Manufacturing is Suffering… Badly
Oct 3rd, 2008 | By Charles Delvalle | Category: Politics & EconomicsFor the past year, the prices producers pay for their goods have been skyrocketing. Yet even with the higher prices they pay, they’ve hesitated to pass along higher prices to consumers. Now they’re paying the price as they face the biggest margin squeeze since 1975.
Typically manufacturers pass along price increases to keep the spread between what they pay and what they sell (known as the margin) wide enough to make substantial profits.
When a recession comes along, manufacturers typically lower prices and see their margins shrink. But at some point, margins will be so thin, that the only choices manufacturers have left are to cut jobs, scale back production, or cut back on spending.
The Chief Economist of JP Morgan believes that this will lead to average payroll losses of 150,000 over the next six months – double the number we’ve been seeing thus far.
What this shows you is that this recession is just getting underway. This means it’s now more important than ever to invest in companies that are rich in cash and have wide operating margins. They are the only ones who will make it through this recession relatively unscathed.
Source: Manufacturing is Suffering… Badly
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Charles Delvalle is a self-taught market-timing professional and value analyst who uses a combination of technical indicators and fundamental research to achieve consistent gains on stocks, commodities and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering great companies on the cheap. He questions government reports and the status quo. In addition to swing trading options, Charles is also Co-Editor of the monthly advisory service - INCOME.
