This tells us that companies simply cut costs, largely through layoffs and inventory drawdowns to beat profit estimates. This can not work for very long.
Once excess inventories are worked off the accounting can no longer cover up the reality of a shrinking economy. This is happening rapidly.
Unemployment is increasing rapidly as well at 10.2% (so they say, we know it is much larger).
The story goes that this is the sign of the end of a recession since when the inventories run down enough they need to start producing more which needs employees. This could very well be true, I don't believe it is what will occur, but that is for another post.
The point is the profits we are seeing are not because of increased revenue or consumer demand. The market is a bubble right now and would not hold onto long positions much longer. We will see what unfolds in the next few months.
"this is the sign of the end of a recession" Yeah, the recession is ending, the depression is just around the corner.
ReplyDeleteCompanies have the low/mid tier employees by the balls in my opinion. I would not want to get fired and be throw into the job hunting pit. So, I am forced to accept more work and work more hours. This is not my personal case, but what I see happening.