Transcript www.glassbuildamerica.com

October 2008
Presented By:
Institute for Trend Research
Dr. Jeff Dietrich
[email protected]
www.ecotrends.org
Does this sound familiar?

“As we know, there are known knowns;
there are things we know we know. We
also know that there are known unknowns;
that is to say there are some things we do
not know. But there also unknown
unknowns – which are the things we don’t
know we don’t know.”
“Nothing made any sense and neither did everything else.”
Joseph Heller, Catch 22.
Concerns about the Bailout
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Rush to Judgment…
Who? How? When? Where? and What?
Americans assume this will “avert recession”
Precedent setting “commitment”
Unintended consequences (taxes, local banks)
Asset values still unknown
Government raises the debt ceiling to $11.3T
Accountability for “Congress”? (Fox in hen house)
Economic Stabilization Act
•
•
•
•
Restore stability to America’s financial system
Restore lending by financial institutions
Avoid outright panic
Avoid massive foreclosures and avert a steeper
recession/depression.
• Could end up a net plus for the “taxpayer”
• Regulation on future predatory lending practices
US Industrial Production Index
Forecast Through December 2011
Annual Average Index
130
Tipping Points- Hard Landing – 2009-2010
130
Here today
Debt (s)
120
120
Interest Rates
110
110
Inflation
Liquidity/Credit “Crunch”
100
100
China
90
90
2006 3.2% Actual
Elections (Stimulus)
80
2007 1.9% Actual
Oil
70
60
80
Forecast (Median)
Housing & Home Prices
2008 0.6%
Unemployment
2009 -2.9%
70
60
Massive Gov’t Intervention
50
50
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
Source: ITR’s EcoTrends®
Monthly Economic Report
Global Industrial Production Indices
12/12 Rates-of-Change
112
112
108
107.2
106.6
102.5
102.2
101.8
101.4
104
108
- SE Asia
- S. America
- Europe
- Japan
- Mexico
- US
104
100
100
The future is your decision. Learn from the
mistakes of others. Take action this year and
next to avert a “recession” in your company.
96
92
96
92
88
88
'00
'02
'04
'06
'08
'10
'12
Source: ITR’s EcoTrends®
Monthly Economic Report
BRIC Industrial Production Indices
12/12 Rates-of-Change
120
120
116.6 - China
116
116
112
112
108
108
107.2 - India
106.8 - Brazil
106.0 - Russia
104
100
104
100
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).
96
96
92
92
'00
'02
'04
'06
'08
'10
Four Phases
12/12 Rate of Change (y-o-y)
Nonresidential
Expansion
Construction
Gas/Oil/Coal
AircraftX
New Orders
FoodX
Prices
B
Exports
C
Retail Sales
B
C
Industrial Production
Zero Percent Growth
Stock Market
A
AutoX D
A
D
PaperX
Banks
Housing
Bankrupt
Phase
Phase
A Phase
A
A Phase B Phase A
B Phase C PhasePhase
B Phase
C D
Company L to US Industrial Production
12/12 Rates-of-Change
Sales
120
US IP
112
115
109
110
106
105
103
100
100
95
97
90
94
Sales
85
91
US Production
80
88
'94
'96
'98
'00
'02
'04
'06
'08
'10
It is not all bad news...
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Nonresidential Construction
Exports
Service Sector (Health care, Wealth Management, Private
Education…)
Commodities
Energy & Alternatives
Food (People & Pets)
Used Machinery and Equipment
Medical Products & Pharmaceuticals
Security (Military & domestic)
Civilian/Commercial Aircraft
Consumer Goods

(Office Supplies, Beer/Wine, Nonprescription meds, games, toys,
sports/wellness, tires, ...)
