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Monday, 25 January 2010 04:00

Right on Point Regarding Caterpillar

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My suspicions regarding CAT were right on point last year. Unfortunately, the suspiciously engineered "feeling" bear market rally made it very difficult to profit from being right. I still have an OTM position on them. Let's see what comes of it.

From CNBC:

Caterpillar Fourth Quarter Revenue Falls Short

Caterpillar reported fourth quarter earnings that beat Street estimates on Tuesday, but fell short on revenue, sending shares lower in pre-market trading.

Sales reached $7.90 billion, below expectations of $8.11 billion and down from $12.92 billion a year ago.

Caterpillar expects 2010 sales and revenues to be up 10 to 25 percent from 2009, and profit is expected to be about $2.50 per share at the midpoint of the sales and revenues range.

The company said it continues to see signs of economic improvement, particularly in China and most developing countries. If the China situation is as I suspect, this will be pulled back significantly. See Follow Up to the China Short Thesis Debate. They also see signs of improvement in North America, Europe and Japan, but these economies remain weak and have not rebounded as quickly as developing countries. I see the possibility of re-weakening here as well coming from CEE.

Caterpillar also sees a marked increase in demand for mining equipment—a result of continued strong commodity prices and growing confidence in economic recovery, and also an improvement in sales of aftermarket service parts, which is usually an early indicator of growing demand for machines and engines. China is supporting commodity demand now. If they do pullback, so will commodity demand and pricing, at least in the near to medium term.

For more on Global Macro, see The Butterfly is released!

For more on CAT, see: