Thursday, July 28, 2011

Profits, Profits Everywhere While Recession Returns

My title is deliberately confusing.  Lots of companies are reporting profits these days while high unemployment and commodity price inflation hobble the larger U.S. economy.  Oil supermajors are riding high in the saddle thanks to the mad props placed under oil prices by MENA madness.  Kirby (KEX), a well-run barge operator I admire, continues to do extremely well. 

These will likely prove to be isolated bright spots in an economy on the precipice of a further decline.  Housing recoveries traditionally lead broader recoveries.  Homebuilders are not recovering, reflecting the inability of the housing sector to lead the economy out of recession.  D.R. Horton and Pulte are not doing nearly as well as they were a year ago.  Their optimism for future growth is delusional. 

The recession never ended.  More confirmation is coming soon.

Full disclosure:  No positions in any companies referenced.