Cat and 3M Earnings Put Worries of Double-Dip to Rest - (WHAT!!!)

I'm a subscriber to Morningstar Research. Morningstar provides investment advice and does an extensive amount of research about public companies, ETF's, Mutual Funds, Bond Funds, etc, etc. Inasmuch as Morningstar's success is tied to the success of investors who invest in the market (rather than squirreling away their funds in a pillow or under the mattress), I think that it is reasonable to assume (even though I hate to assume anything) that Morningstar has a bias towards "positive" news rather than negative news. [Some of you may have heard the phrase "the power of positive thinking." (That phrase comes from the title of a book by author Norman Vincent Peale, and that book is an all-time-international-inspirational-best-seller.)] And, yes, I do agree that "positive thinking" is very important. Look at it this way, if you are the leader of a company and you have positive thoughts, a positive "we can do this" attitude (in spite of a negative environment!), then there is a chance that your company may actually do it, grow and succeed. But, if you are the leader of a company and you have a negative attitude, there is little chance that your company will grow and succeed, for negative thoughts become infectious throughout one's company, meaning, your team members will think negatively too!

Some of my blog-posts may cause you to think that I'm a pessimist. But, the opposite is actually the case; I'm the eternal optimist. That does not mean that I don't think that things (let's say the subject is the economy in the AEC industry) are always rosy and wonderful - because, in fact, nothing is rosy or wonderful "always", the AEC industry and the AEC reprographics industry experience ups and downs (and that's an "always") - it means that even when I don't think things are rosy and wonderful, there is still the opportunity to push forward, survive, grow again, succeed! Like I said, if you "don't think you can do it", you probably won't! And, if you do think "you can do it", you certainly have a better chance of getting it done than you would if you think you can't!

I have no idea why I got off on that tangent, so let me get back to talking about what I intended to talk about when I sat my butt down to write this blog-post.

The other day, I saw an article posted on Morningstar, an article that was a very upbeat article. It appeared in Morningstar's "Morning Digest" and the title of the article was, "Cat and 3M Earnings Put Worries of Double-Dip to Rest". Morningstar's Adam Fleck (the Morningstar team member who authored that article) thinks the strength of industrial earnings this quarter have put to rest fears of an imminent economic downturn.

I would be willing to be anyone that Morningstar's revenues and profits are greater during periods when demand for stocks, bonds, ETF's, Mutual funds, blah blah, etc. is strong and that the opposite is also the case. Demand (appetite "to buy") is what drives up the prices of stocks ... and, when stock prices go up, the market averages go up. When there is that sort of climate in the market, investors want to make even more informed decisions for their portfolios, and that's where Morningstar fits it (subscriptions to Morningstar.) So, when I read an article from a Morningstar team member, I always try to remind myself that it is in Morningstar's best interests for its team members to write positive, rather than negative, articles.

Recently, I did a post (on July 11th) that mentioned Dr. Hussman. Dr. Hussman said, in a very recent article posted on his company's web-site, that "his signs" say that we are going to enter a double-dip, quite soon. On July 15th, I received an e-mail from one of my reprographics industry friends (he is the President of one of the industry's larger companies), and, in his e-mail, he said:

"Hi, Joel, I hope all is well. I saw you posted some comments by John Hussman. Let me tell you, I have been following Hussman for years, and as far as I am concerned, he is one of the top economists, and possibly the best, in the U.S. As an economics major at _____, and a finance major at _____, I know something about economics. But more importantly – and it’s the only thing that counts, actually – he has simply been correct on every prediction, whereas almost everyone else has been wrong. He nailed the recession in 2000. He nailed the one in 2008. He nailed the associated bubbles too. Put your money on this guy, and forget about what you read from 99% of the other guys in the media."

Now, you might be thinking that my friend who said this is a pessimist for thinking that Dr. Hussman's prediction of a double-dip is likely right on. But, the friend who said this is the leader of a company that continues to be very aggressive in the industry, in spite of the downturn the economy experienced! That is the mark of an optimist, and optimism is infectious as well. While he maintains an "eye on" what might prove to be more stormy weather, he is positioning his company to continue its success.

Anyway, back to Dr. Hussman and the Morningstar article I mentioned, on the one hand, Dr. Hussman says that we are headed into a double-dip, and, on the other hand, the author of the Morningstar says (or at least implies) that, because Catepillar and 3M had positive news, "the strength of industrial earnings this quarter have put to rest fears of an imminent economic downturn". Well, certainly two completely opposite points of view!

Which guess is correct, double-dip?, no double-dip? How the hell should I know; I've told you before, I'm not all that smart. And, I don't have a crystal ball. (Actually, now that I think about it, I do have a small crystal ball somewhere, but it must be defective because I never got it to work!)

And, on the subject of crystal balls, I'm now old enough to realize that the substantial majority of those who hold themselves out to be experts in investments, finance and economics and who get paid to make predictions and give advice - whether it be predictions about sales and earnings, or predictions about future stock prices ("target prices", is what I'm speaking of), or predictions about the direction of the economy, or, closer to home, predictions of "recovery" in the residential construction market, or predictions of "recovery" in the non-residential market - don't know their ass from left base! They get paid to GUESS! (Damn, I'd like to have a high paying job where I get paid to guess!)

Case in point. There was a time when some analysts (and financial-investment researchers) who follow ARC said that "ARC only gets 15% of its business from residential construction", therefore implying that non-residential would continue to be okay and ARC's sales and profits would not be hurt too badly. Hmmm. As Lewis Black might say, "well, that guy didn't know ___t!) How about a "buy recommendation" when the stock price was in the mid 20's? (and quickly moved down from that point.)

The point is, is there really "anyone out there" that really knows "what's going to happen .... and when it's going to happen"?

I don't know about the rest of you, but I've yet to find the guy (or gal) who has a working crystal ball.

But, beyond that, one must maintain a "positive thinking" attitude .... and maintain that whether times are great or tough or terrible. That, to me, is the key to being successful in business.

Sorry for the long-winded post, but when I read the title of the Morningstar article that said this, "Cat and 3M Earnings Put Worries of Double-Dip to Rest", it made me smile and laugh out loud, and I just had to share my glee with you!