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PrintWe play a lot of video games, we eat a lot of pizza and we drink a lot of beer. We order the first two online and the third we actually venture out of our hovels to buy.
But executives don't order a lot of capital goods, and the indecision is driving people making major decisions up a wall -- as opposed to trying to figure out whether to play NBA 2K or Madden football or order from Pizza Hut or Domino's (DPZ) -- literally freezing them in their tracks about projects that they otherwise would be spending hundreds of millions of dollars on.
Last night's Electronic Arts (EA) conference call literally was electric, with a ton of talk about increased hours of playing time and a sense that the new line-up including Star Wars Galaxies, Battlefield 1 and the much-fretted about Titanfall 2 are all going to have great holiday seasons.
I heard good things about a potential turn in Pizza Hut from Greg Creed, the CEO of Yum! Brands (YUM) , which announced the Chinese spinoff yesterday -- which the market lapped up, by the way.
And while Molson Coors (TAP) may not have shot the lights out in terms of volume, one, it made tons of money on the consolidation -- these beer companies are incredible even if they don't grow -- and, two, the industry itself is still very strong, the growth just happens to be in craft and in Constellation Brands' (STZ) Modelo and Corona.
But when it comes to capital spending? Holy cow. You got terrible numbers yesterday.
Other than some sunshine from China, it was almost all disappointment. What a tough call to listen to from Cummins (CMI) , a great company that talked about trucking woes in North America that were pretty dramatic. I know Emerson (EMR) looked like it did a good number and I did like the data center and, again, Chinese numbers, there was nothing to excite.
But the starkest in terms of just the tale of the tape was Eaton (ETN) . Almost all traditional business lines were suffering and as new chairman and CEO Craig Arnold walked us through them I was staggered to think how much of a step back the industrials have taken in the last few months. Staggered, until I read this wisdom at the end of the call and I am just going to quote it in full because I think it is the best explanation of what is happening that I have heard:
"We're struggling with the data feeds very much like others but we do think the thematic message that cuts through all through all of these conversations is uncertainty and if you think about any person running a business today and making a long-term capital commitment in the face of an economic environment and a presidential election that has been as noisy as this one, with as much uncertainty around the environment that were going to be dealing in, it's, while disappointing, a little bit understandable that companies are basically pausing and waiting to see how things play out before they make a decision around major capital multi-year commitments."
He continues: "and so we think that's probably what's going on. But once again we're not 100% certain either. What we do hear pretty consistently is that it's a pretty uncertain period of time that we're dealing in and most companies or many companies are cutting their capital budgets and putting decisions on hold with respect to multi-year commitments."
Well, doesn't that just sum it up? The CEO of a major American company -- from Cleveland no less! -- is unsure why people are unsure, but he thinks executives are unsure because the election and the times are unsure, and if they are unsure they are not going to commit big capital.
But young people will commit small capital to beer, pizza and video games while they stay in their apartments which, at least according to the recent data, they are no longer fixing up. And, let's just throw in one more for good measure: they are wearing the same clothes and sneakers, while they are playing that they have for the last year! Silver Lining? At least, according to Procter & Gamble's (PG) Tide division, they are watching them!
