As a avid can collector (yes for added income). I was wondering how to view this article. In relation to PM's and some of the topics we discuss. Bonds, bankers, aerospace, auto production,ect. BS or insight?

Thank You
Earl


Alcoa Against the World

finance.yahoo.com/news/alcoa-against-world-072500163.html

Alcoa AA against the world! Alcoa against 6% Spanish bond yields. Alcoa against the doubling in short term Italian bill rates! Alcoa against Chinese inflation!

Can one company take on all of these forces of evil? One endlessly-disappointing metals fabricator?

Well, kind of, yes.

Because we live in an odd serial world, one where frequently the last voice wins.

And that last voice, that of Klaus Kleinfeld, he, the honest, self-deprecating, worldly and, at times, just plain hilarious CEO of Alcoa, is pretty darned persuasive.

Of course, today he's helped by word from the ECB that all of those Spanish bonds bought patriotically by large Spanish banks won't fall by the wayside. Nor will the banks, either. It does take some guts of the German puppetmasters to tell the Spanish to clean up their house without any incentives for growth and then tell their banks to take a hike. Good to see some justice over there on some issue other than the carbon tax. (Always helps when Deutsche Bank upgrades No. 2 Spanish bank Banco Bilbao, as it did this morning.)

But Klaus did a ton on his own. He made it clear that engineered products across the board -- Alcoa's bread and butter -- are doing quite well with good margins. That's clear from the fact that the company made money on the downstream even as raw costs remain high because of energy and labor, both of which are coming down. I knew someone would seize on the recent weakness in oil and Klaus sure did.

Aerospace is going to exceed growth plans with eight years of plane orders from Boeing BA and Airbus on the horizon. That's 8,400 aircraft on backlog with the likes of the A320 and B737 being all aluminum. We are now talking about a 13 to 14% increase in that aluminum business, which includes the dominant fastener biz (screws). Plus the business jet business, hurt so badly by President Obama's critical, some would say reckless, comments, seems to be coming back.
Autos and 7% growth goes to 12% in North America, which offsets the European decline of 8.3% and is augmented by China's single-digit growth. With oil prices so high, Klaus says, "light-weighting is the name of the game."
Trucks are up 65% even as there is some recent slowing and a reduction in backlog. Worth watching but definitely robust, even in China. European down single digit again.
Beverage cans up 2-3% slightly better than the industry itself.
Industrial turbines up 1-2% but getting much stronger of light.
Consumer electronics remains strong, which is, wink wink, Apple. That's part of what Klaus calls the "aluminizing" of a whole sector in part because of green desires—remember 75% of all aluminum is still in use because of recycling.

The only weakness remains non-residential construction and that is, truly, worrisome because that's where the banks make the money, particularly in the U.S. But that could be a tailwind with any help in U.S. confidence because we haven't built anything in years in this country. We are in "no crane" territory in most urban areas.

How about my biggest worry, an increase in Chinese capacity? Klaus, painstakingly went over how the Chinese simply can't pull off the expansion plans. Not enough water-aluminum smelting takes a ton -- where the cheap coal is. Higher Bauxite costs from Indonesia; that's the chatter about how mining exports should be taxed higher. He says it's just not an efficient way for the Party to put people to work.

So Alcoa against the world? This morning Alcoa wins.

The afternoon's another day!

Earl, this is all just more fluff.

The part of this message that has (conveniently) been omitted by the propaganda machine is that all the wonderful "profits" being extracted by these multinational Oligarchs are now coming from the DEVELOPING economies (primarily in Asia), where the populations actually DO have rising incomes.

As a matter of arithmetic, it is IMPOSSIBLE for their to be any growth in consumption in Western economies when incomes are falling, less people are working, and credit has been maxed-out for the majority.

Thus in a span of only five years these huge oligopolies have gone from basing their earnings strength from the WEST to the EAST.

The aircraft being built with that Alcoa Aluminum are either being sold to Asian airlines, or to Western Oligarchs to be used SERVICING their (growing) Asian routes.

As Alcoa acknowledged itself, most of the automobiles being built with Alcoa aluminum are either being built IN China or FOR China.

So when I talk about U.S. markets being ridiculously overvalued, the one aspect of that analysis which is NOT true is that many of these Oligarchs are doing quite nicely with their non-Western operations. However they are being priced on the basis of GENERAL economic health (and most specifically U.S. economic health) - when the reality is they are totally dependent upon Asian consumption.

Note that ASIAN companies whose earnings are based on Asian consumption get MUCH, MUCH poorer valuations than their overvalued counterparts on the Dow - precisely because Asian consumption is (still) not seen as a "reliable" foundation for corporate earnings...not like the USA !!!

Jeff wrote,

Note that ASIAN companies whose earnings are based on Asian consumption get MUCH, MUCH poorer valuations than their overvalued counterparts on the Dow - precisely because Asian consumption is (still) not seen as a "reliable" foundation for corporate earnings...not like the USA !!!

Jeff,

That's a lot to think about there.

Thank You
Earl