You may not know Trinseo (TSE) . This chemical company is basically the old cyclical part of Dow Chemical, spun off when Andrew Liveris, then CEO of Dow, wanted his company to be less tied to the economic cycles, especially autos.
Last night Trinseo blew up. It missed its forecast and guided down substantially. Third quarter was supposed to be $2.14 and now it will be $1.97 to $1.84.
Now you might ask, who the heck cares about a $2.6 billion market company with $4.5 billion in revenues? Why bother?
The answer: because not only does it confirm the negatives that PPG Industries (PPG) traced out, it broadens them to a whole host of other areas besides automotive: everything from consumer electronics to lighting to furniture, all of the stuff that the so-called flush consumer is supposed to be buying. Their synthetics go into tires. Their plastic go into packaging. Trinseo is a top three supplier globally of polystyrene which is a basic building block of the economy.
In other words it's a core tell of the economy, very similar to PPG, which is more auto, but also to paper makers like International Paper (IP) , where numbers are being cut furiously by analysts across the board because there is too much supply coming on and not enough demand,.
I know my view of the Fed's moves has been derided of late by those who look at the current economy and project strength. The consumer has a good balance sheet. I am not denying it. But is the consumer using a 5% mortgage to buy a home when it is no longer affordable? Is the consumer going to keep her car longer because the incentives are diminishing and the costs going up because of tariffs? Is the small business person going to take advantage of the new tax rates and a better regulatory environment and expand? No, because it is harder to find help, hurting the budget forecast and it costs more to borrow. Plus, a lot of good a tax break does you when you aren't making money that first year. You sure don't want to build a new apartment building or a house when property values are falling. That's a big reason why loan growth no longer is accelerating despite a consumer with a good balance sheet. She doesn't need to borrow anyway.
In a world where property values are going down, where it is harder to afford things, where there is great worry and division in the country, you are not going to be able to keep consumer confidence rising.
And that's before I even get to the trade war issues.
That doesn't mean we should forsake the market. I like that Conagra (CAG) is getting very interesting if it takes out the price of the deal: $35.25. Obviously the drug stocks work as it is now getting obvious to my dog Everest that the Fed can now take its time. And the FANG names should be swinging into action. They have come down so fast that it takes your breath away.
When FANG goes up this fast you know to sell. So when it goes down this fast?
Yeah, that's right. Do I even have to write it?
