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Deere In Headlights After Guidance Cut: Sees 10% Sales Drop Due To “Downturn In Global Farm Economy”
Deere In Headlights After Guidance Cut: Sees 10% Sales Drop Due To “Downturn In Global Farm Economy”
According to the company’s announcement, equipment sales are projected to decrease about 10% for fiscal 2016 and to be down about 8 percent for the second quarter compared with the same period a year ago.
Here is how CEO Samuel Allen tried to spin the cut in guidance which DE had previously seen at just -7%: “Although Deere expects another challenging year in 2016, our forecast represents a level of performance much better than we have experienced in previous downturns,” Allen said.
Downturn? We thought the Fed was hiking because of the “strong recovery.”
Some more details: Deere cuts 2016 U.S. farm cash receipts forecast to $381.3b, had seen $394.4b (Nov. 25)
- Cuts 2016 U.S. farm net cash income to $90.8b, had seen $106.9b (Nov. 25)
- Sees yr U.S. farm commodity price:
- Corn 2015/16 $3.60/bushel vs prior $3.65
- Wheat 2015/16 $5.00/bushel, unchanged
- Soybeans 2015/16 $8.80/bushel vs prior $8.90
- Cotton 2015/16 60c/pound vs prior 59c
- Cuts DE 2016 capex outlook to ~$775m from ~$800m
“This illustrates the impact of our efforts to establish a more durable business model and a wider range of revenue sources.”
Alas, a 10% drop in revenue does not validate the “durable business model” with more revenue sources.
…click on the above link to read the rest of the article…
“One Big Shock Away from a Global Downturn…”
“One Big Shock Away from a Global Downturn…”
Zombies vs. Cronies
DUBLIN – Most elections these days are contests between cronies and zombies. The left favors the zombies. The right favors the cronies.
In yesterday’s presidential elections in Argentina the zombies lost. It’s time for the cronies to take over.
New Argentine president Mauricio Macri – the era of the Kirchner dynasty is over.
Photo via diarioz.com.ar
More on that tomorrow …
Big Shock
The financial news continues to confound and confuse investors. The Fed is telling one story. The world economy is telling another.
The Fed is talking about increasing the federal funds rate – eventually getting rates back to “normal” – because the U.S. economy is so healthy. Meanwhile, the world heads toward deflation.
Says Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management:
“We are now just one big shock away from a global downturn, and the next one seems most likely to originate in China, where heavy debt, excessive investment, and population decline are combining to undermine growth…”
But it looks to us as though the global downturn is already here. First, the Baltic Dry Index is at a record low.
The Baltic has been hung out to dry – click to enlarge.
Here’s Bloomberg with the full story:
“The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.
The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985.”
And falling shipping costs aren’t the only sign of global deflation…
In October, construction and mining equipment maker Caterpillar posted another month of falling sales – making it 35 in a row.
…click on the above link to read the rest of the article…
It Is Different This Time——–Now Comes The Global CapEx Depression
It Is Different This Time——–Now Comes The Global CapEx Depression
Caterpillar (CAT) posted a disastrous 16% decline in worldwide retail sales this morning, meaning that its sales have now fallen for 35 straight months. As Zero Hedge noted, not only did US retail sales finally rollover and drop by 8% compared to prior year, but the rest of the world was a veritable bath of yellow blood:
…….. sales elsewhere around the globe were a complete debacle: Asia/Pacific (mostly China) was down -28%, a dramatic drop from the -17% a month ago, EAME dropping -13%, and Latin America down -36%…
Needless to say, this is something new under the sun. CAT is the leading heavy capital goods supplier to the global construction and mining industries and has a long history of boom and bust.
But CAT’s past contains nothing like what is conveyed in the graph below. The current 35 month plunge in its global sales is now nearly twice as long as the downturn in sales during the Great Recession, which was itself a modern record.
Indeed, CAT’s sales during the quarter ended in September had retraced all the way back to the September quarter of 2006. It is as if the massive tide of global capital spending that CAT has been riding for well more than a decade is heading back out to sea.
CAT Revenue (Quarterly) data by YCharts
In fact, it is. The flip-side of the massive commodities boom since the turn of the century is CapEx.
That is, the tremendous increase in demand for iron ore, copper, zinc, nickel, aluminum and hydrocarbons was mainly driven by a massive one-time build-out of industrial infrastructure for mining, manufacturing, transportation and distribution—–along with related public facilities such as roads, bridges, ports, rails and airports—- in China and the EM.
…click on the above link to read the rest of the article…
The Baby Boomer Survival Guide (Part I)
The Baby Boomer Survival Guide (Part I)
The Yellow Machines Go Silent
PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70.
We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet.
At the Diary, we write about the world of money. About economic policy and how it affects you. But what if, in your world of money, you are running short? What should you do to get more? Check under the seat cushions? Rob a bank?
