DuPont Revises 2011 Guidance
Dec09

DuPont Revises 2011 Guidance

DuPont has reduced its 2011 earnings-per-share guidance by a dime, down to a range of $3.87 - $3.95. In the company’s press release CEO Ellen J. Kullman said something somewhat disconcerting: “We are seeing slower growth in certain segments during the fourth quarter, driven by economic uncertainty. This uncertainty is contributing to ongoing conservative cash flow management in some supply chains.” Inventory drawdowns are very normal this time of year. A bigger inventory reduction than expected can mean many things. For instance, it can mean that customers expect prices in the supply chain to decline. (The most benign option.) Customers can be cashing out their inventories in order to brace themselves for potential Armageddon. (This happened during the 2008 panic.) Or customers, not knowing what the future has in store, don’t want to tie up too much of their working capital in inventories. (Middle of the road, not necessarily bad. This seems to be Kullman’s view.) Also, keep in mind that DuPont has reset its 2011 guidance a bunch of times. Here are the changes: Oct. 25, 2011:      $3.97 - $4.05 July 28, 2011:     $3.90 - $4.05 Apr. 21, 2011:      $3.65 - $3.85 Jan. 25, 2011:     $3.45 - $3.75 Dec. 14, 2010:     $3.30 - $3.60 DuPont is still way ahead of where it was in April. Looking at the list reminds me of Dow Chemical, which rather famously doesn’t give earnings guidance. I do see the wisdom in such a policy. Real numbers come in every quarter. Analysts have their own set of fake numbers. Why have another fake number? (Companies tend to lowball these anyway to set the stage for an artificial earnings beat.) If I am ever at the helm of a public company*, I would adopt the no guidance policy. *It would be a breach of fiduciary duty for a board of directors to let such a thing...

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Let’s Twist Again, Like We Did 50 Summers Ago
Sep23

Let’s Twist Again, Like We Did 50 Summers Ago

The Federal Reserve launched Operation Twist this week. In a nutshell, the Fed will sell $400 billion in bonds with maturities of three years or less, thereby increasing the yields of those bonds. It will then buy bonds with maturities of six to 30 years, thus decreasing their yields. (The yields for long-term bonds are higher than those for short term bonds because long-term bonds involve more risk. See the yield curve here.) The Fed hopes to reduce interest rates for long-term borrowing. (BTW, I was hoping that I would use my Chubby Checker knowledge to get an original headline. Turns out, I did not.) Like a party ruined by a tactless remark, markets freaked out when the Fed said this: The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. If the Fed said, “moderate downside risks”, the Dow Jones Industrial Average might not have dropped 391 points yesterday. Closer to the chemical industry, the downside risks are also looking, for lack of a better word, significant. The American Chemistry Council’s report on Weekly Chemistry and Economic Trends, released today, says: Outside of the United States, preliminary purchasing manager indices indicate that Chinese manufacturing contracted for a third consecutive month and that business activity stalled in Germany. This, combined with the recent evidence of falling commodity demand, suggest global manufacturing may be contracting. U.S. chemical production increased by 1.7% on a year-over-year, three-month moving average, basis through August. Global production volumes increased 3.9%. Both of those figures are a decline from earlier in the year. There are indicators that bode well for chemical demand. Chemical railcar loadings and new building permits are both...

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Let’s Twist Again, Like We Did 50 Summers Ago
Sep23

Let’s Twist Again, Like We Did 50 Summers Ago

The Federal Reserve launched Operation Twist this week. In a nutshell, the Fed will sell $400 billion in bonds with maturities of three years or less, thereby increasing the yields of those bonds. It will then buy bonds with maturities of six to 30 years, thus decreasing their yields. (The yields for long-term bonds are higher than those for short term bonds because long-term bonds involve more risk. See the yield curve here.) The Fed hopes to reduce interest rates for long-term borrowing. (BTW, I was hoping that I would use my Chubby Checker knowledge to get an original headline. Turns out, I did not.) Like a party ruined by a tactless remark, markets freaked out when the Fed said this: The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. If the Fed said, “moderate downside risks”, the Dow Jones Industrial Average might not have dropped 391 points yesterday. Closer to the chemical industry, the downside risks are also looking, for lack of a better word, significant. The American Chemistry Council’s report on Weekly Chemistry and Economic Trends, released today, says: Outside of the United States, preliminary purchasing manager indices indicate that Chinese manufacturing contracted for a third consecutive month and that business activity stalled in Germany. This, combined with the recent evidence of falling commodity demand, suggest global manufacturing may be contracting. U.S. chemical production increased by 1.7% on a year-over-year, three-month moving average, basis through August. Global production volumes increased 3.9%. Both of those figures are a decline from earlier in the year. There are indicators that bode well for chemical demand. Chemical railcar loadings and new building permits are both...

Read More
Let’s Twist Again, Like We Did 50 Summers Ago
Sep23

Let’s Twist Again, Like We Did 50 Summers Ago

The Federal Reserve launched Operation Twist this week. I, a nutshell, the Fed will sell $400 billion in bonds with maturities of three years or less, thereby increasing the yields of those bonds. It will then buy bonds with maturities of six to 30 years, thus decreasing their yields. (The yields for long-term bonds are higher than those for short term bonds because long-term bonds involve more risk. See the yield curve here.) The Fed hopes to reduce interest rates for long-term borrowing. (BTW, I was hoping that I would use my Chubby Checker knowledge to get an original headline. Turns out, I did not.) Like a party ruined by a tactless remark, markets freaked out when the Fed said this: The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. If the Fed said, “moderate downside risks”, the Dow Jones Industrial Average might not have dropped 391 points yesterday. Closer to the chemical industry, the downside risks are also looking, for lack of a better word, significant. The American Chemistry Council’s report on Weekly Chemistry and Economic Trends, released today, says: Outside of the United States, preliminary purchasing manager indices indicate that Chinese manufacturing contracted for a third consecutive month and that business activity stalled in Germany. This, combined with the recent evidence of falling commodity demand, suggest global manufacturing may be contracting. U.S. chemical production increased by 1.7% on a year-over-year, three-month moving average, basis through August. Global production volumes increased 3.9%. Both of those figures are a decline from earlier in the year. There are indicators that bode well for chemical demand. Chemical railcar loadings and new building permits are both...

Read More