Ten Hallowe’en fears the Fed might pay for last summer…

last summer

Despite the “treats’ being delivered by record market highs, real estate euphoria and heightened internet expectations there are still a number of risk “ghouls” out there. And those signals, in the main, are coming from old economy cash focused franchises.
WealthiFi has listed 10 things which are hitting our risk radar….

1. Industrial giant Caterpillar reported Q3 profits down 42% and revenues down 18% from the same period a year ago. Cue its third cut to its original full year forecast for 2013.

2. WealthiFi had previously described Heineken’s profit profile as a bit too flat for its valuation. It turns out that full year profits won’t even be flat compared to last year. They’ll actually fall.

3. Traditional banking: Chinese banks have decided to treble the provisions they had made for bad debts.

4. Unilever sales growth has just fallen to a four year low.

5. IBM and Oracle both missed on Q3 revenue expectations

6. Despite a weak Yen, Japan’s exports grew by a slower than expected 11.5%(vs 15.6% consensus). But for a 15th straight month the current account was in deficit as imports rose by 16.5%.

7. Oil prices continue to fall.

8. According to US Commerce Department corporate profitability as a percentage of sales(margin) is at 10.9% which is the highest since records began in 1929. Is that as good as it gets?

9. Expectations for growth must still be pretty high if the performance of US Industrials sector over the last 6 months is an indicator. Chart from FinViz:

10. And if growth expectations are pretty positive US Treasuries are sending a different signal in recent weeks…

We know what the Fed did last summer and Emerging Markets fright can possibly explain some of the above but, like the movie, the damage may already be done. We just don’t know the identity of the ultimate risk villain…..

Quality Franchises

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