What they said is true. At our plant, we have cut off the second shift, and I've laid off about 25% of the workforse, with more to come. I have excess capacity in the plant, in other words. I don't see any end to this soon, as our customers are laying off people (GM, Ford, DCX, Visteon, Delphi, Lear, etc.), as well as all of our competition. They aren't selling their product at the levels of the past year or two, andthey have excess capacity.
The outlook is that this will continue - that demand for their products, and therefore ours, will remain soft, and thus production will remain soft.
Remember that the object of the FOMC is not to protect the stock valuations, but to foster stabilty in the economy - that doesn't mean its always going to go up if valuations are too high and the outlook for earnings drops. Lowering interest rates softens the lending rate so that those who do have demand, or the ability to invest, build, increase production, or grow, can do so. But there has to be a consumer for those goods.
Anyone buyng a new car? Buying big ticket furnishings or building a house? Taking any grand vacations? Investing with wild abandon or shrugging off even small losses? Dropping a whole basis point would help the makrket for a day or so, but wouldn't change the pace of the economy in whole or in general - it takes months for those effects to take place.
My opinion is that, given the history of the market, we are in for a long summer. Basic materials are rising some, like WY and GP, and utilities and oil (OPEC is slowing produciton btw) are rising and value is still beating growth. And that is reasonable, as those firms can increase profits and/or poduction and still be profitable. Toy's R US can't, nor can an automaker or most commercial goods.
I can see an opportunity for Bush/Congress to fund military spending that will make GE and GD and TEN and others good trades, but generally that doesn't occur until longer into a decline.
Goldman Sachs just took a beating for beating earnings and saying it was going to get better still.
The market is awarding anyone - its just "Take the money and run."
I think I will just sit on mine for awhile longer.
sorry for the diatribe.
scott |
