There is a good bit worth pondering in an article today in the Wall Street Journal, an article seemingly filled with enthusiasm over a recovering economy and troubled only about a government which might interfere with that recovery by regulating it to death.
First is the thrilling data about Caterpillar, all about its improvement in profits in the first quarter of this year and the effect of that news on the stock market. Not mentioned is that Caterpillar’s revenue decreased 11% in that same quarter; they made more profit while selling fewer engines and less equipment. Their profit improvement was due to cost cutting, which is rather an old story. How, precisely, does that signal a recovering economy?
The article then goes on to describe increased manufacturing in Texas, Whirlpool seeing increased revenue in consumer appliances, and Alcoa improving as metals futures prices rose, all of which actually are signals of an improving economy. First it indulges in hyperbole about profits from diminished sales, and then it just sort of brushes by actual improvements with a casual mention.
The caution it sounds is that Wall Street is concerned about the regulation of derivatives. Apparently the economy of making things, producing actual goods and people buying real tangible products could be unraveled by government regulation of the trading of pieces of paper which provide high profits for the traders on Wall Street.
I’m certainly glad that we’ve been warned of that impending doom.