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alstry (35.88)

Yes....Sales are Evaporating....

Recs

18

October 20, 2009 – Comments (8)

U.S. housing starts down 28% in past year.....U.S. Sept. housing completions record-low 693,000

Precision Castparts Corp. sales fell to $1.3 billion from $1.8 billion.

Headline:   Texas Instruments profit falls 4.4%, but sales up  Reality:  Revenue fell to $2.9 billion from $3.4 billion.

Illinois Tool Works revenue dropped to $3.58 billion from $4.64 billion.

Caterpillar sales came in at $7.3 billion, vs. $13 billion in last year's third quarter.

Whether its cities, counties, states, businesses and families....it appeaers now many are seeing revenues decline 20-40%....the only reason health care and food is remaining relatively stable is because Government is running a $2 Trillion dollar deficit that the world knows can't be sustained.

The problem is America now is burdened with $50 Trillion dollars of debt versus only $5 Trillion in 1980.  That debt is NOW the primary asset and income source of our nation.  If that debt is not performing, assets are crashing and income is evaporating.  Now with revenues no longer sufficient to sustain servicing much of the debt, we are seeing record defaults, massive deficits and unprecedented revenue declines in a short period of time.

Going forward, based on much lower revenues, as savings runs out, more and more debt will default causing a contraction our nation has never seen before.  The problem is much of our current savings is held in debt based assets...so as the debt defaults, so does the savings.  And as savings is depleted, so is banks ability to lend.......

Now that government is laying off.......and revenues pretty much generally are down 20-40%(save deficit spending), it seems clear that with unemployment already at 20%, we could easily see 40-60% unemployment ahead.

None of this is fun to analyze...just the facts and the diagnosis based on the patient presented.  If you own real estate, save a change in policy, it could very likely decrease in value 50% or more from current valuations as fewer and fewer will be able to pay rent or service mortgages.

As stated before, if we don't change current policy, you should expect much of America to look like Detroit in the not too distant future.  It is not the end of the world, just the end of the world as you  know it.

 

8 Comments – Post Your Own

#1) On October 20, 2009 at 9:05 AM, leo744 (< 20) wrote:

Hey Alstry,

 You failed to mention Apples great qtr...any comments on that?? Also if a company is able to defer some of their profits to another quarter how do we really know the REAL current health of the company?

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#2) On October 20, 2009 at 9:15 AM, alstry (35.88) wrote:

Apple did have a great quarter.  It has great products and great market position.  That said, a lot of apple's sales is to government...and with revenues to government evaporating, Apple may have some headwinds ahead.

"Profits" in financial statements are a strange and moving target.  You can take a company with no sales and have it report massive profits simply by applying a few accounting tricks....this does not apply to Apple.

Similarly, you can mask profits in one quarter and save them for another to make it look like profits are growing.  I prefer to use sale as my baseline and back into profits.  If sales are growing, it is generally a healthy sign assuming product is not being given away.

Great questions.

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#3) On October 20, 2009 at 10:12 AM, miteycasey (30.92) wrote:

U.S. housing starts down 28% in past year.....U.S. Sept. housing completions record-low 693,000

Could that be becuase of the record building that happen the previous year(s)?

Could supply & demand be a factor?

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#4) On October 20, 2009 at 11:14 AM, JerseyShoreGirl (< 20) wrote:

Remember that 'crazy' Web Bots prediction I posted a few weeks ago? Here's the Audio of their prediction ... Don't laugh; these guys could be onto something .. 10/25 is just around the corner ....

http://www.youtube.com/watch?v=cukV1sjzxY4

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#5) On October 20, 2009 at 11:31 AM, bigcat1969 (92.80) wrote:

Alstry is right about revenue.  I've been keeping track of at least the major companies as they do their Q3 reports and aside from the investment banks almost every company is down quite a lot YOY.  Dominos had a nice quarter at the expense of Pizza Hut, Lockheed had a nice quarter at the expense of the Government and Apple blew the doors off, but that is it really in dozens of Q3 reports so far.  Again that's aside from investment banks.  Clearly GS and JPM were huge gainers.

I think Apple's huge gain is a credit to the company which is known for quality and innovation and possibly cracks in the WINtel monopoly.  I've always felt that new OS releases from Microsoft were a time when folks might switch to Apple.  If you dislike your current computer or network and are looking at the required time and money to upgrade it to a new OS and business / office program suite, you would be more likely to consider the greater cost and effort to simply jump to another system.

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#6) On October 20, 2009 at 11:54 AM, booyahh (< 20) wrote:

You gotta compare Q3 '09 to Q2 '09.

Recovery doesn't mean we're back to boom times:  it means that each new quarter is better than the previous one.

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#7) On October 20, 2009 at 12:04 PM, cudakhan (< 20) wrote:

Correction, apple does not have the majority of the market share with the government, RIM does.  Apple is well run and will greatly increase when the iphone is available on other networks.  Apple's share price will soar to over $280.

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#8) On October 20, 2009 at 1:02 PM, bigcat1969 (92.80) wrote:

I'm sorry but until now, we always compared YOY.  Every business I've ever worked for or knew anything about always did YOY.  When I did sales it was YOY.  Next quarter had better be a big increase Q to Q for retailers, but if it isn't an increase YOY then we are still deep in a depression.  The rules change when we are searching for green shoots with CNN, but the real rules don't change and that is and always will be year over year.  If you really want to track Quarterly change than get the YOY numbers for the last three quarters and that will tell you something about trends, but sequantial quarters mean absolutely nothing.

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