The first definition of industrials, as far as I can tell from the dictionary, is: “of or relating to the industry.” Sounds pretty simple, doesn’t it? Wrong. The actual definition of industries isn’t very clear-cut: they are companies that create financial capital products. Capital products are the items used to create the items you actually buy.
So what do I mean by financial capital goods? Well, for example, let’s say you just purchased a new bottle of perfume. That’s a capital good – something that produces a life or feeling of beauty in your life, and that you can use to buy something else. Now, the perfume itself isn’t much of a capital item, but the bottle itself is – in fact, it’s a large part of the economic value of the product, because perfume, together with other beauty markups and related industries, generates a lot of surplus value. Which means that if you don’t use it right away, you lose the potential profit and the value of the good.
In other words, it seems like the definition of industrial companies could include all kinds of things that aren’t considered stock market products, such as tools and other technology. But when you think about it, lots of the items in that list would be considered liquidable commodities, and perhaps even money. So, the true definition of industrial companies is one that takes products like clothes, shoes, technology, and beverages and makes them available to the general public. In this way, these companies can both increase their cash flows and increase their net worth – the bottom line for all of these sorts of cyclical industries.