Very Bad Economic Sign (Leading Indicator): Price of White Paint Component Plunges

Discussion in 'Economics' started by ByLoSellHi, Sep 15, 2009.

  1. [​IMG]

    Price of white paint component dips at faster pace

    Associated Press|Sep. 15, 2009, 3:23 PM|

    By JEANNINE AVERSA, AP Economics Writer

    The price of key ingredient in white paint is declining at a faster pace, signaling that a pickup in manufacturing activity could lose some steam.

    Titanium dioxide prices fell 7.3 percent over the 12 months ending in August, the Labor Department reported Tuesday. That suggests the pace of home construction, renovations and manufacturing will be plodding in the coming months, analysts said.

    "I think the white paint index is signaling that the manufacturing recovery may be short-lived," said Richard Yamarone, economist at Argus Research.

    Economists track titanium dioxide as a barometer of the country's overall economic health. When people are buying homes, remodeling or even getting a house ready to sell, they buy paint. About 419 million gallons of paint were sold last year, more than a third of it was white.

    The price for titanium dioxide, which is not seasonally adjusted, tends to be volatile and should be viewed with caution, analysts say.

    In July, prices fell 4 percent over the year. That came after a 4.6 percent drop in June, and a 5.1 percent decline in May. That stretch of smaller price declines for titanium dioxide came as the recession eased its grip.

    Many economists predict the economy is growing again in the current quarter, but they are bracing for a bumpy recovery. One of the biggest hurdles: rising unemployment. It climbed to 9.7 percent in August, a 26-year high, and is expected to top 10 percent this year. That could crimp consumer spending, the single-biggest driver of national economic activity.

    White paint is used on a wide variety of manufactured goods, including cars and household appliances.

    Economists predict industrial production will rise 0.6 percent in August, up from a 0.5 percent increase in July. The Federal Reserve is scheduled to release that report Wednesday morning.

    The Cash for Clunkers program, which gave car buyers a cash rebate for trading in their gas guzzlers, has lifted car sales and boosted production. However, the program ended last month and some analysts believe there could be smaller gains in manufacturing activity in the coming months.
  2. stocks like cat dont go up 3 points after a breakout in one day if the market thinks manufacturing is going to crater.
  3. wartrace


    Well DUH, Cat paints their products yellow & black.:p
    (sorry, I couldn't resist)
  4. One thing about this rally in last few mos. is the slow intraday momentum compared to previous rallies. This has more of a late 2007 feel to it.
  5. S2007S


    CAT hahaha, how many of those earth moving machines are sitting dormant right now. No need for cat equipment when no one is building.
  6. so why is the market is bidding up cat and all the other industrial stocks if does not think a recovery is on the way.
  7. clacy


    BLSH is losing his steam. His posting pace has slowed significantly, as the market keeps climbing higher.

    If I see that BLSH capitulates and stops posting, I will probably liquidate long positions at that point :D
  8. pitz


    a) Financing is available against the entire stock market extremely inexpensively (ie: 0.75% or less at Interactive Brokers). So the break-even point of owning a stock like CAT is very low.

    b) The same stuff is happening on CAT's balance sheet; their debt service costs are gradually falling to nothing.

    c) CAT's products are exportable to countries where there is growth.

    d) CAT has good exposure to the mining industry, which is still making crazy amounts of money right now (ie: $3 copper!!, $1000 gold!).

    e) Infrastructure renewal is a pretty constant theme worldwide. CAT's equipment has pretty good demand there too.
  9. Mvic


    You can add USD weakness to your well made list.

  10. vhehn why not ask the traders in 1930 why they bid the mkt up
    50% only to see it fall 82% as they also thought business was turning.. human greed has taken over huge at this pt and we've all been trained to chase stocks as they run as a greater fool will follow.many big stocks are back to 2006 prices when business and credit were booming to no end. what are the chances of seeing that level of business with 10% unemployment? zero.99% of people are followers and feel safe to buy when others are buying. as far as cat goes it would need $5 earnings at a 11 p/e to justify this price. 2010 EST'S ARE $1.90. CAT WAS $26 IN 2003 WHEN EARNINGS WERE 2 TIMES THE PRESENT EARNINGS. as fatr as trading and chasing hey i'm in there doing it. but people who hold better do there homework. but in the end when stocks keep rising people desperately come up with reasons why such as "hey if the stocks running it means business is better"
    #10     Sep 15, 2009