11
US Industrial Production to Non-Residential Construction
Data Trends
Index
140
Growth slowing through 2008 into mid ‘09
Construction
400
Office Building Construction (+12.9%)
Commercial Building Construction (+9.8%)
125
Decelerating growth in 2009
Industrial Building Construction (+37.1%)
350
2010 a challenging year
Public Projects (Schools) (+10.5%)
110
300
Casinos – Resorts - Lodging (+45.5%)
Airport Terminals (+43.5%)
95
Hospitals – Medical Facilities (15.7%)
250
College and Universities, Tech Schools (+16.5%)
80
Health Care Facilities (+13.2%)
200
65
150
50
Index
100
Construction
35
1975
50
1980
1985
1990
1995
2000
2005
2010
Airport Passenger Terminals Construction
R-O-C
200
MMT
15
1/12
12/12
150
12
143.5
141.7
100
9
6.260
50
6
12MMT
3MMT
0
3
-50
0
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
Industrial Construction Spending
Billions of $
R-O-C
160
Forecast
2008
MMT
190
Power Sector +37.7%
24.4%
Manufacturing +32.0%
141.3
137.1
140
3/12
160
12/12
Apr '06
120
130
115.900
Jul '06
100
100
12MMA
3MMA
Jan '04
80
70
Oct '04
60
40
'96
'98
'00
'02
'04
'06
'08
'10
Source: ITR’s EcoTrends®
Monthly Economic Report
Office Buildings Construction
Billions of Dollars
R-O-C
140
MMT
115
1/12
Apr '07
12/12
120
Apr '06
100
80
85
70
Forecast
2008 6.9%
60
100
112.9
112.5
Jun '01
$57.167
2009 3.2%
3MMT
40
40
12MMT
20
55
25
Nov '03
0
10
'94
'96
'98
'00
'02
'04
'06
'08
'10
Private Lodging Construction
Billions of Dollars
R-O-C
190
MMT
59
3/12
Positive through 2009
12/12
160
52
Beware of the overbuild…
130
145.5
133.6
May '05
45
100
38
Jan '06
34.569
70
31
40
24
3MMT
10
17
May '05
12MMT
-20
10
Dec '03
-50
3
'94
'96
'98
'00
'02
'04
'06
'08
'10
Commercial Buildings Construction
Billions of $
R-O-C
130
MMT
150
3/12
12/12
115
130
Sep '06
109.8
Jan '07
100
110
98.8
Forecast
85
2008 3.9%
2009 5.5%
$86.687
3MMT
Jul '01
70
90
70
12MMT
55
50
May '03
40
30
'94
'96
'98
'00
'02
'04
'06
'08
'10
Source: ITR’s EcoTrends®
Monthly Economic Report
US Industrial Production Index to Multi-Retail Buildings Construction
12/12 Rates-of-Change
Construction
140
US IP
115
132
112
Projected 6,800 store closings in 2008
124
109
RSales were 3.5%
116
106
108
RSales 0.1%
100
103
100
Buildings Construction
92
97
US IP
84
94
'96
'98
'00
'02
'04
'06
'08
'10
Private Educational Buildings Construction
12/12 Rates-of-Change
R-O-C
140
MMT
160
3/12
12/12
120
135
Mar '06
Sep '05
100
110.5
107.0
80
110
83.081
Dec '02
3MMT
60
85
60
12MMT
Apr '03
40
35
20
10
'94
'96
'98
'00
'02
'04
'06
'08
'10
Total State & Local Government Construction
Billions of Dollars
R-O-C
130
MMT
440
Diminishing through 2010, likely 2011
3/12
12/12
115
380
109.8
106.0
100
320
276.607
85
260
3MMT
70
200
12MMT
55
140
40
80
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
Fed. Government Cash Account to US Industrial Production Index
Data Trends
Index
160
Cash
540
140
450
120
360
100
270
80
180
60
90
40
0
20
-90
0
-20
-40
1960
Index - Annual Average
-180
Cash - Bils. Of $ Monthly
-270
-360
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Retail Sales Excluding Automobiles
Adjusted for Inflation
Trillions of 82-84$
R-O-C
MMT
Rates of Change
109
12/12
106
3.00
Jun '04
3/12
2.75
Apr '05
103
2.50
100.1
100
Forecast
97
94
Actual 2007
2.2%
2008
- 0.9%
2009
3..0%
Revenues
2.25
98.6
2.00
$1.859
1.75
3MMT
12MMT
91
1.50
Computers, clothing, furniture, personal care
88
1.25
85
1.00
'94
'96
'98
'00
'02
'04
'06
'08
'10
Source: ITR’s EcoTrends®
Monthly Economic Report
Housing Starts
Millions of Units
Forecast
R-O-C
130
4.2
2008 - 23.7%
3/12
2009 - 15.0%
12/12
115
MMT
3.7
Dec '05
100
3.2
May '05
