For Caterpillar, This Is What The "Second Great Depression" Looks Like

Having repurchased billions of its own stock near the all-time high price (or, to avoid cause-and-effect confusion, leading to all time high prices), Caterpillar recently hit its debt issuance ceiling and as a result is no longer able to sell debt and use the proceeds to buyback stock. The result: CAT stock has recently tumbled to levels last seen in 2011. And judging by its monthly retail sales data it is going much, much lower.

The reason: the second great depression which for industrial bellwether CAT started in December 2012 and has since resulted in 32 consecutive months of declining global retail sales and over a year longer than the decline observed during the great financial crisis, refuses to go away.

Notably, CAT suffered a sales decline in virtually every region, not just Asia where the drop accelerated from -19% to -25% Y/Y, but surprisingly in North America where the -5% slide was tied for the largest decline in two years. The one silver lining: Latin America is no longer seeing sales plunge by 50% - in august the Lattin America plunge was "only" -37%.

So how can a company report 32 consecutive declines, the vast majority of which are double-digit? Simple: just think of its as Xeno's paradox for the New Normal: the sad reality is that CAT retail sales can decline in perpetuity and they will never actually hit zero, although the same can not be said for CAT's stock price if the stock buyback machinery has indeed gotten rusty.