Since hitting their lows last March, Fedex shares have rallied more than 150 percent and are not far off their 2009 highs.
Given that equity investors are supposedly able to anticipate the future, that must mean things looks are looking up for America's premier transportation and logistics company.
Right?
And since the company's fortunes are also closely tied to the health of the U.S. and global economies, money managers must also be betting that the economic outlook remains bright.
Right?
Then why, as the Financial Times reports in "FedEx Warns on US Recovery," is the head of the company so concerned?
The nascent US recovery could falter because businesses are still reluctant to invest in new equipment and technology, the head of global delivery and logistics company FedEx has warned.
“Business investment went up somewhat in the fourth quarter but is far below what it ought to be in a cyclical recovery like this,” Fred Smith, chairman and chief executive of FedEx, told the Financial Times.
He added that companies were being held back by continuing “uncertainty” over the outlook.
During the downturn many companies, including FedEx, cut their capital expenditures in response to falling demand, moves that in turn intensified the drop-off in economic activity. The levels have yet to recover.
Boosting investment spending was crucial to catalysing a sustainable recovery, Mr Smith said, because it created jobs. When people were worried about unemployment, they tended to spend less, undercutting a driver of the economy.
Mr Smith’s views on macroeconomic issues are widely sought because FedEx is seen as a bellwether of the global economy with connections to most big companies and insights into their planning. Last month Barack Obama, US president, singled out Mr Smith, a long-time supporter of Republican Senator John McCain, as the chief executive he most admired, citing his ability to think “long term”.
People have mindlessly driven up the shares of this company and a few others that have, since the end of WW2 served as barometers of traditional economic recovery. The present historic disconnect between equity prices and the real economy is a direct result of gambling on an outcome that has failed to materialize by "investors" who still do not recognize this is not your daddy's or granddaddy's recession. What did Franklin say? Experience keeps a dear school but fools will learn in no other?
Posted by: robert | March 12, 2010 at 03:02 PM