Interested in Joy Global (JOYG) Under $42 But...

I am interested in Joy Global (JOYG) here as it breaches below $42, which is now lower than it was before it announced its massive share buyback program. [Sep 11: Joy Global to Buyback 1/5th of Shares this Year; 2/5ths by 2011]. However, the problem with a lack of credit is just about all major sales purchases of any major product, the world over, is based on financing. Without financing, we have no global economy. We have no big ticket purchases such as huge mining equipment. Etc. Hence, we remain on a precipice to see if the banks will stop hoarding cash or not. The one problem with this bailout other than being too small in size to address the problem is, there is no guarantee that the cash we give them won't just sit on their balance sheet to protect themselves. Instead of the true intent - to be lent out. You would think this would be a moment where the banks of countries who actually have savers can swoop in and take the place of American (and some European) institutions on the global stage but we are not seeing that yet as everyone sits on their hands. It is quite an amazing moment in history.

• As the world's mining equipment makers meet here for their quadrennial trade show this week, they should be in a celebratory mood given the booming business they have done since they last got together. Instead, a mood of uncertainty prevails at MINExpo, with one question hanging over the event like fog: how much of a toll will the global financial crisis take on their sales?
• There are signs that the global credit crisis and historic changes on Wall Street are affecting the industry's sales financing model, which relies on securitization of customer loans.
• On Saturday, Sergio Marchionne, chief executive of Italian industrial company Fiat, said the credit crisis had brought the financing business at Fiat's construction and farm equipment units to "an absolute standstill." He predicted there would be a "phenomenal repricing of risk" that would not spare anyone in the equipment industry. (this would be a disaster for the Caterpillars, Deere's, CNH Global's etc)
• The four years since the manufacturers last met have been wildly profitable. With prices of copper, nickel, iron ore and other metals rising with consumption and infrastructure investment in developing countries, mining companies worldwide stepped up orders for such equipment as gigantic shovels, drills and excavators. Two-year waits for some equipment became common as companies like Caterpillar Inc (CAT) and Komatsu Ltd dealt with the spike in demand and a shortage of some supplies, like huge tires and large metal castings.
• "Is this a correction or the end of the bull market?" Nicholas Brooks, head of research and investment strategy at ETF Securities, asked last week. "This is the key question." It is also the key question at companies like Bucyrus International (BUCY), Joy Global (JOYG) and Terex (TEX), which make draglines and mining trucks, some the size of small office buildings, on display at the show
• In July, Jim Owens, Caterpillar's chief executive, said commodity prices could fall "significantly ... I'm talking 30 percent-ish and still be at levels that would be attractive to drive investment in the mining and oil and gas industries because there has been such a prolonged period of underinvestment." Speaking in Beijing a month later, Owens said: "Caterpillar has so many orders for heavy mining and power generation equipment that it is sold out of most items through 2010." (that's fine and dandy but....no financing = no orders at least in the Western world - some in the East still have cash I suppose)
• But even if that business holds up, a potential trouble area for the companies is the coal industry, which was until recently a bright spot for equipment manufacturers. The big story has been China, which used to be a coal exporter but is now an importer as it builds about two new coal-fired power plants a month.
• Analysts believed China's planned power generation expansion alone would increase global coal demand by nearly 4 percent per year through 2011. That doubled the Central Appalachian spot coal price in the last year and caused U.S. coal exports to rise 42 percent in the first quarter, along with production increases in the United States and Canada. But as private companies have scrambled to get into the Chinese utility market, margins have contracted. In a recent note, JP Morgan's Ann Duignan estimated that 80 percent of the country's power producing industry was losing money, suggesting companies may have overestimated demand.

Good times. Every investing decision now is such a complex matrix and until we see if banks begin to lend we simply cannot make a decision.

No position