Friday, May 01, 2009
inventories can't be cut enough
I watched with some amusement as analysts decided that reduced Inventories in the GDP data boded well for future GDP figures. While, all else equal, certainly lower would be better, the fact is we are slashing inventories (and trying to do so even more) because there are no orders. None. We do take "orders" (non-binding, no cash down payment) which are what is optimistically shared with the Street but binding orders with cash down payments do not exist today, haven't for over 8 months now. When one lands it is company news and because a government entity somewhere backed it. And trust me, if we aren't getting orders neither are the next 5 guys.
I suppose either the analysts - and the market, which has been juicing our stock (thanks for that) - are correct and the orders are about to start rolling in, or they are going to be somewhat disappointed later this year when our backlog starts to run dry. I hope they're right. But I assure you the absolute last thing that's going to happen is for us to start *growing* inventories without the orders - that strategy can only possibly be conceived in a cubicle somewhere, occupied by someone that never worked in a real job.
this unfortunately corroborates pretty well with what i'm hearing anecdotally. companies needs orders to return to inventory building, much less capital expenditure. hopefully, the blip in consumer confidence will translate into something like a spending pickup down the line. but for now, for many companies, inventories simply can't be cut enough -- which is why last quarter was one of record inventory cutting and production shutdowns.
UPDATE: zero hedge with more from david rosenberg.
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