Posted on 01/17/2015 7:05:54 AM PST by thackney
It had nothing to do with the higher US Dollar vs. the Euro and JPY?
They will be slow to drop because both trucking companies and airlines hedge their exposure to fuel prices. Oil/gas will need to remain low for 8-12 months for the lower price to be passed on to the consumer. And even then, retail price reductions will be gradual.
I’m of the opinion the oil and gas industry is the only thing that has kept the economy from a complete collapse.
People don’t have the slightest clue how much royalty oil companies pay to the mineral owners.
When royalty is cut in half, or completely stopped in some cases, a lot of people are going to be in trouble because they depend on that money to pay for big ticket items like houses and cars they couldn’t afford otherwise.
Yes, but I would think that CAT’s exposure to the USD exchange rate is significantly greater than their exposure to the oil price.
I think I'm fine with the world cutting all oil revenues by half.
And that will allow other uses for those materials that had otherwise become economically unviable.
When those great paying jobs (75k or better is not uncommon in this industry) go away, so does the money derived from mostly non-government sources. This leads to an absence of private money being replaced with tax/public money for things like unemployment benefits and entitlement programs many of the former employees will move to. As a result, the cheap gas prices may leave more money in some people's pockets but that will be short lived as they see a general slow down in the economy.
The people on subsidized living will benefit the most as they see a cut in expenditures for every day living cost but the private sector will suffer more as the many tens of thousand of jobs related to energy are no longer there to buy homes, cars, electronics and so on. That will have a ripple effect on other private businesses.
In other words, I see a lot of our economy driven by the private sector moving to more government driven sector. I'm writing this on my phone so it's probably not as well said as I'd like.
The maker of diggers and dozers’ direct exposure to the sector is equal to about $6.5 billion, or 12% of revenue, while its indirect exposure may be as much as 15% of revenues, analysts wrote in a note. That means almost 30% of its total revenue is facing pressure in 2015 and 2016.
Has the dollar risen that much?
https://www.google.com/finance?q=eurusd&ei=4Yq6VOHUA4q_8waPjYDYCg
https://www.google.com/finance?q=jpyusd&ei=RYu6VIiFNYfj8wahi4CgAQ
Thousands of truckers will no longer have a job also.
The key being if other sectors of the economy are doing well then truckers will have alternative sources for hauling revenue. I admit I don’t know about other sectors booming. As an aside I’m out three days a week at 3:00 AM and the amount of trucks has increased. On last Friday the freeway was almost wall to wall in “Big Rigs.” Any posters out there who are truckers?
Thanks for the article. It seems to support my position that truckers will seek alternative markets for their services. The issue being ARE THERE OTHER MARKETS AVAILABLE?
But then look what happens. It goes back up. Right now, even at 86.00 it's higher than it was in Jan. 2009.
The company said that “30% of its revenue is facing pressure”
That does not mean that all 30% of the revenue is at risk.
The 25% rise in the USD is a reduction of the ex-US topline (unless they hedge their exposure, which they probably do not).
Thankfully, retirement portfolios are not made of single-sector stocks.
This stock, sporting a 3% plus dividend, is a buy. I’m probably buying a couple hundred shares next week.
” that will be short lived as they see a general slow down in the economy”
Yes the slowdown in the economy that caused the price drop in oil is the problem and will be exacerbated by the transfer of oil capital into consumer spending (because of the lower fuel price). The government redistribution of wealth to consumer spending is now aggravated by a capitalist redistribution of wealth into consumer spending. Which will cause less investment and thus more government support of consumer spending.
(Not stated anywhere near as well as i’d like!)
Of course if the government would reduce it’s redistribution then the price drop could be beneficial.
But that won’t happen.
Buy on the dip!!
The last time CAT cut their dividend was in 1991, after losses (don’t know for how many years) and a strike.
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