The Business Press Maven is actively engaged in the hobby of collecting something few in the business media are: signs of stagflation in corporate earnings results.
Slow growth and rising inflation, components of stagflation, will eventually undermine an economy.
As I've been building my collection in the past week, I've looked around to see how many others have been vigilantly mentioning the possibility of an emerging state of stagflation. Come along as I peck through the forest.
The Wall Street Journal
basically one mention in the past month.
Except for a mention in an
Age of Turbulence
book review in
The New York Times
, not much there either.
With Financial News, Read Between the Lines Oct. 31
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The Financial Times
has shown scant interest in the concept in recent months. One of its most prominent mentions came more than a year ago and it was to the tune of this headline: "
Renewed stagflation fears unjustified."
The Business Press Maven frequently strikes the business media on the snout with a rolled up newspaper for too easily declaring a trend. Typically, all it takes is a few anecdotes, several possibly coincidental occurrences and they go off, declaring a false trend.
Now the question becomes: If a real trend finally started and the business media were not there to write about it, is it, in fact, a trend?
We'll get to my growing collection in a moment.
Right now, as you know, I have been large-picture bullish for the past couple of years. And I still, as of this moment, believe the deterioration in housing prices will mitigate the inflation pressures that are currently lurking. I am currently capturing signs of stagflation, particularly from companies that sell small daily pleasantries (like pizza and chocolate) or small daily requirements (like soap and deodorant).
With apologies to the media at large, three does not make a trend for The Business Press Maven. But for now, here are the three most prominent members of our collection. If more are caught in my net, I may be reappraising my bullish stance:
Procter & Gamble
lost $2.82, or 3.9%, to $69.01. The company forecast a full-year profit that trailed analysts' estimates on slowing U.S. consumer spending and higher commodity expenses.
As seen here,
on Oct. 18 announced disappointing earnings "against a backdrop of severe commodity cost pressures."
Then on Oct. 16, David A. Brandon,
Chairman and CEO, said:"Unprecedented cost pressures and a weak consumer environment negatively impacted our domestic results in the quarter, which made striking the right balance between increasing prices, while operating in a period of declining traffic, very difficult."
What we must guard for, while wielding our net this way and that, is that stagflation becomes a vogue excuse like cold weather, hot weather, suppliers tripped up by the credit crunch or
the shortage of nuts and bolts that has befallen the world. (Yes, I'm talkin' 'bout you,
But don't make the mistake here of thinking
modest outperformance in the third quarter put stagflation fears to bed by turning Procter into a liar, liar pants-on-fire. You headline readers might be thrown by unfortunately predictable headlines like this one from
Colgate's Minty-Fresh Earnings."
They were fresh, but not totally exciting, delighting to me.
With even more international exposure than P&G, Colgate benefited even more from the weak dollar and more fragmented competition overseas. That's not to knock its efforts. Colgate is a great company that has done a great job overseas. A strengthened dollar could hurt it good, but, more relevantly to our discussion of stagflation, the overseas bounty masked weakness at home. Moreover -- uh, oh -- prices are a goin' up on a host of basic products from soap to dog food.
For a tour of price increases (don't let the children ride along -- this is haunted house material, real scary) please read
The Wall Street Journal's
P&G, Colgate Plan to Increase Prices."
As a slight digression, let's revisit last week's lesson about how headline writers are not allowed, under pain of death, to speak to article writers and how this can throw investors. This
story hit all the right cautionary notes about P&G, from the rising prices to how dependent its strength was on the weak dollar. But look at the headline: "Colgate, P&G Profits Up."
So let's add Colgate to our collection, now the fourth company we have pinned to the stagflation display board. Also, please join the search party and email me any evidence you see. Because, my friends, this collection is starting to scare me more than my Angelo Mozilo costume will scare any of the children tonight.
Have a Happy Halloween and, most importantly, be safe. It's getting a touch scary out there and I'm not even talking about the goblins and ghouls.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;
to send him an email.
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