85
2.7
Slower rate of decline through 2009
70
55
70.9
69.4
Mar '06
3MMT
2.2
12MMT
1.7
40
1.2
Mar '01
1.055
25
0.7
'94
'96
'98
'00
'02
'04
'06
'08
'10
Source: ITR’s EcoTrends®
Monthly Economic Report
Producer Price Index
1982 = 100
R-O-C
MMA
110
270
109.5
107.3
3/12
Jan '06
105
240
12/12
Aug '07
100
210
95
180
175.2
3MMA
90
12MMA
150
Sep '01
Sep '02
85
120
'94
'96
'98
'00
'02
'04
'06
'08
'10
US Industrial Production to Construction Steel Production Index
12/12 Rates-of-Change
Steel
140
US IP
112
130
109
120
106
110
103
100
100
90
97
80
94
Construction Steel
70
91
US IP
60
88
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
Aluminum Base Scrap Producer Price Index to
Steel Scrap Producer Price Index to
Nickel Commodity Prices to Copper Futures Prices
12/12 Rates-of -Change
250
250
Aluminum
225
225
Nickel
Copper
200
200
Steel
175
175
150
150
125
125
100
100
75
75
50
50
'96
'98
'00
'02
'04
'06
'08
'10
26
Glass Producers Price Index to Windows Producers Price Index
12/12 Rates-of-Change
Glass
106
Windows
106
104
104
102
102
100
100
98
98
Glass Index
Windows Index
96
96
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
27
Going Forward…
 Make
the most of the LAG TIME
 Maintain a Strong Cash position
 Avoid unwarranted optimism for 2010
 Diversify – where you can be effective
 Have a plan to deal with the recession
 Look for strategic acquisitions to gain
market share
28
GDP, Bils of US $, Current Prices
Percent of World GDP
2.0%
1.7%
1.8% 1.7%
2.3%
2.4%
25.8%
2.6%
United States
2.7%
3.9%
Italy
Japan
4.7%
5.2%
8.1%
6.1%
6.1%
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 billion
2. Term Auction Facility
$150 billion on Fed balance sheet
3. 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 billion
5. Housing Bailout
$300 billion
6. AIG
$ 85 billion
7. Detroit (Big Three)
$ 25 billion
8. Banking bailout (if it happens)
$700 billion on latest news
9. Lehman Cost
$ 87 billion
(to JP Morgan to facilitate bankruptcy)
10. ABCP (mutual fund bailout reserves)
$ 180+ billion on Fed balance sheet
11, California asking for “loan”
$ 7 billion
12. 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 Industries
12/12 Rates-of-Change
US IP
109
Profits
136
106
124
103
112
100
100
97
88
US IP
Profits
94
76
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
US Industrial Production to Gross Domestic Product
3/12 Rates-of-Change (Quarterly year-over-year % change)
115
115
S&P
500ofofficially
enters
a bear
market
July
Lehman
Bros.
largest
bankruptcy
in US
history
2/3rds
Americans
believe
we
are
in ain
recession
Unemployment
Consumer
&
Housing
at
6.1%
Stimulus
and
rising….
Packages
$464B
Inflation
(5.4%)
highest
since
early
1980s
Global
Weak
Equity
Dec
–
Sept
Losses
Retail
estimated
Sales
$1.5T
to
2T
ANDdown
Merrill
Lynch
bought
by BofA,and
plusguarantees
AIG, JP
Government
promises
aresay
at
DOW
7%
last
week
60%
of
US
economists
surveyed
by
USA
Today
Morgan,Mae
Morgan
Stanley… Mac
sand others
who
shall
Fannie
&and
Freddie
now in
conservatorship
9/8
$1.5B
counting…
weremain
are too
nameless
- for now…
Government
bailout
$700B and counting…
110
105
110
GDP 2.8% 2Q08
100
105
100
Not YET an official
recession..
GDP
95
95
This is...
US IP
90
90
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
Commercial & Industrial Loans at Commercial Banks
Rates-of-Change
125
125
120
120
115
115
110
110
105
105
100
100
3/12
12/12
95
95
90
90
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
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.
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Another word for Recession…