than the continuation of a double down and let it ride mentality that has been ratcheting the market higher while reenforced by media hype.

Most analysts agree that money from countries with weakening currencies is flowing out of the troubled areas and the U.S. is receiving most of the benefit. The Japanese as well as many Chinese and Europeans know with so much money floating around and few safe harbors America is becoming the most comfortable option for temporary investing their money. More on why this should be viewed as a sign of massive instability rather than a reason to celebrate in the article below.

http://brucewilds.blogspot.com/2014/11/why-american-equities-are-rising.html