We’ll come back to this question in a few moments. First, let’s take a look at the big picture.
It appears that the world economy is headed for recession. An economy makes and takes. Whatever you make – whether it is an apartment building or a plastic toy – you have to begin by taking dirt out of the ground.
Caterpillar-made fleet of mining trucks
Photo credit: Caterpillar
You need to dig a hole before you can put up a building… or even make a parking lot. And you need to scrape up raw materials – copper, iron, oil, etc. – before you can make anything at all.
This requires machines. Yellow machines. When economic activity goes down… so do sales of these machines. Yellow machines move dirt. They are used in construction, mining, and every sort of resource industry. We’re talking about backhoes… tractors… forklifts… excavators… bulldozers… and loaders.
Ominously, demand for these machines – along with the stuff they move – is collapsing. Two of the biggest suppliers are Caterpillar in the U.S. and JCB in Britain. Both report catastrophic drops in sales.
Caterpillar says its sales have fallen three years in a row. And it expects a fall of another 5% next year. This marks the first time in its 90-year history that sales have fallen four years straight.
CAT’s worldwide sales have been declining for quite some time (via Zerohedge) – click to enlarge.
…click on the above link to read the rest of the article…
World Trade Drops Most Since Financial Crisis
World Trade Drops Most Since Financial Crisis
Maybe we shouldn’t take our daily corporate samples too seriously. Maybe they don’t adequately represent the global economy. So IBM’s revenues last quarter plunged 13% from a year ago. It blamed China and the dollar, among other culprits. But IBM’s revenues have dropped for 13 quarters in a row. It’s a normal IBM condition and not a reflection of the global economy.
A whole slew of other tech companies chimed in with either disappointing revenues or disappointing outlooks, or both, each blaming a variety of issues, among them China and the dollar. Chip maker Qualcomm just reported a 14% plunge in its quarterly revenues. It’s having trouble in the smartphone market and will lay off a bunch of people. But maybe they’re just running into tougher competitors, rather than a lousy global economy. And the PC business, which is cratering, is dragging down all those involved. That’s structural and has little to do with the state of the global economy.
Then there’s industrial giant United Technology which reported that its revenues last quarter dropped 5%. Today Caterpillar reported that global machine sales plunged 15% in June compared to a year ago, after having dropped 12% in May and 11% in April, In Asia, machine sales plunged 19%, in Latin America 50%. And in booming North America? Down 5%, after having been up for the prior two months.
So CAT is facing Japanese, Chinese, and German competitors. It’s having to slug it out with them in China precisely when China is slowing. So it may be just CAT that’s having a hard time.
But don’t look at energy. Energy is getting clobbered….
So maybe we’re cherry-picking negative data. There are companies with actual revenue increases and positive outlooks, like Equifax, the credit bureau, which just reported a 10% jump in revenues (14% “in local currency,” as it says). Consumer borrowing is king, and Equifax expedites the process.
So what the heck is going on?
…click on the above link to read the rest of the article…
Ex-Im Bank is Welfare for the One Percent
Ex-Im Bank is Welfare for the One Percent
This month Congress will consider whether to renew the charter of the Export-Import Bank (Ex-Im Bank). Ex-Im Bank is a New Deal-era federal program that uses taxpayer funds to subsidize the exports of American businesses. Foreign businesses, including state-owned corporations, also benefit from Ex-Im Bank. One country that has benefited from $1.5 billion of Ex-Im Bank loans is Russia. Venezuela, Pakistan, and China have also benefited from Ex-Im Bank loans.
With Ex-Im Bank’s track record of supporting countries that supposedly represent a threat to the US, one might expect neoconservatives, hawkish liberals, and other supporters of foreign intervention to be leading the effort to kill Ex-Im Bank. Yet, in an act of hypocrisy remarkable even by DC standards, many hawkish politicians, journalists, and foreign policy experts oppose ending Ex-Im Bank.
This seeming contradiction may be explained by the fact that Ex-Im Bank’s primary beneficiaries include some of America’s biggest and most politically powerful corporations. Many of Ex-Im Bank’s beneficiaries are also part of the industrial half of the military-industrial complex. These corporations are also major funders of think tanks and publications promoting an interventionist foreign policy.
Ex-Im Bank apologists claim that the bank primarily benefits small business. A look at the facts tells a different story. For example, in fiscal year 2014, 70 percent of the loans guaranteed by Ex-Im Bank’s largest program went to Caterpillar, which is hardly a small business.
Boeing, which is also no one’s idea of a small business, is the leading recipient of Ex-Im Bank aid. In fiscal year 2014 alone, Ex-Im Bank devoted 40 percent of its budget — $8.1 billion — to projects aiding Boeing. No wonder Ex-Im Bank is often called “Boeing’s bank.”
…click on the above link to read the rest of the article…
