As I survey the destruction that this downturn has wrought, I continue to wonder about the timing and shape of any upturn. I know many of our readers will say, get real! It's already under way, while many others would vociferously argue that we are merely seeing a dead cat bounce (Wall Street lingo for even a drowning man can bob his head above the water a couple of times before going to Davie Jones locker), with the truly cataclysmic impacts of our over-indebtedness and failed policies yet to come.
Earlier this week the Conference Board's leading economic indicators (LEI) were reported. The index rose 0.7 percent, vs. economists' expectations of 0.4 percent. Economist Josh Shapiro at research house MFR Inc. put it well when he was quoted on CBS Marketwatch saying "We're now getting data which points to stabilization, the overall signal they're sending is the slide in economic activity is poised to end. The jury is still very much out in terms of what happens after that."
Interestingly, as this corporate reporting season progresses I am seeing the impact of the reversal of the CNN effect that occurred last fall. Since the world has not ended, and some amount of consumption, maintenance, repairs, etc. is being done in the economy, supplies, parts and inventories that have been drawn down are having to be replaced. This is being evidenced by data points like:
Intel ( ) beating their expected earnings and raising their guidance.
Nokia ( ) claiming they were constrained on their ability to deliver some of their high-end phones due to spot shortages of leading-edge chips.
Steel supplier AK Steel ( ) reporting that they expect automakers to increase their build rates by 50 - 60% in the second half of this year.
Nabors Industries calling a bottom to the U.S. oil/gas drilling slowdown.
Now all of these "positive" data points or green shoots are really just evidence of a snap back from unsustainably low economic activity; however, every upturn starts with an inflection point and it usually involves inventory re-stocking. What is actually shocking to me is how many companies were able to absorb 15, 20 or 30 percent hits to their top lines and remain profitable during this collapse.
