I only wish manufacturing made up more of the economy
Manufacturing continues to contribute more than its share to the economic recovery, according to index numbers released this morning (March 1) in the Institute for Supply Management survey of purchasing managers.
Unfortunately, manufacturing accounts for only about 12% of U.S. economic activity.
U.S. manufacturing expanded in February for a seventh consecutive month.
The Institute for Supply Management’s index did drop to 56.5 from January’s 58.4. But that was a drop from a very high level. January’s reading was the highest since August 2004. In the survey anything above 50 indicates an expansion.
What’s wrong with this picture? Consumer spending up but saving down
The Commerce Department announced today (March 1) that consumer spending rose by 0.5% in January.
But that personal income fell by 0.1%.
The report pretty much sums up everything that worries me about the economy.
Consumers lag but business confidence builds on recovery
Hmmm. Is that a trend I see in today’s economic numbers? It sure looks like we’re seeing a recovery led by business and manufacturing, and where consumers still lag.
Today’s (February 26) revised numbers for U.S. GDP (gross domestic product) show the economy grew at a faster than expected 5.9% in the fourth quarter. That’s above the 5.7% growth in the initial numbers for the quarter reported last month.
The extra growth came from inventories—which accounted for 3.9 percentage points of growth, more than initially reported—and from business investment in software and equipment. Investment in those categories grew at the fastest rate since 2000. Purchases of equipment and software increased at an 18.2% rate in the quarter.
Contrast those positive economic trends with the bad news today and earlier this week on consumer confidence.
Update Thompson Creek Metals (TC)
Thompson Creek Metals (TC) announced earnings of 15 cents a share for the fourth quarter last night (February 25) after the market close. Revenue for the quarter came to $106 million. Both beat Wall Street projections for 8 cents a share in earnings and $94 million in revenue.
Those numbers represent a 42% decline in revenue from the fourth quarter of 2008 and an 86% drop from earnings per share of 56 cents in that same quarter. These numbers are Thompson Creek’s first financial report under U.S. accounting rules (required since more than 50% of the shares of the Canadian company are now owned by U.S. citizens.) If the company were still reporting under Canadian accounting rules earnings per share for the fourth quarter would have been 17 cents.
In its guidance the company said that it continues to see signs of recovering demand for molybdenum in 2010. The company’s mines are currently operating at full capacity and it expects molybdenum production in 2010 to reach a record 29 to 32 million pounds. Cash costs are expected to remain low in a range of $6 to $7 a pound.
Can CEOs destroy shareholder value in an acquisition? Just watch them
I call it destruction by acquisition.
Forget the synergies, the cost-savings, the cross-selling that CEOs tout when they announce one of these deals.
Too many of the huge merger and acquisition (M&A) deals struck in the second half of 2009 and that are still being struck will take money out of shareholder pockets this year and for years to come.
But some CEOs are so desperate for growth and so pessimistic that their company can produce growth internally–you know by doing things like developing new drugs, marketing new products in new markets or finding new reserves of oil or natural gas, for example—that they’re willing to mortgage the future for a deal that makes them look good now. Or that allows them to disguise how bad things actually are with accounting tricks for long enough to walk out door and cash out those options. (For more on how hard it will be to find profits in this recovery see my post http://jubakpicks.com/2010/01/19/get-your-portfolio-ready-for-the-profitless-global-economic-recovery/ )
Money can’t buy you love but it can buy a CEO the semblance of revenue and earnings growth.
Not every deal in 2009 and 2010 will destroy shareholder value. I’d give you a few at the end of this post that might actually work out well for shareholders and discuss how to tell the difference between the good and the bad. But a high percentage of the deals that have earned the headlines and moved the stock market in the last year or so need to be seen for what they are: admissions of weakness in sectors desperate for growth.
