Global Markets Pummeled: â€œThe Writing Has Been On The Wall For A Whileâ€ (DD, UTX, MMM, UPS, RSH)
Mac Slavo: When global freightÂ transportation collapsed to record lows in JulyÂ of this year most analysts wrote it off as an anomaly. In September, when one of the largest retail shipping companies in the worldÂ warned of weakening global economic conditionsÂ and announced they would slash thousands of jobs, financial markets barely even noticed.
Last week, Google, the largest small business advertising platform on the internet, announced a 21% decline in revenue per share year-over-year, leading to such a rapid decline in their stock price that stock exchange circuit breakers wereÂ forced to halt trading. Still, not many financial pundits noticed and investors didnâ€™t seem too worried about the overall picture.
But this morning, investors in the U.S., Europe, and Asia canâ€™t ignore the facts.
In a veritable whoâ€™s who of global behemoths, companies with operations across the globe and in many different industriesÂ are showingÂ severe strainÂ in a recessionary economic environment that can no longer be papered over.
The weakÂ earningsÂ and dwindling revenues have led toÂ cost-cutting that will add to lost jobs in order to protect profits.
â€œThe writing has been on the wall for a while,â€ said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
â€œItâ€™s a very tough environment, tough to generate new revenues, soÂ it shouldnâ€™t be too big a surprise we are having people miss on that front.â€œ
With earnings for over 30 S&P companies to be released throughout the day, hereâ€™s where we stand as of right now:
- DuPont (NYSE:DD), one of the worldâ€™s largest chemical companies and manufacturers of polymers like nylon and kevlar, Â reported a lower-than-expected quarterly profit and announced 1,500 job cuts to offset falling sales around the world.
- Â Aerospace and construction firmÂ United Technologies CorpÂ (NYSE:UTX) reported a 3.3 percent decline in third-quarter earnings and cut its sales forecast for the year, citing weak demand from airlines and an uncertain economy.
- 3M Co (NYSE:MMM), which makes Scotch tape, Post Its and thousands of other products for retail and commercial use,Â cut its profit forecast for the full year as acquisition costs and a strengthening dollar hurt margins.
- FedEx competitor, United Parcel Service Inc (NYSE:UPS),Â reported a lower quarterly profit on Tuesday, citing slowing global trade, and said there was â€œsome uncertaintyâ€ about the strength of the coming holiday season.
- RadioShack Corp. (NYSE:RSH), swung to a third-quarter a net loss. â€œOverall, our business performed below expectations,â€ said Dorvin Lively, interim CEO of the electronics retailer.
Executives at these and other firms have advised that they will be taking extreme cost cutting measures in theÂ foreseeableÂ future, indicating that these savings will be achieved, in part, by further job cuts in the hopes that the moves will boost profits.
They may boost profits temporarily, but theÂ viciousÂ death spiral that is created by such action will lead to further declines in the future. As more Americans lose jobs they are forced to spend less, often becoming dependent on government support to survive. This leads to further declines in revenues and profits, requiring even more jobs cuts. And the downward spiral subsequently continues, wiping out thousands of jobs, hundreds of billions of dollars in wealth, and adding more pressure to social safety nets that are already bursting at the seams.
Given what has transpired over the course of the last several years, there is a strongÂ likelihoodÂ that the US Government and Federal Reserve will move to prevent a stock market collapse through a variety of means, including the injection of billions of dollars in cash via the infamousÂ Plunge Protection Team.
Whether they can stop a mass sell-off and prevent panic is of no consequence, really. What matters is that all the facts point to a significant decline in global economic output and consumption, hundreds of thousands of job losses across G-20 nations, and obscene levels of unserviceableÂ debt in the United States and Europe.
The pain is coming, whether we want to believe it or not.
As Mike RiveroÂ humorouslyÂ suggested atÂ What Really Happened?, it may be time to engage in some alternate investment strategies if you havenâ€™t done so already:
As we noted previously, such a collapse and continued unrecoverable degradation of the system may be so severe that it could have far-reaching effects â€“ andÂ not just for a few months or years:
If this credit bubble pops the depression is going to be so severe that I honestly donâ€™t think our civilization can survive it.
Readers often comment or email us to ask when such a collapse may happen.
Look around folks, itâ€™s happening right here and now.
These are theÂ worst conditions in at least 50 years:
We havenâ€™t seen these highs since the mid â€™60s. That survey indicates the poverty level has grown from 15.1% to as high as 15.7% [since 2010], andÂ itâ€™s spreading at record levels to many socio-economic groups from unemployed workers, suburban families, to the poorest poor.
â€¦More discouraged workers are giving up on the job market and unemployment aid is running out.Â They found that the suburbs are seeing an increase in povertyâ€¦
Those experts surveyed alsoÂ predict poverty will remain above the pre-recession level of 12.5% for many more years.
Americans from all walks of life â€“Â at least 100 million of themÂ â€“ are living through what can only be described as an economic depression, where jobs are scarce, wages are comparable to those of indentured servants, and no hope appears to be on the horizon.
This article is brought to you courtesy ofÂ Mac Slavo.