View the full cat chart at Wikinvest

Cat Stock Blog

Caterpillar Inc. (NYSE:CAT) stock news and links

Archive for the ‘Commodities’ tag

Commodities bottoming?

Mining Weekly notes a Barclays Capital commodities analyst told a convention in South Africa that the first quarter of 2009 is likely to see the worst of the current downturn, but that things should pick up by the end of the year.

Norrish expected the first quarter to prove the bottom of the price cycle, and expected growth to improve in the second half of the year.

However, conditions were unlikely to be in play for a sustained recovery until late 2009.

Norrish listed three factors that encouraged the belief that the commodity sector would begin to improve later this year. These included the fact that Chinese business confidence was bottoming out, dry-bulk rates were moving up and the decline in US home loan applications has stalled.

In addition, he argued that China’s spending package would support economic growth and increased demand for metals, particularly copper, aluminum and zinc.

In the mining sector, commodity prices have to recover before Caterpillar’s “replacement cycle” argument kicks in: lots of operators have old Cat equipment that needs to be replaced, but the only way it’s affordable is if the metals and minerals bring in significantly more than they cost to produce.

no comments | Permalink | Tags:
Tom Mangan posted at 8:40 am February 9th, 2009 |

Fascinating debate on speculation in oil

Barry Ritholtz, king of the finance bloggers, dismantles a “60 Minutes” report blaming oil speculators for the fantastic run-up in oil prices last year. His contention: The CBS News newsies left out a host of other factors implicated in the oil run-up.

What set the journalism hounds on the trail of this story was the obvious disconnect last year between prices and demand: Prices were going through the stratosphere while demand was falling off. I concluded it was plainly a bubble caused by too much money chasing too rare a commodity: not necessarily physical oil, but the oil futures contracts by which all oil is purchased.

Plainly this is speculation, but the traders responding to Ritholtz’s comments insist that individual speculators are a) not truly to blame because no individual trader can move markets; b) performing a vital market function in helping establish prices; and c) doing society some good by causing consumers of oil to burn less, which is good for the planet. Another interesting contention: if evil speculators were manipulating markets for their own gain, how did the prices ever correct and return to earth?

Check out the “60 Minutes” report and decide for yourself.

3 comments | Permalink | Tags:
Tom Mangan posted at 7:41 am January 14th, 2009 |

Oil and commodities profile

The Energy Report has a great interview with Roger Wiegand, editor of Trader Tracks, on what’s happening in petroleum. One factoid buried deep down that I had never seen before:

Now, here’s something about oil that a lot of people don’t understand. We have been focused on Saudi Arabia and the Middle East as our top U.S. oil supplier. They are no longer the largest oil producer for America. The top supplier of crude oil to the United States is Canada.

Who knew? Also, Mexico’s biggest oil field is about to run dry; bad news for the government, which relies heavily on the revenue from this field. Read the whole thing, it’s full of juicy details about where commodities are going in the next few quarters.

Roger Wiegand usually charges a pretty penny for his expertise, so it’s nice get a freebie.

Incidentally, the Energy Report looks like a solid bookmark for energy-industry watchers. I also like the “Uranium Directory“; sounds like the name of somebody’s punk rock band.

no comments | Permalink | Tags:
Tom Mangan posted at 9:09 am December 23rd, 2008 |

Oil price collapse: good or bad for Cat?

The New York Times notes that oil and gas projects around the world are being canceled because of the collapse in oil prices. This chart tells the tale:

Classic boom and bust pattern. Credit: Credit:

Classic boom and bust pattern.

Last year the story was we were running out of oil. This year the story is what we going to do with all this oil nobody wants? The spike in prices earlier this year had little to do with the supply of oil and everything to do with the supply of oil futures contracts — oil demand had inched up a few percent, but oil futures demand went through the roof because so many other investments were going south: Oil was merely the last bull market to give up the ghost before the bear took over. The massive deleveraging of the past couple months wiped out everything in its path as Wall Street players craved cash at any cost.

Falling oil prices drove inflation to a record low in November, the Times reports. The problem with the oil crash is that it has infected other commodities, many of which must be carved from the earth’s crust with Cat equipment. Cheap fuel helps Cat, its suppliers and its customers cover their energy costs, but if nobody wants the aluminum, steel and other earthly stuff most deeply implicated in Cat’s business, Cat has problems.

This is the crux of the Cat downgrade at Goldman Sachs last week. Cat’s stock looks cheap (Jim Cramer calls it a buy under $40) but its prospects are cloudy in a slowing global economy that’s punishing demand for drilling and mining.

(More on the consumer price index numbers at CNBC.)

no comments | Permalink | Tags:
Tom Mangan posted at 7:56 am December 16th, 2008 |