Caterpillar (CAT) Succumbs

ZeroHedge has been running articles on Caterpillar for years, with increasing frequency. Two of the most recent, from August and three days ago.

For Caterpillar, This Is What The "Second Great Depression" Looks Like
What On Earth Is Going On With Caterpillar Sales?
Below we show the latest monthly data from CAT which is once again in negative territory across the board, but more importantly, the global headline retail drop (down another 11% in August) has been contracting for 33 consecutive months! This is not a recession; in fact the nearly 3 year constant contraction - the longest negative stretch in company history - is beyond what most economists would deem a depression.
The stock market is to a large degree a reflection of social mood. When invetors are in a good mood, they ignore fundamental problems in the economy. When mood is negative, they ignore positive developments and cheap valuations.

Caterpillar has been whistling past the graveyard for years, but only last summer, coinciding with the U.S. dollar rally and drop in oil prices, did CAT stock fall. Now the stock is almost in free fall. The latest "news" is here: Caterpillar Shocker: Industrial Bellweather To Fire Up to 10,000; Slashes Revenue Outlook. There's no shocker though, things have been the same for almost 3 years.

Economists are frequently wrong about things such as China contagion because they ignore social mood and psychological factors. The broader market today is telling you nothing about China because the overall confidence is high. The Brazilian currency, high-yield debt (especially the distressed debt market) and copper? They're telling you another story. Eventually, these prices are going to synchronize. It could be that these weaker sectors will bounce and converge with equity prices, but I'm betting the opposite will happen. One day investors will decide these problems matter, will price it in accordingly, and economists will scream "contagion!"

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