Prepare for Bad Earnings

Alcoa -- the third largest aluminum producer in die Welt -- is the first S&P 500 company reporting earnings, and it's bad news. First-quarter profits there are down 54 percent on high energy costs and week pricing from lower prices for commodity metals and the low dollar.

What will be most shocking in the weeks ahead is not just other corporate earnings releases but the more-realistic economic estimates that begin to factor the impact of higher current energy costs. The prices of oil and of rice and of wheat we pay today are largely based on old prices of goods in inventory. Costs of replacement goods have gone up since.

If you fathom what it costs farmers to keep large John Deere and Caterpillar machines running through a harvest and you factor current prices, the realization is scary -- food prices on the shelves up 10 ... 20 ... 30 percent from "normal". We will start to see higher food prices this summer and they will escalate through next Fall.

Save up, America. It's going to be bad.

Comments

[Roy Schestowitz]

I agree with you on that one, Sam. My hope is that it will lead to positive /cultural/ changes.