The hope that the consumer is back. (again) Remember, reality is not reality in the stock market... perception is reality. So you could buy on perception of the upteempth "consumer is ready to rebound" rally in the past 2 years, and you banked some excellent coin. Congrats if you participated. As long as you did not stick around for reality this morning.
Want to know something else? I see nothing different from Whirlpool's report than I saw in Eaton's (ETN) [Jul 20: Eaton Corp - Another Example of Why Betting Ahead of Earnings is Dangerous] or Caterpillar's (CAT) [Jul 21: Caterpillar Pleases the Street]. A lot of jobs, and benefits were cut, earnings expectations on the bottom line were beat, revenue stunk, guidance is stable blah blah blah. So why did those stocks rocket up and Whirpool crumble today?
*crickets chirping*
*crickets chirping*
I have no idea why. It is yet again - why the popularity of gambling on earnings report is beyond my comprehension. I scoured this report a few times and said, this is identical to Caterpillar - its better than Eaton! Those stocks were up 8-10%+ on earnings, Whirpool is down 8-10%.
What we need to ask for all these companies is excluding government transfers of money to create "prosperity" what will you be cutting 3 quarters from now if the so called green shoots are not blossoming? You've cut all your muscle out to "beat the numbers" - you will be left with bone.
Let's take a closer look at WHR and again, if you read my reports on CAT or ETN you will see all the same wording. In the meantime I'll continue to talk to this wall over here repeating like a drone how the consumer is not back, and your playbook that you've been using the past 3 decades ("don't ever bet against the US consumer") is not going to work this time around. Even allowing for government transfers of money trees from future generations (and foreign creditors) to the current generation - effectively trying to blackmail Americans to buy cars, homes, fridges, Harleys, and visit malls in great numbers spending their great grandchildren's money. I wonder if these people would be so giddy about the handouts from government if they realized where this money comes from. Or what Ben's campaign to manipulate mortgage rate downs will bring to the country on the "other side" (when rates rise). Thankfully economics classes appear to be only for "nerds" and this type of stuff is not taught in the humanities courses - or in High School...
When the government gives us money it comes from their special money machine. No one gets hurt. Go forth and shop. Except for fridges. (just whisper softly to yourself as you read this "the consumer will be back soon - I just know it". The stock market says so and the market is never wrong. He has no job, but he has China's money via Ben and Tim and Larry. And my grandchildren's money.)
Via AP
- A significant drop in consumer demand slashed second-quarter profit 33 percent at Whirlpool Corp., the world's largest maker of home appliances.
- The profit was better than analysts expected, and the company brightened its full-year forecast.
Wait... the stock is supposed to rocket up 10%+ on this "surprise". Reboot the stock market... something is amiss today.
- But Whirlpool's revenue dropped 18 percent (much better than Eaton or Caterpiller) to $4.17 billion from $5.08 billion, missing Wall Street's average forecast of $4.2 billion (that's ok, everyone is missing revenue - you just manipulate the bottom line via tax changes, inventory changes, cutting heads, taking 1x costs that don't count on Wall Street - we all win here), and investors pushed the stock down $4.85, or 8.6 percent, to $51.49 in afternoon trading. (that's just wrong. Analysts expectations were beat, by birthright this stock should be in the $60s. Uncle Ben, push more of your paper dollars into the stock market - we have a runner here)
- Whirlpool, whose brands include Maytag and KitchenAid as well as Whirlpool, earned $78 million, or $1.04 per share, for the period ended June 30. That's down from $117 million, or $1.53 per share, a year earlier. Analysts surveyed by Thomson Reuters predicted a profit of just 51 cents per share. (they crushed analysts)
The term redpill was popularized in science fiction culture via the 1999 movie The Matrix. The movie relies on the premise that an artificial reality that is advanced enough will be indistinguishable from reality and that no test exists that can conclusively prove that reality is not a simulation. This ties in closely with the skeptical idea that the everyday world is illusory. In the movie, a Redpill is the term used to describe a human who has been freed from the Matrix, a fictional computer-generated world set in 1999. Bluepill refers to a human still connected to the Matrix.
Welcome friend... i see you've chosen the red pill. Reality is ugly, I'm sorry to say - but the truth sets you free. Rick Santelli is the only guy we have working for us on the "inside" - but let's keep that between just you and I. Let's continue shall we?
- Whirlpool has found that shoppers are still putting off some appliance purchases amid a recession complicated by tight credit and falling housing prices, both of which directly affect the market for appliances. "Consumer demand for appliances was significantly lower in the second quarter, which negatively impacted our global unit volumes," Chairman and CEO Jeff M. Fettig said in a statement.
- The sales decline was driven by lower unit volumes in both North America and Europe.
- One bright spot was Whirlpool Asia, which saw a 3 percent uptick in sales.
Ok that's the bad news - now the good news, expense control was fantastic as many heads were chopped, 401k contributions stopped (Main Street = Wall Street), and benefits hammered.
Via Reuters
- Cost cuts and a tax benefit helped Whirlpool Corp (WHR.N) beat analysts' second-quarter earnings estimates. JPMorgan analyst Michael Rehaut cited a better-than-expected tax benefit....
- The company has reduced its contribution to retirement plans, shuttered plants and cut capital spending to curb costs in the economic slump.
Surely there must be replacement demand... right? I mean when your fridge breaks down you have to replace it. Or the washer and dryer?
- In April, it said it saw a more challenging market than it had previously expected for the rest of the year as consumers continued to delay replacement purchases, even for appliances that are beyond repair, because of the economic uncertainty.
That said, all this "negative" talk of consumers not even able to find funds to replace washers and fridges makes no sense to me ... when you are unemployed you have far more time to go shopping for appliances (and many other things). Either CNBC is wrong about the US consumer or a company that directly deals with them day after day is wrong. I can only assume a company that deals with consumers every day is wrong (what do they know anyhow?); the pundits on CNBC are always correct (as is the stock market).
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Now in all fairness let me give you the new thesis on Wall Street which is of the bullish bent.... companies have cut costs so sharply that once demand surges back the profits will be flowering in ways we've never seen before. (this is course assumes as demand picks up no one new will need to be hired, 401k payment won't have to be restored, healthcare costs won't go up, etc - therefore increasing costs to the companies) For example so many heads have been chopped (and benefits lost) Whirpool North America is minting money even with sales falling off a cliff.
- Whirlpool's North American profit rose 19% despite a 17% sales drop.
Aha! Call the grandkids, time to break open their (already broken into 17 times) piggy bank! Stimulus 4.0 time. No CEO left Behind! The workerless American economy (ex C- level executive, healthcare, education and federal govt jobs) is on track.
