— – Recommended Links Ferrari had a strong first day on the stock market… Yesterday, the Italian carmaker Ferrari (RACE) had its initial public offering, or IPO. An IPO is when a company sells shares to the public for the first time. Ferrari was looking to raise around $900 million. It planned to sell shares for $48-$52. Ultimately, the company settled on an opening share price of $52. This put the company’s valuation at $9.8 billion. • Ferrari’s reputation as a luxury automaker helped it get a premium valuation… Yesterday, CNBC said Ferrari’s valuation falls somewhere between a high-end automaker and a luxury goods company: …[A]t $52 a share, the IPO valued Ferrari at around 14 times earnings before interest, taxes, depreciation and amortization (EBITDA). This puts it on medium ground between automakers like BMW, that have lower ratios, and luxury firms like Hermes and Cucinelli, which have higher ratios. E.B. Tucker, editor of The Casey Report, thinks Ferrari will have trouble living up to its lofty valuation. Following its strong public debut, Ferrari is now valued at nearly $10 billion. That’s a huge valuation for a company that prides itself on being exclusive. They only sell around 7,000 cars every year, and the cheapest new ones start at about $198,000. Last month, I went with Doug Casey to Canada to try to buy a $400,000 Ferrari. The dealer refused to sell it to him. The market for Ferraris is so high that they don’t need any more customers. Ferrari shareholders will want to see sales and profit growth. But Ferrari can’t grow by selling more cars…because selling too many cars will tarnish the brand. That means the only way for Ferrari to grow is by raising its prices. Ferrari’s steep valuation hasn’t scared investors away yet. Its stock price was up as much as 17% yesterday. It closed up 6%. • Ferrari may have timed its IPO perfectly… Here’s what Doug Casey said in The Casey Report just days before Ferrari went public: Ferrari is going to have an IPO on its stock soon. A smart move on their part; when the ducks are quacking, you should feed them. I wouldn’t touch it if your broker offers you some… E.B. Tucker also thinks Ferrari’s owners are cashing out at the right time. The Ferrari IPO is a classic example of insiders unloading expensive shares on to the public at the end of a bubble… The mainstream media will tell you that companies go public because they need capital to grow. Sometimes, this is the case. But what you don’t hear is that most company founders and early backers see IPOs as a way to “cash out”…to sell part or all of their company’s shares to public buyers who are willing to pay a lot more than knowledgeable private buyers would. The public’s appetite for IPOs is biggest at market peaks. This is when the social mood is rosy. It’s when things look great. The guys who specialize in unloading stocks onto the public (investment bankers) know this. That’s why there is a rush to take companies private during market peaks (like we saw in the late 1990s). • Going public now looks like a smart move… The Federal Reserve’s easy money policies have fueled one of the most powerful bull markets in U.S. history. The Fed dropped its key rate to effectively zero in December 2008. It hasn’t lifted it since. Rock-bottom interest rates make it cheap to buy stocks with borrowed money. That’s a big reason why the S&P 500 has gained 130% since December 2008. But prices for a lot of stocks are detached from reality. A popular long-term valuation metric called CAPE indicates that U.S. stocks are 49% more expensive than their historical average. Rickards: “This is the Biggest Accounting Hoax Since Enron” According to Jim Rickards, the fallout will be 525 times bigger than Enron and is sure to affect all American citizens — no matter where you live, what you do for a living or how much money you have. The mainstream media could uncover this deception anytime now. Once that happens, it will be too late for anyone to act. Will you be ready? Click here to find out the four steps you need to take to prepare for the coming chaos. Two Amazing Conferences for the Price of One Casey Research has put together a package never before seen… an incredible value… and it’s only available for the next 8 days. When you purchase the audio collection from the just completed 2015 Casey Research Summit, you get free access to Stansberry Research’s October 2015 Conference Series video stream. You’ll hear from Ron Paul * Gerald Celente * Richard Maybury * Doug Casey * Marc Faber * Porter Stansberry * Bud Conrad * Scott Taylor * E.B. Tucker * Louis James * Nick Giambruno * Mark Spitznagel * Rudi Fronk * Erez Kalir *… and more. But it’s only available until October 28, so click here now. • Expensive stocks are one of the many side effects of today’s “Alice in Wonderland” economy… Low interest rates have helped push up the price of just about everything… Last year, the value of the global art market grew to a record $54 billion. And earlier this month, commercial property research firm Real Capital Analytics said U.S. commercial property prices topped their 2007 peak for the first time in August. Almost everything is expensive these days. But million dollar homes and $400,000 sports cars don’t feel too expensive when you can pay for them with cheap, borrowed money. E.B. thinks this will end badly: We’re seeing the same thing in high-end art and luxury Manhattan apartments. The ultra-rich are bidding prices up to all-time highs. The problem is that the rich can only own so many paintings, 5th Avenue condos, and $400,000 Ferraris. When investors realize they’ve been living in an “Alice in Wonderland” economy for the past seven years, the prices on everything from fine art to luxury apartments to blue chip stocks will collapse. • Meanwhile, Caterpillar’s shrinking business is another bad sign for the “real economy”… Caterpillar (CAT) released awful third-quarter results this morning. Caterpillar is the world’s largest publicly-traded machinery manufacturer. It sells trucks, bulldozers, and other heavy machinery to miners, energy producers, and lumber companies. The company’s revenues for the third quarter were 19% lower than they were last year. And its earnings fell 62%. To make matters worse, the terrible results didn’t come from a slowdown in one or two of Caterpillar’s businesses. All of the company’s business lines are shrinking right now. • Caterpillar is a victim of the global commodity bloodbath… The Bloomberg Commodity Index, which tracks 22 different commodities, is near its lowest level since 1999. The price of oil is down 46% over the last year. The price of lumber is down 23%. The price of copper is down 21%. Weak commodity prices are crushing revenues and profits for commodity producers. With less money coming in, these companies are canceling and postponing projects. Commodity producers are Caterpillar’s main customers, and they’re not buying much equipment from Caterpillar right now. Equipment orders by mining, metals, and energy companies are falling by as much as 40% annually, according to global asset management firm The Carlyle Group. Last month, Caterpillar announced $1.5 billion in spending cuts. The company also plans to lay off 10,000 workers over the next four years. • Caterpillar also expects sales to fall another 5% in 2016… Management said 2016 will “likely be our 4th consecutive down year in sales, which has never happened in our 90-year history.” Caterpillar’s terrible results point to trouble for the broader economy. The company sells equipment used to build houses, office buildings, and other infrastructure for the “real” economy. That’s why many investors consider it a “canary in the coalmine” for global economic health. Chart of the Day Caterpillar’s business is shrinking… Today’s chart shows Caterpillar’s quarterly revenue growth rates since 2008. These growth rates measure the year-over-year change in revenues. For example, the latest quarterly growth measures the change in revenue between this year’s third quarter and the third quarter of 2014. Caterpillar’s revenues bounced back after the Great Recession. It had significant sales growth from early 2010 through mid-2012. However, sales started shrinking in the fourth quarter of 2012. And they’ve fallen almost every quarter since… Caterpillar’s shrinking sales suggest that the global economy is not healthy. Regards, Justin Spittler Delray Beach, Florida October 22, 2015 We want to hear from you. If you have a question or comment, please send it to [email protected] We read every email that comes in, and we’ll publish comments, questions, and answers that we think other readers will find useful.