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Another Round of Handouts Will add Years to a Recovery

|Includes:Whirlpool Corporation (WHR)

Normally the article in "The Indian Times", Economic Times section 20 July 2010,  below would be good news and a sign of better times ahead.                                         
"Whirlpool 2Q Net income More than doubles Whirlpool earned $205 million, or $2.64 per share, during the three months that ended on June 30. Excluding certain one-time items, that figure is $2.82.In the same period for last year the company earned $78 million, or $1.04 per share.Revenue rose 9 percent to $4.53 billion, up from $4.17 billion.

Analysts surveyed by Thomson Reuters expected the company to earn $2.17 per share on revenue of $4.50 billion.

Demand for the company's washers, dryers and other appliances had been hurt in the recession. But sales are picking up due to federal rebates for energy efficient appliances.

That prompted the company to boost its full-year profit forecast. Whirlpool said it expected to earn between $9 and $9.50 per share for the full year. That's up from its previous forecast of net income between $8 and $8.50 per share, and above Wall Street's expectation of $8.67 per share.”

Reading the article you see the caveat contributing the improved sales, not to new needs in new housing, but a handout in the form of a rebate for existing appliance replacement from the federal government. Whirlpools improvement in earnings is actual the results of  a one shot deal at best and in my opinion  without the handout Whirlpool will not be able to meet its optimistic annual prediction.

Handout Cash for Clunkers.

Handout check in the mail

Handouts are just one example of the many ways our stimulus plan is skewing the normal capitalistic processes in our economy and a second round of stimulus could add as much as another decade of lackluster performance to the US equities markets.

Our economy depends on the spending habits of the consumers. Currently a large percentage of the consumers are with out employment. An unemployed consumer has no money to spend and does not pay taxes. The government is currently running on borrowed money, but this too has a limit. When they can borrow no more the government subsidies will dry up. Only then will the normal processes of capitalism resume and we will start on the real road to growth, prosperity and true capitalism.

Economic experimentation (actually more like trail and error) at the world level results in unknown consequences. Be patient, it is going to be a stock pickers market for a log time.


 

 




Disclosure: No positions
Stocks: WHR