Cat Stock Blog

Bloomington Pantagraph profiles one John Brown, a Caterpillar employee who went on a fitness kick a couple years back and hasn’t stopped since. He lost 140 pounds in just over two years after winning a Caterpillar weight-loss contest. Brown’s Seven Steps to Fitness:

1. Accept the truth. You are fat because you’re eating more than your body is using. Slow metabolism, genetics and other “reasons” you’ve been using to explain away your weight are inconsequential compared to that simple fact.
2. Keep a diary to keep track of what you do. Make fitness a priority in your life or die younger; the choice is yours.
3. Embrace the enemy and make it your ally. Food is the tool we use to make us fat, but it is also the key to how we get thin and stay that way. Enjoy food, but do it the right way.
4. Learn to listen to your body and give it what it needs, not what it thinks it wants.
5. Set goals, lots of them — hard ones, easy ones, weight goals, fitness goals, exercise goals. Make whatever you can quantify into a goal. It feels great to live a life filled with constant and repeated achievement.
6. Surround yourself with people who represent the person you want to be. A support group of people who have achieved what you wish to achieve is more powerful and more permanent than any drug, program, plan or gimmick. They will not let you fail. Join clubs for support and information. Members thrive on each other’s successes.
7. Reaching your goal weight is not the end of your journey. See it as the beginning of the next phase. Plan for the future by setting goals beyond losing weight.

To me, losing weight is like quitting smoking: you have to ready to change. Meaning, you want to be thinner more than you want all the goodies that make you fat. I lost almost 40 pounds by hiking and cutting out snacking, so I know it can be done.

Paul Gordon of the Peoria Journal Star pokes some holes in the notion that workers in the new Caterpillar engine plant in Seguin, Texas, will make $21 an hour, a number some local real estate type appears to have pulled out of thin air.

I researched the typical base wages for factory workers in Texas, the San Antonio area in particular.

According to the U.S. Department of Labor, Bureau of Labor Statistics, the only production workers now making $21 an hour, or $44,000 a year, are supervisors – the bosses of those doing the assembly work.

Engine assemblers – which I expect many of these jobs would be – make an average of $16 an hour there, or about $33,270 a year. The BLS says there are currently only 540 engine assemblers in the San Antonio metropolitan area. Other assemblers make less.

Machinists – which likely will be among the jobs to be created at Seguin – make an average of $14.41 an hour, or just under $30,000 a year.

The average pay for all production workers in that area, the BLS says, is $12.79 an hour.

Cat flacks won’t say what they plan to pay. Gordon notes there’s at least a shred of likelihood that Cat is doing in private what it says in public: consolidating production in a single location mainly to improve efficiency.

For fun we should set up a pool to see who can guess how long it’ll take the folks responding to Paul’s post to blame everything on greedy corporate bean-counters or grasping union leaders.

Nothing to it, Motley Fool says. Just put $20 a day in stocks for the next 25 years and you’re all set. A few quibbles:

• Twenty dollars a day is Seven Thousand, Three Hundred Dollars a year. If you can spare seven grand after paying for houses, kids, clothing, health care, groceries, cars, college funds, etc., you probably don’t have all that much to worry about, financially.
• Say you followed Foolish advice and invested wisely in stocks for the past 25 years and had your million in the bank as of this time last year. Today you’d be down Four Hundred Thousand Dollars. Given that most most bubbles overcorrect to the tune of 80 percent, it’s not unreasonable to assume another 40 percent haircut in the next year. OK, so having 200k left over after the worst crash in history wouldn’t be so bad, but it wouldn’t exactly be fulfilling those Foolish promises of becoming a millionaire.

The surest way to pile up money in your investment accounts is to put more in than you take out. Stocks offer the promise of more rewards, but they also carry significantly more risk. Every stock can go to zero and you can lose all your money, just like at the casino.

I met a guy the other day who made an risky bet on building the business of his dreams and it cost him four million dollars. Entrepreneurs and professional traders lose this kind of money all the time; they share a common trait: major appetite for betting large, minor fear of losing large. If you’re one of those people, you ought to be risking it all on building that biz of your dreams rather than chasing paper profits in the stock market. If, like me, you have zero discipline and a tendency to panic, you’re better off in money market funds.

There are lots of ways to become rich; the stock market has disappointed far more than it has pleased, because amateurs buy tops, sell bottoms, get in/out at the worst times and have little/no concept of risk management. Not that the professionals have done that much better: this year they gave us the worst crash in 80 years (it’s probably no coincidence this happened after almost all the survivors of ’29 had died).

I’m all for saving $20 a day — but if you can avoid the temptation to think a penny saved is a penny earned and therefore justifiably spent on, say, a 52-inch plasma TV, you’ve got more self-control than most. Sure, the best things in life are free, but most of the next-best things cost money — it all comes down to how much next-best stuff you want to do without so you can have a few extra bucks in the bank.

OK, so maybe the Santa Claus rally showed up a day late. A quiet Friday that saw no further collapse of oil prices seemed to spread a bit of cheer through the markets.

