As earnings results poured in over the past week and a half, all I could imagine were the emails from the CEOs of various American-based multinationals to our leaders in Washington.
Such as one like this from Ellen Kullman at DuPont
(DD) to Ben Bernanke: Ben -- Thanks so much for the devalued dollars this quarter -- currency translation made all the difference!
Or from Jim Owens at Caterpillar
(CAT) to Nancy Pelosi: Nancy -- It was like one of those food towers from Harry and David -- three gifts at once: tax benefits, currency gains, and fiscal stimulus! Just wait till those “shovel ready” projects kick in 2010, bulldozers are going to fly out the door!
Or even from Lloyd Blankfield at Goldman Sachs
(GS): Chris, Barney, Ben -- what else can I say? Wow! Rest assured you can always count on us to know what to do with free money.
And we haven’t even heard yet from Alan Mullaley at Ford
(F) or Bob Toll of Toll Brothers
(TOL). Given the state of their respective industries, I suppose their notes could be very simple: I can’t imagine what we would have done without you!
Don’t get me wrong, I have a lot of respect for these CEOs and our leaders in Washington, I really do. But before we go around celebrating heroic corporate achievement, I think we need to at least acknowledge the role the umbrella of monetary and fiscal stimulus played in keeping at least the worst of the recession out of these companies’ results. See also Under the Fed Umbrella
But at the risk of shedding too much light on the topic, I'd offer that the strong results from a handful of the world’s largest companies are masking a much broader American earnings malaise. And as someone who spends the day focused on the financial services world, no where is that clearer than in this quarter’s regional bank results.
While big multinational corporate America is stabilizing, thanks in no small part to Washington’s largess, small businesses and the consumer are still suffocating to death -- particularly as neither group can capitalize on dollar devaluation, cheap debt, and shareholder dilution the way large companies can.
Judging by bank earnings reports, the cost and availability of credit to small businesses and consumers are going in the wrong direction.
Now please don’t interpret this as a plea for additional Federal aid. (Judging by the early results of the government’s mortgage loan modification program, all Federal aid seems to be doing is postponing the pain, not eliminating it.)
No, my point is much simpler: Those who believe that the results of the largest companies in America are indicative of the whole are likely to be sorely disappointed by the trajectory of this recovery. Until Main Street and its banks see improvement, real end-user demand for goods and services in America remains suspect.
Positions in SPY and JPM.