Margin Pressure and the Coming Wave of Private Sector Layoffs(Updated)

And I'm talking about yet another prediction that is an epic fail. Read through the dozens of OTHERS on here with similar predictions about how this country is going to fall apart financially or otherwise, only to see nothing happen.

I respect the work you have done w the topic. All I'm saying is your thread will end up in the scrapheap of other failed prediction threads.

reply to post by silent thunder


We've been seeing this over the last ten months ON TOP OF price inflation as it pertains to food.

I bought a bottle of Sprite yesterday and paid 1.39 for it. I thought I had picked up the 20 ounce bottle...Turn out they cut it down to 16 ounces.

Originally posted by amongus
And I'm talking about yet another prediction that is an epic fail. Read through the dozens of OTHERS on here with similar predictions about how this country is going to fall apart financially or otherwise, only to see nothing happen.

I respect the work you have done w the topic. All I'm saying is your thread will end up in the scrapheap of other failed prediction threads.

Ok...You're not getting this:

1. Margin pressure is real. It affects stock prices and whether companies are able to hire or maintain work forces.

2. I have provided several examples of this happening across several sectors of the economy including 2 reputable sources that support my view.

3. Price inflation is happening NOW and is the reason for the margin squeeze as explained in the OP.

4. You need to make an attempt to understand the data before passing judgement. Otherwise you're not denying ignorance, you're feeding it.

reply to post by projectvxn


I am not going to pretend to understand the ins and outs of what you are saying, but something struck me while reading your post when I read this "Our government is politically locked to the fate they've sealed for us. We will collapse, and only then will reform come in earnest. We MUST resist the urge to hand over all control to the government, as they were responsible for covering up this mess to begin with. We have to clean it up ourselves."

Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek.
Barack Obama

I can tell you I didn't walk away from hearing that thinking he was gonna be the one to change it. Replace the we's with you's and now we're on to something.

reply to post by amongus

Call it a gut feeling but by mid next year I think the US will have 13-15 per cent unemployment and that things will be much more expensive other than Zimbabwe the only other country I know of that moneterised its debt was germany in the 1930's in my stamp collection is a 1933 200 million mark postage stamp that prooves how well that went.

reply to post by recycled


While the words that Obama spoke were altruistic, the fact that he's pursuing the very policies that caused this mess makes those words hollow to me..

Change is a shiny pair of handcuffs for the crooks, responsibility with the people's money, and accountability.

I've yet to see any of this happen.

I think a fair number of U.S. companies in this situation right currently have production facilities in places like India and China. Margins for factories in China are already razor-thin as they are pretty much relying on exports to drive their profits. The declining economic conditions will affect all players sooner or later due to the complicated web created by globalisation and its ties to the U.S. dollar.

Sending factories overseas now only benefits companies who have the ability to extricate themselves from unstable markets such as the U.S. and focus on the domestic market where they reside. This is why you are seeing many companies expanding their headquarters in India and China while closing or downsizing their U.S. operations. I don't see companies returning to the U.S. on any large scale anytime soon, if ever, unfortunately.

reply to post by projectvxn


With all the shrinking in labor that this companies has done to keep margin profits and claim that the economic is growing the reality of what is actually facing this nation is coming our way.

Right now you can tell how the holidays are going to be looking like when stores are not filling up their the way they did before the economic collapse, I mean just go around and look.

The forecast for the season is no very good either, I said earlier during the summer that after mid term election the reality of our economic downfall will show.

We bailed out the wealth of the ones on the top, but nobody is bailing our the hard working American and that is the biggest mistake that this government and its predecessor has done.

But then again who runs America this days? right.

reply to post by projectvxn


I was not holding him up in any way. Just struck me how uncanny his words were. He seemed to say over and over, it is "You" America who will bring about change. And now it is time for us to listen.

Originally posted by recycled
reply to post by projectvxn

 

I was not holding him up in any way. Just struck me how uncanny his words were. He seemed to say over and over, it is "You" America who will bring about change. And now it is time for us to listen.

Oh I hear ya.

I used to support Obama and am well aware of what he's said. It's the reason I supported him.

He understood, at least it seemed at the time, what Constitutionalism was all about.
Today, I see him as just another statist out to make money for his buddies.

Margin Compression being reported in the Steel industry.

Steel Service Centers Fared Better Than Steel Producers in 3Q; Expect Some Weakening in 4Q

We have seen in the past few weeks that the third quarter produced a significant margin squeeze for steelmakers, as falling steel prices met with little to no relief from raw-material costs. Steel service centers' operating performance is heavily determined by the change in steel prices, and Reliance Steel and Aluminum RS, Olympic Steel ZEUS, and Worthington Industries WOR performed relatively well in the third quarter as they have become accustomed to operating with leaner inventories in the past year, which partially shielded them from the decline in steel prices during the summer. In the final quarter of the year, we expect to see some seasonal weakness from normal shipping reductions around the holidays combined with relatively steady realized pricing for service centers compared with the third quarter

From investors.com

WASHINGTON (MarketWatch) — Conditions for New York area manufacturers deteriorated sharply in November, with a regional survey turning negative for the first time since June 2009.

The Federal Reserve Bank of New York's Empire State manufacturing survey fell to a reading of negative 11.1, a far cry from the 15.7 seen in October, according to data released Monday. The release was far worse than economist expectations for a 15 reading and marks the first negative level since July 2009.

A steep drop in the new-orders components of the index, as well as a big drop in shipments, sent the reading into negative territory.

