October 2008 Presented By: Institute for Trend Research Dr. Jeff Dietrich [email protected] .
34
October 2008 Presented By: Institute for Trend Research Dr. Jeff Dietrich [email protected] www.ecotrends.org
-
Upload
cornelius-brown -
Category
Documents
-
view
217 -
download
0
Transcript of October 2008 Presented By: Institute for Trend Research Dr. Jeff Dietrich [email protected] .
October 2008Presented By:
Institute for Trend Research
Dr. Jeff Dietrich
[email protected] www.ecotrends.org
Does this sound familiar?Does this sound familiar? ““As we know, there are known knowns; As we know, there are known knowns;
there are things we know we know. We there are things we know we know. We also know that there are known unknowns; also know that there are known unknowns; that is to say there are some things we do that is to say there are some things we do not know. But there also unknown not know. But there also unknown unknowns – which are the things we don’t unknowns – which are the things we don’t know we don’t know.” know we don’t know.”
“Nothing made any sense and neither did everything else.” Joseph Heller, Catch 22.
Concerns about the Bailout
Rush to Judgment… Rush to Judgment… Who? How? When? Where? and What?Who? How? When? Where? and What? Americans assume this will “avert recession”Americans assume this will “avert recession” Precedent setting “commitment”Precedent setting “commitment” Unintended consequences (taxes, local banks) Unintended consequences (taxes, local banks) Asset values still unknownAsset values still unknown Government raises the debt ceiling to $11.3TGovernment raises the debt ceiling to $11.3T Accountability for “Congress”? (Fox in hen house)Accountability for “Congress”? (Fox in hen house)
Economic Stabilization Economic Stabilization ActAct
• Restore stability to America’s financial Restore stability to America’s financial systemsystem
• Restore lending by financial institutionsRestore lending by financial institutions• Avoid outright panic Avoid outright panic • Avoid massive foreclosures and avert a Avoid massive foreclosures and avert a
steeper recession/depression.steeper recession/depression.• Could end up a net plus for the “taxpayer”Could end up a net plus for the “taxpayer”• Regulation on future predatory lending Regulation on future predatory lending
practicespractices
50
60
70
80
90
100
110
120
130
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
50
60
70
80
90
100
110
120
130
50
60
70
80
90
100
110
120
130
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
50
60
70
80
90
100
110
120
130
US Industrial Production IndexUS Industrial Production IndexForecast Through December 2011Forecast Through December 2011
Annual Average IndexAnnual Average Index
Here todayTipping Points- Hard Landing – 2009-2010
Source: ITR’s EcoTrends®
Monthly Economic Report
2006 3.2% Actual
2007 1.9% Actual
Forecast (Median)
2008 0.6%
2009 -2.9%
Debt (s)
Interest Rates
Inflation
Liquidity/Credit “Crunch”
China
Elections (Stimulus)
Oil
Housing & Home Prices
Unemployment
Massive Gov’t Intervention
Global Industrial Production Indices12/12 Rates-of-Change
88
92
96
100
104
108
112
'00 '02 '04 '06 '08 '10 '12
88
92
96
100
104
108
112
107.2 - SE Asia 106.6 - S. America102.5 - Europe102.2 - Japan101.8 - Mexico101.4 - US
Source: ITR’s EcoTrends®
Monthly Economic Report
The future is your decision. Learn from the mistakes of others. Take action this year and next to avert a “recession” in your company.
BRIC Industrial Production Indices12/12 Rates-of-Change
92
96
100
104
108
112
116
120
'00 '02 '04 '06 '08 '10
92
96
100
104
108
112
116
120
116.6 - China
107.2 - India106.8 - Brazil106.0 - Russia
Brazil #1 exporter of soy, coffee, sugar, beef, poultry. Second largest iron ore deposits. “New” oil discovery off the coast. Gaining in rice & corn ($58B in farm products).
Phase A Phase B Phase C Phase DPhase A
A A
Phase A Phase B
A
B
A
B
Phase A Phase B Phase C
A
B C
A
B C
Phase A Phase B Phase C Phase D
A
B C
D A
B C
D
Four Phases12/12 Rate of Change (y-o-y)
Bankrupt
ExpansionNonresidential
Construction
AircraftX
FoodX
Retail Sales
Industrial Production
Zero Percent Growth
Gas/Oil/Coal
New Orders
Prices
Exports
Stock Market
AutoX
PaperX
Banks
Housing
Company L to US Industrial Production12/12 Rates-of-Change
80
85
90
95
100
105
110
115
120
'94 '96 '98 '00 '02 '04 '06 '08 '10
Sales
88
91
94
97
100
103
106
109
112US IP
Sales
US Production
It is not all bad news...
