Take for example today. Within 15 minutes of the opening bell, the Dow was down over 100 points. Much of it was based on poor earning reports form Caterpillar (heavy equipment manufacturer), 3M (huge manufacturer) and Harley Davidson (luxury motorcycles).
So, lets take a look at two of these stocks and how the American homeowner/consumer plays a HUGE roll in the performance of these companies and the values of their stock.
Let’s start with Caterpillar.
Obviously, this company is directly tied to the construction industry and it’s no secret that industry is in dire straights. It’s simply too hard to obtain financing right now and many perspective builders, whether that be owner builders or contractor spec builders have halted ALL projects. Plus the availability of credit is basically non-existent. You can’t have booming construction during a “credit crunch” like we are having now. Couple that with a weak demand from consumers (because they can’t get loans to build) and you have the not so surprising poor earnings report from Caterpillar.
Also, analyst and Wall Street gurus have made erroneous claims that the commercial construction market would over ride and off set the weak demands in the residential construction sector. Wrong again guys!
In the press release Caterpillar made these comments that EVERYONE should be very concerned about:
The company said several key U.S. industries it serves, including trucking and nonmetal mining, are “in recession,” and its machinery sales to nonresidential builders are declining as fast as sales to the residential building industry, which it said was in “severe recession.”
It said the tightening of the credit markets in recent months has not had a significant impact on its own borrowings. But it said loan delinquencies of more than 30 days at its CAT Financial unit, which finances equipment purchases by the company’s customers, jumped to 2.52 percent at September 30 from 1.89 percent a year earlier.
“Most of this increase is related to North America and is specifically related to the downturn in the housing market,” Caterpillar said.
Now you have Harley Davidson. This is by all means a luxury purchase that is made by mostly middle class consumers to go along with their SUV and BMW in the driveway that they bought through the repeated refinancings of their homes. They are now selling these items to float their mortgages and they will not be buying more Harley’s anytime soon.
This is not rocket science. It doesn’t take a stock market guru to tell me what I can clearly see myself. This is common sense based on reality.
Expect the same earnings reports to be coming out form ALL luxury item retailers and manufactures/companies that are driven on the backs of the American middle class.
This shows me that we are heading into a recession. When recessions hit, you will see companies that thrive during depression markets. I suspect pharmaceutical companies that specialize in sleeping aid medication, anti-anxiety and depression medications will thrive. Alcohol and tobacco earnings will see big earnings increases over the next few quarters.
The purpose of these posts that I have been making is not to promote fear but to promote the reality of what our great country is facing.
Take a look at this basic chart and look at the reasons for the Great Depression of 1929. This is EXACTLY what is happening right now.
great read Moe! do you think this issue with be one of the main issues in the next presidental race? obviously health care, the war in Iraq and same-sex marriage are going to be front-runners but with this impacting so many one would think it would be a top priority.
I think this is a huge issue and it should have got more attention long ago. This is more important than all those issues at the moment. But the President is too worried about foreign affairs. That is why he is losing touch with the American people.
“I’ll drink to that” Just kidding, lawyers don’t drink.
I agree with your assessments Moe. What is so predictable is not just that things are going down as fast as they are but that the talking heads from the Fortune 500s, banking industry, politics, and the media keep saying “Well, it’s getting worse than we originally thought.” This is the first line of every speech I’ve heard for the last 6 months. Either there has been a widespread outbreak of cranial rectosis or “They” are just trying not to alarm the public while they dump their stocks, move their assets, and otherwise secure their financial positions before runs start on the banks and the Great Depression of 2008 hits hard.
It only makes sense. They always say it’s worse than we thought, when? When they HAVE to on their “quarterly earnings reports”. They don’t say jack $hit till then. Because why? They don’t want everyone dumping their stock SO THEY CAN CONTINUE TO PROFIT UNTIL THE DAY OF Reckoning. This seems to be the new MO of all these companies.
My advice is for everyone to get their cash and bury it or turn it to gold. Extreme times call for extreme measures.
Moe, is it your recommendation not to purchase a home until this crisis plays out. If no one were to buy then how does the market ever recover? Don’t you think if all the fence-sitting buyers began buying then wouldn’t “The middle class…drive the markets based on their consumption of goods and services”? Isn’t home ownership the major force in driving the economy?
Yes, homoenwership is a major driving force in our economy. Buying a home is something I would not even consider myself, for quite some time. Would you buy a car today, if you knew in 6 months that same car may be half price and there is MORE than enough data to support that. I want to support our economy and I want people to be helped. But I do not support BAD buying decisions and destruction of wealth. To me, it would be a bad buying decision.
svirtokilo 19 post
all about svirtokilo and top news
svirtokilo 43 post
all about svirtokilo and top news
Buy xanax online.
Xanax overdose. How long does xanax stay in your system. Generic xanax no prescription. Can you buy xanax without a prescription. Buy xanax without prescription in usa. Xanax. Xanax without a prescription.
Cialis.
Buy cialis. Cheapest cialis. Cialis.
Xanax.
Commit suicide on xanax. Buy 180 xanax 2mg. Beer and xanax. Xanax withdrawal symptoms. Xanax. Geniric xanax. Xanax side effects.
Buy cialis pharmacy online.
Buy cialis. Cialis how it works. Cheap cialis. Cialis.
Soma.
Soma without rx. Soma online sales. Soma. Pornstar soma.
I’m writing a bill for Civics class. I was thinking that it should be about how loans provided by banks to people with a low income who want to by more house than they can afford causes some of the housing crisis. I don’t know where to start to find information! I’m so confused! Help!