Indexes for both prices paid and received declined, with the latter also falling into negative territory — worrying for the Federal Reserve, which has publicly fretted about the prospect of deflation in the U.S. economy.

The prices paid index fell from 30 to 22.1, while prices received dropped to -2.6 from 8.3.

“While the New York region is just one slice of industrial activity across the country, this does suggest that margin compression is becoming a reality,” said Dan Greenhaus, chief economic strategist at Miller Tabak.

From seekingalpha.com

he surging agricultural commodity prices are making their way into margin compression and raising questions about earnings sustainability. I remain long quite a few food-related consumer staple companies but am keeping a close eye on this issue and watching cash-flows to be sure that dividend sustainability is not in doubt.

Yep, just another ATS prediction unsupported by any facts or data what so ever.

For those of you out there who say that nothing is happening....


A couple of points:

Confirm that nothing is happening by reviewing and judging the data yourself.

Confirm that the data you're getting is solid and not subject to arbitrary interpretation.

Confirm that you know what the hell you're talking about before you talk about it...


That last point really helps when you're trying to make a point for or against what we see going on in the markets. It is not constructive to pass judgement on issues you don't understand. So please, if you don't know what margin compression is, and you only focus on key words like 'collapse' then you're not learning anything, and you're not contributing anything.

Learn first, then speak.

Those that still do not believe that we are facing the worst economic downfall ever seen in this nation is due to the propaganda of economic recovery.

But what else can the government do to keep the Americans from becoming angry against the trillions of dollars that used to bailout the rich and international banks.

Oh, yes, it was not only bailing out Americans elite wealth but as a nation with global ties, we also bailed out foreign banks.

But many have not clue to the extend of tax payer money give away, while the tax payer in the nation finds itself jobless and destitute.

The steel is the last true staple of our nations economy, we produce the best steel in the world but no necessarily the cheapest, China is doing that and attract more buyers, I been watching for a while when this last American staple will fall like everything else.

I mean we have a government that have not problem forcing commerce in its population with mandatory health care but can not protect any of the American industries in this nation and is selling the nation one piece at a time for foreign favors.

Look at the telecommunications in the US, China is buying into it, posing very high conflicts with national security, but then again our government allowed that because it needs China to keep buying our debt.

Look at what the greed of private companies is doing to our nation also, we have trained and prop nations in Asia that now are competing with the US from workers to products and that is OK, people have no idea that those H-1 visa workers were trained with American tax payer money to come to the US and take jobs.

Even the update of nuclear plants in the US have nothing domestic in it more security concerns because now China is going to supply parts for American nuclear plants.

Rather than do what Texas did after public outrage and forced developers to buy American manufactured parts[/b ].

I tell you our own government and the corporate greed is killing America and we just seat and watch it happening.

Traitors is what we have in our nations government.

reply to post by marg6043


Agreed.

Government is about to grind to a halt anyway. Some people say that's a good thing, but with a badly need budget restructuring and cutting initiative the problems will only compound. I'm not sure what America will look like by 2012, but I'm guessing it won't be pretty.

Karl Denninger via Seeking Alpha

So while we have evidence of improvement in both operations and sentiment, the problem with margin compression remains -- and despite claimed optimism, the six-month forward expectations show even more compression!

Yep....More coming down the pike.

I love that despite obvious and serious flaws in the bottom lines of companies across the board that the media and the government is still able to sell optimism for the sake of optimism. I find this ridiculous, offensive, and completely negligent.

If you read this correctly they're saying pretty much what I expected. Lower interest rates, cheap money, and as a result-further devaluing dollar, are creating margin compression. If this trend continues, and all evidence points to this being the case, margins will be squeezed so much that layoffs will become inevitable. Companies big and small are dealing with this right now.

Source

In the third quarter of 2010, consolidated net operating revenues from continuing operations increased modestly to approximately $38.2 million from $36.9 million for the corresponding period of 2009 as increases in fee income sources helped offset the revenue implications of a shrinking balance sheet. Ongoing margin pressures consistent with a low interest-rate environment, and adversely impacted by elevated levels of nonperforming assets, resulted in a 2.2 percent decline in net interest income. Capitol's efforts to maximize core deposit funding sources, as referenced earlier, helped mitigate some of this margin pressure. The net interest margin of 3.01 percent for the months ended September 30, 2010, while relatively static with last year's comparable period at 3.00 percent, reflected a notable 13 basis point increase when compared to the 2.88 percent reported on a linked-quarter basis. Cash and cash equivalents approximated $814 million, or 19 percent of the Corporation's consolidated total assets at September 30, 2010 reflecting the Corporation's continued focus on enterprise-wide liquidity. Other noninterest income approximated $6.9 million, compared to approximately $4.9 million in the comparable 2009 period.

The Corporation continues to emphasize the reduction of operating expenses. Noninterest expenses, although reflecting notable declines in "controllable" salary costs and core operating expenses, increased year-over-year to approximately $51.8 million in the quarter ended September 30, 2010. Costs associated with foreclosed properties and other real estate owned (which approximated $14.6 million in the third quarter of 2010 versus $9.6 million in the corresponding 2009 period) increased significantly, while FDIC insurance premiums and other regulatory fees increased from approximately $3.5 million in 2009's third quarter to $3.7 million in the most recent three-month period. Combined, these two expense areas increased to approximately $18.4 million in the current quarter, a substantial increase from the combined approximate $13 million level during the corresponding period of 2009.