Friday, December 9, 2011

DuPont (DD) Warns this Morning as "Decoupling" Theory of 2007-2008 Shall Prove Silly Once MOre

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Those of you who have been around a while remember all the 'decoupling' talk of 2007-early 2008.  That is (was), weakness in one part of the globe would not affect another, and please feel free to buy equities.  While decoupling proved to be a complete failure over time, leave it to Wall Street to have a short memory as old ideas are recycled and sold as fashionable once more.  That decoupling talk has begun to resurface as economic data in the U.S. - while "meh" in a general sense - has outperformed that of Europe.  (Of course one area is running 10% deficits to create such data points)

This morning, Dupont (DD) is out with lowered guidance which is a hit to 'decoupling'.  Much like copper, chemicals are in every part of the global economy, so when a Dow or Dupont start offering warnings it is smart to listen.  (As an aside, despite the giddiness in the markets since early October, neither the bond markets or things such as copper are feeling very happy - see this WSJ story yesterday)   I was especially surprised by the warning on consumer electronics, because if you listen to the media there is insatiable demand for the newest phone, tablet, laptop, video game platform, etc.

Via Reuters:

  • Chemical maker DuPont cut its full-year profit outlook, citing slower growth in some of its business due to weakness in its end markets.  For 2011, the company sees earnings in the range of $3.87-$3.95, down from earlier forecast of $3.97-$4.05.
  • "The earnings revision reflects destocking across polymers and certain industrial supply chains that has accelerated during the fourth quarter," Chief Executive Ellen Kullman said in a statement.  "Consumer electronics demand has further softened, and housing and construction markets remain weak," Kullman added.
  • "We are seeing slower growth in certain segments during the fourth quarter, driven by global economic uncertainty.  This uncertainty is contributing to ongoing conservative cash management in some supply chains."
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