Nonresidential ConstructionNonresidential Construction Exports Exports Service Sector (Health care, Wealth Management, Private Service Sector (Health care, Wealth Management, Private
Education…)Education…) CommoditiesCommodities Energy & AlternativesEnergy & Alternatives Food (People & Pets)Food (People & Pets) Used Machinery and EquipmentUsed Machinery and Equipment Medical Products & Pharmaceuticals Medical Products & Pharmaceuticals Security (Military & domestic)Security (Military & domestic) Civilian/Commercial AircraftCivilian/Commercial Aircraft Consumer Goods Consumer Goods
(Office Supplies, Beer/Wine, Nonprescription meds, games, toys, (Office Supplies, Beer/Wine, Nonprescription meds, games, toys, sports/wellness, tires, ...)sports/wellness, tires, ...)
11
US Industrial Production to Non-Residential ConstructionData Trends
35
50
65
80
95
110
125
140
1975 1980 1985 1990 1995 2000 2005 2010
Index
50
100
150
200
250
300
350
400Construction
Index
Construction
Growth slowing through 2008 into mid ‘09
Office Building Construction (+12.9%)
Commercial Building Construction (+9.8%)
Industrial Building Construction (+37.1%)
Public Projects (Schools) (+10.5%)
Casinos – Resorts - Lodging (+45.5%)
Airport Terminals (+43.5%)
Hospitals – Medical Facilities (15.7%)
College and Universities, Tech Schools (+16.5%)
Health Care Facilities (+13.2%)
Decelerating growth in 2009
2010 a challenging year
-50
0
50
100
150
200
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
R-O-C
0
3
6
9
12
15MMT
143.5
6.260
141.7
Airport Passenger Terminals Construction
12MMT3MMT
12/121/12
Industrial Construction SpendingBillions of $
60
80
100
120
140
160
'96 '98 '00 '02 '04 '06 '08 '10
R-O-C
40
70
100
130
160
190
MMT
137.1
115.900
141.3
Jul '06
Apr '06
Oct '04
Jan '0412MMA 3MMA
3/12
12/12
Source: ITR’s EcoTrends®
Monthly Economic Report
Forecast
2008 24.4%
Power Sector +37.7%
Manufacturing +32.0%
Office Buildings ConstructionBillions of Dollars
0
20
40
60
80
100
120
140
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
10
25
40
55
70
85
100
115MMT
112.9
$57.167
112.5Apr '06
Jun '01
Apr '07
Nov '0312MMT
3MMT
1/12 12/12
Forecast
2008 6.9%
2009 3.2%
Private Lodging ConstructionBillions of Dollars
-50
-20
10
40
70
100
130
160
190
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
3
10
17
24
31
38
45
52
59MMT
145.5
34.569
133.6
Jan '06
May '05
May '05
Dec '0312MMT
3MMT
3/12
12/12
Positive through 2009
Beware of the overbuild…
Commercial Buildings ConstructionBillions of $
40
55
70
85
100
115
130
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
30
50
70
90
110
130
150MMT
Jan '07
Jul '01
Sep '06
$86.687
109.8
98.8
May '03
12MMT
3MMT
3/12
12/12
Source: ITR’s EcoTrends®
Monthly Economic Report
Forecast
2008 3.9%
2009 5.5%
US Industrial Production Index to Multi-Retail Buildings Construction12/12 Rates-of-Change
84
92
100
108
116
124
132
140
'96 '98 '00 '02 '04 '06 '08 '10
Construction
94
97
100
103
106
109
112
115US IP
Buildings Construction
US IP
Projected 6,800 store closings in 2008
RSales were 3.5%
RSales 0.1%
Private Educational Buildings Construction12/12 Rates-of-Change
20
40
60
80
100
120
140
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
10
35
60
85
110
135
160MMT
110.5
83.081
107.0
Mar '06
Sep '05
Apr '03
Dec '02
12MMT
3MMT
3/12
12/12
Total State & Local Government ConstructionBillions of Dollars
40
55
70
85
100
115
130
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
R-O-C
80
140
200
260
320
380
440MMT
109.8
276.607
106.0
12MMT
3MMT
3/1212/12
Diminishing through 2010, likely 2011
Fed. Government Cash Account to US Industrial Production IndexData Trends
-40
-20
0
20
40
60
80
100
120
140
160
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Index
-360
-270
-180
-90
0
90
180
270
360
450
540Cash
Index - Annual Average
Cash - Bils. Of $ Monthly
85
88
91
94
97
100
103
106
109
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
MMT
100.1
98.6
$1.859
Jun '04
Apr '05
Retail Sales Excluding AutomobilesAdjusted for Inflation
Trillions of 82-84$
12MMT3MMT
3/1212/12
Rates of Change
RevenuesForecast
Actual 2007 2.2%
2008 - 0.9%
2009 3..0%
Source: ITR’s EcoTrends®
Monthly Economic Report
Computers, clothing, furniture, personal care
25
40
55
70
85
100
115
130
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
0.7
1.2
1.7
2.2
2.7
3.2
3.7
4.2
MMT
70.969.4
1.055
Mar '06
Dec '05
May '05
Mar '01
Housing StartsMillions of Units
12MMT
3MMT
3/12
12/12
Slower rate of decline through 2009
Source: ITR’s EcoTrends®
Monthly Economic Report
Forecast
2008 - 23.7%
2009 - 15.0%
