WEDNESDAY JULY 15, 2009

Cutting to the bone?

The green shoots crowd has won the last few trading days in the equity markets. Last week, the market was awash in negativity concerning the weak economy. However, strong earnings reports from Goldman Sachs, Intel and Federal Express, to name a few companies, have the markets firmly back in the economic recovery camp.

 

While the earnings reports have been better than expected, the good results are largely due to strong expense control. Certainly, in difficult economic times, companies look to control costs as a way to maintain their long-term economic viability. It often results in painful lay-offs, plant closings, and other “restructuring.” Expense control is essential to surviving difficult times. However, expense reduction is a limited source of earnings. Eventually, the company must generate top line, or revenue growth, to prosper. 

 

I continue to think the markets will grudgingly go higher. However, I wouldn’t get too excited about these earnings reports unless there is revenue growth as well. With cost cutting, sooner or later, you cut into the bone.

POSTED AT 1899-12-30 15:05:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

RECENT POSTS

Targeted and Temporary


Better Unemployment Number


The "Safety of Bonds" Myth


Just like that!


Ugly August


Bright Side of Double Dip Fears


All eyes on Wyoming


Lack of Business Confidence


Are bonds forecasting a double dip?


Are rates too high?

The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.