Afterthought: Go to the Basket

Today’s Machining World Archives November/December 2010 Volume 06 Issue 09

I’m writing this column two weeks before Thanksgiving. I think the business world has changed a lot in the past year, but many people are so focused on looking backwards that they may have missed it.

Business in the domestic manufacturing world has turned decisively better, yet we see a torrent of auctions because legal bureaucracy moves slowly. The two big Detroit auction houses, Hilco and Maynard’s, have been selling off the rationalized flotsam of GM, Ford and Chrysler. These are the forlorn assets of yesterday’s Detroit and they will continue to pour into the system into 2011.

Still, looking backwards we have the huge overflow of foreclosed and soon-to-be foreclosed residential property. The muddling legal process helps keep the backlog of homes trickling onto the market, which will keep house prices at the shrunken “new normal” for years.

I think we can ascribe 9.5 percent unemployment primarily to the housing bust. When you are building 500,000 new houses a year instead of two million, you need a lot fewer hammer swingers, plumbers and drywallers.

But focusing on the Detroit implosion and the real estate bust is the preoccupation of a negative and biased press. What I’m seeing today is the continuation of a significant upturn in business for machining firms. This coming New Year should be the best since 2007.

Why?

American manufacturing is lean and hungry coming off a horrible 2009 and a rebounding 2010. I see companies at a perfect fighting weight. Add in the weak dollar versus the euro and yen and big demand from China and India for American agriculture and industrial goods as well as services. Throw in nice tax breaks like the $500,000 expensing provision and accelerated depreciation through 2011. There is also the likelihood Obamacare will be revamped and there will be gridlock for new Democrat-pushed legislation, which gives you a balmy economic climate.

The big deflation scare has blown over with the aggressive monetary easing of a Bernanke led Federal Reserve Bank. Some doomsayers are looking for rollicking inflation to come, but I believe they are living in a 1970s view of the world. We will gear little price bump, but if you are in business you can adjust and enjoy it. Deflation is economic cholera and we appear to have dodged that plague, unless we are house heavy.

So what is the game plan for 2011? Put simply, “It’s time to play offense.” If last year’s message was “stay in the game” this year’s is “put up points.”

This is the year to expand, take risks, add good new people, take on inventory, gamble to bring in new clients, and export. We get windows in business and in life to score. You can’t win the lottery if you don’t buy a ticket.

Believe me, 2011 is the year to light up the scoreboard. Forget about looking backward. Go to the basket.

Lloyd Graff

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