Producer Price Index1982 = 100
85
90
95
100
105
110
'94 '96 '98 '00 '02 '04 '06 '08 '10
R-O-C
120
150
180
210
240
270
MMA
109.5
175.2
107.3
Sep '01
Jan '06
Sep '02
Aug '07
3MMA12MMA
3/12
12/12
US Industrial Production to Construction Steel Production Index 12/12 Rates-of-Change
60
70
80
90
100
110
120
130
140
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10
Steel
88
91
94
97
100
103
106
109
112US IP
Construction Steel
US IP
Aluminum Base Scrap Producer Price Index to Steel Scrap Producer Price Index to
Nickel Commodity Prices to Copper Futures Prices12/12 Rates-of -Change
50
75
100
125
150
175
200
225
250
'96 '98 '00 '02 '04 '06 '08 '10
50
75
100
125
150
175
200
225
250
Aluminum
Nickel
Copper
Steel
26
Glass Producers Price Index to Windows Producers Price Index12/12 Rates-of-Change
96
98
100
102
104
106
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10
Glass
96
98
100
102
104
106Windows
Glass Index
Windows Index
27
Going Forward…
Make the most of the LAG TIMEMake the most of the LAG TIME Maintain a Strong Cash positionMaintain a Strong Cash position Avoid unwarranted optimism for 2010Avoid unwarranted optimism for 2010 Diversify – where you can be effectiveDiversify – where you can be effective Have a plan to deal with the recessionHave a plan to deal with the recession Look for strategic acquisitions to gain Look for strategic acquisitions to gain
market sharemarket share
28
GDP, Bils of US $, Current Prices
Percent of World GDP
2.7%
3.9%
4.7%
5.2%
6.1% 6.1%
8.1%
25.8%
1.7% 1.7% 2.0%
1.8%
2.3%2.4%
2.6%
United States
Japan
Ger
man
y
Chi
na
United KingdomFrance
Italy
Spain
Canada
Brazil
Russia
India
Korea
Au
straliaM
exico
29
“It is always the adventurers who do great things, not the sovereigns of great empires”
- Charles De Montesquieu
1. Bear Stearns purchase orchestrated $ 30 billion2. Term Auction Facility $150 billion on Fed balance sheet3. Direct swaps with investment banks $105 billion in Primary Dealer Credit Facility on Fed balance sheet as of Wednesday 4. Freddie Mac & Fannie Mae GAO estimates $5 billion authorized up
to $25 billion5. Housing Bailout $300 billion6. AIG $ 85 billion7. Detroit (Big Three) $ 25 billion8. Banking bailout (if it happens) $700 billion on latest news9. Lehman Cost $ 87 billion (to JP Morgan to facilitate bankruptcy) 10. ABCP (mutual fund bailout reserves) $ 180+ billion on Fed balance sheet11, California asking for “loan” $ 7 billion12. Foreign subprime losses covered $ unknown____________________________________________________________________________
Total $1,509 Trillion and counting… Debt ceiling in the US has been raised to $11.3 trillion because of all this,
which is about 78.0% of GDP. #17 in the world, up from #27. Canada 68.5% France 64.0% Germany 63.1%
US Industrial Production to Corporate Profits - Financial Industries12/12 Rates-of-Change
94
97
100
103
106
109
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
US IP
76
88
100
112
124
136Profits
US IP
Profits
US Industrial Production to Gross Domestic Product3/12 Rates-of-Change (Quarterly year-over-year % change)
90
95
100
105
110
115
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10
90
95
100
105
110
115
GDP
US IP
Weak Dec – Sept Retail Sales2/3rds of Americans believe we are in a recession
60% of US economists surveyed by USA Today say we are too
Consumer & Housing Stimulus Packages $464B
Fannie Mae & Freddie Mac now in conservatorship 9/8
Inflation (5.4%) highest since early 1980sUnemployment at 6.1% and rising….Global Equity Losses estimated $1.5T to 2T
S&P 500 officially enters a bear market in July
DOW down 7% last week
Government bailout $700B and counting…
GDP 2.8% 2Q08
Not YET an official recession..
This is...
Lehman Bros. largest bankruptcy in US history
AND Merrill Lynch bought by BofA, plus AIG, JP Morgan, Morgan Stanley… sand others who shall remain nameless - for now…
Government promises and guarantees are at $1.5B and counting…
Commercial & Industrial Loans at Commercial BanksRates-of-Change
90
95
100
105
110
115
120
125
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10
90
95
100
105
110
115
120
125
3/12
12/12
Summary Global view: “North America” is in trouble; Europe’s
growth is slowing. Japan is as well. Other global economies (BRIC) are showing signs of weakening and expected to follow this downward slope in 2009.
Prolonged cyclical event, projected to extend 2010
Caution against linear projections. Maintain a strong cash position. Avoid large capital expenditures that do not translate into market share gains.
Another word for Recession…
