Posts Tagged ‘ US ’

The Economic Process of Deleveraging Part One – What Happened in Japan?

February 9, 2012
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The Economic Process of Deleveraging Part One – What Happened in Japan?

The process of deleveraging has been in place since the onset of global recession and financial crisis in 2008. Many investors and economists have highlighted how long the process can take once it gets going. It’s striking how the theme of deleveraging, broadly speaking, is universally assumed to play out over a very long time. Japan is the oft cited example of how a deleveraging processes can take 20 years or more! It is all very alarming given that the western world’s recent crisis is only 2-3 years in. At risk of sounding Pollyannaish, there are dramatic differences between the economic situation in Japan in the late 1980’s and the US in 2008. For a number of reasons, I believe that a decade-long deleveraging process in the United States...

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Standard & Poors Places Europe on Negative Credit Watch – World Set for Downgrade!?

December 6, 2011
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Standard & Poors Places Europe on Negative Credit Watch – World Set for Downgrade!?

I find it rather ironic that Standard & Poors placed the EU-17 on negative credit watch on the same day the market provided the strongest one-day positive assessment to peripheral Europe’s sovereign credit outlook since August (borrowing costs were down sharply on Monday). I have no issue with actually conducting a downgrade of the entire EU-17, but question how this is of any meaning or particular use to investors? Standard & Poors changed its methodology, and incorporated its own political forecasts into the ratings process, which renders the conclusions difficult to interpret. Not that the ratings were of much predictive use in determining credit quality before this change (see 2008). The question now arises; how does one utilize information from a mostly backward looking set of ratio based credit...

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US Industrials See No Evidence of Global Recession – Results from Caterpillar (CAT) and Parker Hannifin (PH) Hammer Home the Point!

October 24, 2011
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US Industrials See No Evidence of Global Recession – Results from Caterpillar (CAT) and Parker Hannifin (PH) Hammer Home the Point!

Caterpillar (CAT) reported very strong earnings this morning, beating estimates quite handily. EPS of $1.71 compared to consensus of $1.57 (a 9% beat). As important, the company outlined an environment consistent with global growth persisting and a strong outlook for 2012. Caterpillar’s organic sales grew by 34% this quarter excluding the recent acquisition of Bucyrus. Caterpillar is a cyclical company, and overly sensitive to changes in the global economy. For perspective, in 2009, Caterpillar saw sales decline by 37%. Each of CAT’s business segments has what are called “trough plans” which are fire drills that prepare CAT in advance for sudden slowdowns in the global economy. This is a company and management team used to handling volatility in the global economy so they are well worth listening to during...

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