Closing numbers

Credit: BigCharts.com

Say thanks to Santa

• Wednesday’s close, 41.91
• Today’s open, 41.98
• Range: 41.90-42.91
• Close: 42.72 +0.81 (1.93%)
• Volume: 2,840,015

The Indexes:

• Dow, 8,515.55, +47.07 (0.56%)
• S&P 500, 872.80 +7.38 (0.85%)
• Nasdaq, 1,530.24 +5.34 (0.35%)

Tough to say what today’s numbers mean with such light volume. The ugly numbers on retail sales didn’t seem to bug the markets too much, which is a small ray of sunshine.

RealMoney contributor Robert Loest says the debt-fueled economic expansion of the U.S. consumer sector has about had it. He contends the developing world will be a major source of growth in coming years and that large multinationals like Caterpillar are best poised to exploit those opportunities because they have such a huge head start at doing things like building factories, developing markets and dealing with political complexity around the globe.

Investors may want to consider replacing many of their iconic consumer companies with global industrials with good, relatively secure dividends such as Caterpillar, Rockwell International , Emerson Electric , ABB Limited and similar companies, unless their consumer stocks are really undervalued and pay a hefty, secure dividend

You’ll have to forgive the author for using buzzwords like “paradigm shift” and “event horizon.” Some can’t help themselves.

Peoria Pundit, aka Bill Dennis, writes more about Peoria’s politics than anything else, but most major Caterpillar doings get some coverage. I have no idea who put this idea into his head, but today he put a call out, offering to host Cat-related blogs.

Of course, any insiders who want to blog what goes on the shop floor or behind closed doors at Caterpillar World Headquarters would have to be anonymous. And I would be happy to help, perhaps with a group blog focusing on Big Yellow.

I’m sure the Yellow Father would welcome the scrutiny.

I’ve added a news feed from Twitter.com to post quickie headlines about cool stuff not directly related to Caterpillar and its stock performance.

Most folks use Twitter to announce their new choice of underarm deodorant or complain about their rectal itch flare-ups, but a crucial minority use it to share headlines and quick observations of news events in real time. When news breaks, Twitter posts start showing up almost immediately: Journalists are already learning to just check Twitter first to find out what’s going on in the world.

Stock market bloggers are using Twitter too. My favorite example is Brett Steenbarger, who typically writes one post a day about the psychology of trading, but uses Twitter to post market stats on trends as they arise.

Paul Kedrosky’s Infectious Greed is another popular blog among techies who follow the markets. His Twitter feed is always interesting.

There are tons of Twitter tools to help you learn the ropes. One of the handiest is Twitter Search.

I’m not thinking about computers or blogs or the fate of corporations or nations till after the holiday.

Be back then.

Bad news on the housing and GDP fronts drove the broader markets down, with Caterpillar dropping 1.56 percent vs. a 1.18 percent loss on the Dow Jones Industrial Average. Holiday week volume is dropping; yesterday’s was 9.1 million, today’s was 6.4 million.

Credit: BigCharts.com

Head and shoulders, anybody?

• Monday’s close, 41.78
• Today’s open, 42.08
• Range: 40.65 – 42.27
• Close: 41.13, down 0.65 (-1.56%)
• Volume: 6,445,283

The Indexes:

• Dow, 8419.49, -100.28 (-1.18%)
• S&P 500, 863.16, -8.47 (-0.97%)
• Nasdaq, 1521.54 -10.81 (-.71%)

It looks like we’re getting the traditional bear market slope of hope — small losses every day gradually eating away at all the gains.

Lenny Dykstra, the former Major League Baseball star, is a financial wiz these days with a column at TheStreet.com and everything. He offers a primer on adding a growth component to a stock’s price/earnings ratio to get a better idea of a stock’s potential momentum.

When you add the growth trajectory to a P/E, what you get is a PEG ratio: a P/E multiple divided by its expected rate of earnings growth. A stock is generally considered to be fairly priced when its P/E ratio equals its growth rate, which works out to a PEG ratio of 1 (for example, a P/E of 10 divided by an EPS growth rate of 10% equals 1). A PEG ratio below 1 is considered undervalued. The lower the PEG the better, as long as it’s not in negative territory.

You have to rely on companies’ and analysts’ estimates of forward earnings to arrive at the PEG, so it’s a bit of a crapshoot (as is every other data point in isolation), and it’s especially rough sledding in times like now, when so many companies are lowering their profit estimates. You can’t calculate Price/Earnings/Growth if there’s no growth. How does Cat fit in?

In this recession, we’re seeing many companies predict lower total sales for 2009. For a company whose earnings will drop, the PEG ratio becomes meaningless. For example, Caterpillar has a forward P/E of 8.9. But its consensus 2009 EPS estimate is about 20% lower than 2008 earnings. Dividing P/E by a negative growth rate gives a negative PEG number that is not useful.

The reality is that Caterpillar’s earnings outlook is unclear, and an expected revenue drop could be offset next year by a big federal infrastructure spending package once President-elect Obama takes office.

Dykstra shows how it works by crunching numbers for a couple tech companies with actual growth estimates for next year.

You don’t have to do the math yourself: Yahoo’s stock screener, for example, includes PEG. Interestingly, very few stocks have a PEG under 1, according to Yahoo’s screener, suggesting either a) the screener is wrong; b) stocks are still overpriced despite the fall crash; or c) everybody’s earnings are falling next year so their PEGs are negative.