Monday, August 01, 2011

The Least Reassuring Headline You Will Read Today


The least reassuring headline you will read today—and it may not get much attention with all the budget talk going on—is from our friends at Reuters:
 White House Not Worried About Double Dip - White House economic adviser Gene Sperling said on "Fox News Sunday" he was "not worried the U.S. will have a double-dip recession" – Reuters 
 The reason this is not as reassuring a headline as it might appear is that it comes amidst an earnings season that, aside from a few leading lights (mainly in the technology field and those companies doing significant businesses in Asia), has yielded news from the ground which is not nearly so perky as the ‘30,000 foot view’ preferred by lofty economics advisors such as Mr. Sperling.
 Pepsi, for example, had the following to say recently about its U.S. business two weeks ago:
 “Of the three factors impacting North American beverages—inflation, consumer demand and pricing—the consumer demand picture is the most concerning to us at this point.  In fact, the modest pickup in total consumer sending almost all U.S. businesses saw earlier in the year has reversed in the past several months.”
 And it isn’t just North American where things are wobbly.  Newell Rubbermaid warned last week:
 “Unfortunately we are seeing a softer economy in the US and Europe than we would hope for.”
 Indeed, this morning, Armstrong World Industries added its voice to the chorus:
 “We now expect our residential and commercial end markets opportunity to be slightly lower as the domestic economic recovery appears to be delayed.”
 There are many more examples of the sudden bloom of cautious commentary from businesses.  HSBC, no slouch in the world of global banking, this morning announced plans to cut 25,000 jobs—only a few days after the FT leaked that the company was going to “trim 10,000 people.”
 One might say HSBC “beat the number”…but in a double-dip sense.


Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com


© 2011 NotMakingThisUp, LLC
                                                             
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.

1 comment:

Aaron said...

Professor Jeff:

Judging from the conference calls I'm reading/hearing, the WH probably isn't worried about a double dip recession only because the current occupant will be more likely than not be voted out of office by the time the next recession gets here, if it isn't here already! This from a frustrated liberal who voted for Obama! Just sayin'!