Brazil becomes a big player in the profitless global economic recovery
Want to know why this is going to be a profitless recovery? And not just in the United States either.
Then look at the IPO (initial public offering) planned by OSX Estaleiros, a start-up ship building company. The March 19 offering aims to raise $5.6 billion. (For more on the profitless global recovery see my post http://jubakpicks.com/2010/01/19/get-your-portfolio-ready-for-the-profitless-global-economic-recovery/ )
For ship building?
This is an industry with global overcapacity. Shipyards in Korea, Japan, China, and Germany have all been forced out of business. How can this company possibly hope to float such a huge offering? Why would investors even think of putting money into such a company?
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.
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.
Is today’s good news on home prices only a false dawn?
So how stable is this stability in home prices?
That’s the question raised by the good news on home prices from today’s (February 23) release of the most recent S&P/Case-Shiller index of home prices. On a seasonally adjusted basis the index climbed 0.3% in December from November. For the fourth quarter the index climbed a seasonally adjusted 0.3% from the third quarter.
On a year to year basis the index was down 3.1% from December 2008. But that’s still good news: It’s the smallest year to year drop since May 2007.
Enjoy the good news while it lasts because most housing experts expect to see home prices fall again in 2010. And home builders, which have recently shown signs of recovery, are warning of tougher times ahead. D.R.Horton (DHI), which reported its first quarterly profit since 2007 in the fourth quarter of 2009, told investors in a February 2 conference call that it sees the September quarter ahead as its most challenging because the government tax credit for buying new homes that juiced sales in 2009 is now set to expire in April.
An even bigger problem than the expiration of tax credits is a wave of foreclosures expected in 2010.
Was Lowe’s earnings report good or bad news for the economy?
So when does beating low expectations stop counting as good news?
It’s an important question for the stock market and for the economy as a whole. After easy to beat earnings comparisons in the first and second quarters, stocks face a bigger challenge in the third and fourth quarters of 2010 as they pass the absolute bottom for the economy. For more on how earnings comparisons get tougher as 2010 goes along see my post http://jubakpicks.com/2010/01/22/2010-well-the-first-half-anyway-looks-good-for-stocks-despite-the-current-correction/ )
Today, February 22, before the stock market opened Lowe’s (LOW) reported fourth quarter 2009 earnings of 14 cents a share and revenue of $10.17 billion. The results were above Wall Street expectations of 12 cents a share in earnings and $10 billion in revenue, but below the company’s own guidance for 15 cents a share and $10.3 billion in revenue.
Confusing picture, no?
Well, it doesn’t get any better if you dig a little deeper. Comparable store sales fell 1.6%, but Wall Street had expected that comparable sales would fall by 2%. This is the smallest drop in comparable sales since the second quarter of 2006.
Lowe’s CEO Robert Niblock told investors that the worst is behind the company.
Which isn’t, apparently, the same as saying that things are actually going to be good.
