American Economy: Follow the hogs
Today's Financial News - Posted April 18, 2008
“You cannot open a newspaper without reading of major job cuts. The banking industry got slammed, now the ripples are spreading throughout the pond.” – Andrew Snyder
By Andrew Snyder
Baltimore (TFN)– I must be looking at the equities through a different lens, because what I see and what Wall Street is apparently looking at is much different. Somehow the market remains positive, yet signs of ominous doom continue to build. The charade cannot last.
Just look at Harley Davidson’s (HOG:NYSE) earning report yesterday. Because domestic sales dropped by more than 13% during the year’s first quarter, the company will cut its annual production by 27,000 motorcycles and fire 8% of its workforce. That is not going to help the economy.
This news should be a neon sign that the economy is in trouble. But it hasn’t been.
You cannot open a newspaper without reading of major job cuts. The banking industry got slammed, now the ripples are spreading throughout the pond. Unfortunately, these waves are not going to slowly diminish, they are going to get larger and larger until they come crashing to shore.
This old mule ain’t what she used to be
We need to stand back and take a look at what has been driving the American economy over the past few years. It is a good opportunity to re-visit Alan Greenspan’s “irrational exuberance” phrase.
The market was overvalued. Fundamental value no longer had a meaning, but as long as values kept rising, everybody was happy. In the end, if things got too expensive, we could just take out a larger home equity loan. The world was grand.
But now, it takes sheer insanity to be willing to pay the prices some equities are getting. Let’s face it, the economy is moving backwards. Home values are plunging. Consumers are buying less. And manufacturers are scaling back.
Down and down we go
It is creating a vicious circle that will create more job loses, reduce consumer spending even further, and slow the economy that much more. Just in the last week, thousands of Americans lost their jobs. It is only going to get worse.
If there is one glimmer of hope (it is what is propping up the market today), it is the global markets. Even Harley Davidson admits its overseas sales were strong. Caterpillar announced the same thing this morning. While the economy is slowing here and the dollar continues to plunge, foreign economies continue to plug along… at our expense.
But I cannot be so naive to believe those countries will not be affected by our economic downturn. This is a global economy that is heavily linked to the prosperity of the American economy. If we stop buying, the countries that make those goods are going to be in serious trouble.
This is just the tip of the iceberg. Yesterday, people bought less motorcycles. Today, unemployment lines are growing. Tomorrow, who knows?
I bet it won’t be pretty.
****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. Sign up through your favorite reader here. Or, if you prefer, have the feed delivered to your email.
Next Article: Foreign Investment: The showdown for Africa begins
Posted by Andrew Snyder · Filed Under News that Matters, Oil and Energy, US Stocks and Markets
| 
Be the first to leave a reply.
Your comments are welcome
Follow TFN via RSS or Twitter |
 |
 |
 |
Advertisement
Latest Headlines
- The Big Picture for Sinobiopharma, Inc. (SNBP)
- Beazer Homes USA, Inc. (BZH) and Hovnanian Enterprises, Inc. (HOV) up despite horrid housing news
- The FDA catalyst: 2010 moves in MannKind (MNKD), Roche Holding (RHHBY), Acorda Therapeutics (ACOR) show it still works!
- Steepest drop since Feb. 2009: Here we go again!
- Is the silver run over? Coeur d’Alene Mines (CDE), Silver Wheaton (SLW), Alto Group (ALTO), Hecla Mining (HL), Endeavour Silver (EXK) close down