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Profits are up at JP Morgan, Intel and Coke - are we really headed into a recession?
Earnings seem to be indicating otherwise!
Answers
951 points
Grudun answered one year ago …
Yes, although the severity is up for debate. But this one is primarily going to be the result of the credit crunch and its secondary effects. Two of the companies you mentioned (Intel and Coke) do not use significant amounts of debt to finance their opperations and expansion. This allows them to continue their current plans with minimal problems caused by the lack of available funds. A lot of other companies are cutting back on opperations and expansion due to a higher cost of money(case in point is AMD, who already has a lot of debt on their balance sheet and is not getting as much as it needs to continue at its current pace due to the increased costs). A lot of bussinesses are partially or fully debt funded and they are going to cut back on opperations because the funds are not available or are at higher rates that some opportunities warrent. The slowdown in bussiness expansion combined with the housing market slowdown is causing a contraction in the economy. How long this will last and how severe it will be will depend on how soon the credit markets can become healthy again.
This does create a great investment opportunity for value investors. If you can find companies with cash, small amounts of debt, and a strong product line you have an investment that will be strong during the downtime and will be in a position to take off when the economy recovers.
546 points
warren answered one year ago …
Have you checked the news yet today. Bloomberg hedline reads "JPMorgan Profit Declines 50% on $5.1 Billion of Charges"
Read more from warren
260 points
Hillcat88 answered one year ago …
Whether we ARE in a recession is irrelevant in respect of investing in the stock market. The appropriate question, if your real intention is to ask whether it is good time to buy stocks, should be when this recession would end. The stimulus plan tax refund checks will be sent out three weeks from now and six months from the first rate cut, you can expect better economy in the second quarter.
Further, INTC and KO have a large percentage of their revenue from international markets, in view of the weakness in the dollar, it is no surprise that they should perform well.
265 points
MaverickInvestor answered one year ago …
It strikes me that your question is mixing two different timeframes.
"Are we headed into a recession?" is asking about conditions today, going forward.
Profit reports, on the other hand, are reporting on what happened over the past few months - yesterday, going back over.
The two don't mix well!
