In 2009 the U.S. Department of energy estimated that natural gas accounted for only 25% of the nation's energy, versus petroleum's almost 37%.

The negativists see 8% unemployment, home foreclosures, Spain in free-fall, a Socialist winning in France, an Obama second term, and $4 gasoline. Plenty to moan about, but U.S. machining companies see an economic honey pot. Why?

Autos (not so much pickups) are still selling despite gas prices. This indicates that car purchases are more related to economic optimism than the price of gas.

Why do we have $4 gas? It is not lack of supply that hurts, because we have a glut of oil in North America. It just isn’t in the right place at the moment. The East Coast refineries get oil from Venezuela, the Gulf, the Middle East, and some domestic. They adjust prices according to the Brent crude price, which is $20 higher than the Nymex price. The lack of pipeline capacity from the Canadian Tar Sands and North Dakota’s huge new fields cannot easily go East because we lack pipeline capacity. Supply now overwhelms capacity to transport to Houston’s big refineries. Add the slow move to natural gas as a transportation fuel. It will happen eventually, not now.

Iran is the other wild card. Gasoline demand in the U.S. fell 7% last year, an enormous drop, but prices were bid up because of the fear of an interruption from the Mideast. Ironically, Iranian oil is not that important in itself. It’s the “what if” that pushes the futures market. A wounded or empowered Iran might move on the Saudi fields, which would make a mess.

But business in the U.S. is still humming and the immense new supply of natural gas makes for an interesting cross current. Cheap natural gas is killing coal as power plants switch over. The railroads, which carry so much Montana coal to the East and Midwest, are short of cargo now.

But chemical companies are in expansion mode because cheap natural gas feed stock from America means big profits for a long time. They are already lobbying against the export of gas as LNG (liquid natural gas) to China or elsewhere for fear it would raise the domestic price of natural gas.

I see several opportunities for machining firms from this situation. The conversion to natural gas for transportation will happen over the next five years, especially for trucks – big new market. New chemical plants and natural gas turbines mean a lot of fab and machining here. Stainless steel fittings and valves will be in demand.

We are also in the midst of a big replacement cycle for airplanes, and gas guzzling old cars. Add in China’s loss of advantage because of high energy costs and rising wages, and India’s inability to compete in world manufacturing, and you can see why American industrial firms like GE and Caterpillar are expanding in the United States now.

It’s a good time to be in manufacturing here. It’s about time.

Question: At what price point for gasoline would you change your driving habits or vehicle?

Mark Zuckerberg and Kevin Systrom

There has been a lot of hand wringing in the press about Facebook’s deal to buy the Bay Area startup Instagram for $1 billion, almost what the New York Times Company is valued at. Mark Zuckerberg, founder and still principal owner of Facebook, negotiated the deal with Kevin Systrom of Instagram, which has 13 employees and zero revenue. People are sniping at Zuckerberg because he did the deal over a weekend without informing his Board of Directors. But in the fast moving world of social media he saw a strategic threat to his $100 billion dollar enterprise, because his users wanted to move photos easily on smartphones, and he had a clunky application to do it.

Systrom of Instagram, who owns 45% of his company, knew he had a piece that Zuckerberg coveted, even if he was a speck. The two guys knew each other from Palo Alto networking. The entire deal was negotiated in Zuckerberg’s refurbished old house, very much the way Steve Jobs once did it at his home. Systrom supposedly said that his company was worth 2% of the value of Facebook. He ultimately settled for 1%, or $1 billion for his “revenue-less” company.

I find the story absolutely compelling on several fronts. Zuckerberg understood the potential threat of Systrom selling to rival Google or doing what he had done himself, going it alone. Systrom had strong venture capital partners behind him, so Zuckerberg knew he could not intimidate him. Before Facebook goes public he can still run the company like a private business, even with a billion dollar deal, and he can thumb his nose at the investment bankers and feel secure. Zuckerberg must be both enormously cocky and a little paranoid to pay such a sum to a startup begun in 2010.

This kid Zuckerberg is remarkable to have learned so many lessons about business on the fly. And he knows enough to know what he doesn’t know and pay what it costs to fill the gaps at Facebook.

Question: Would you vote for Romney, even if he has no discernible “core beliefs” other than desperately wanting to be President?

What is all this stuff worth?

The education of my son Noah in the used machinery business has been progressing for nine months. This is a report from his boss, which is complicated because he is also his father. Next week you’ll hear from Noah about his view of the process.

To an outsider, buying and selling used machinery may seem simple: buy low, sell high. The reality is that it is one of the most demanding intellectual challenges I have ever encountered. Valuing dirty, broken, flawed, obsolete iron and convincing a potential buyer they are getting fair value is so difficult. The iron is generally an illiquid asset. Noah’s job is to liquefy the illiquid, but to do that he has had to learn why people still buy screw machines that most people, even those in the trade, think are weighty anchors.

He has educated himself by talking to people in the field at meetings, one on ones in their factories, watching videos, and especially by listening to Rex Magagnotti, Graff-Pinkert’s go-to guy on screw machinology. Rex has even taught him how to measure the slop on an Acme end tool slide with a dial indicator, a skill that my brother Jim and I never learned. He’s picked up the lingo, if not the context of machining terms. He has the knowing smile even if he’s bluffing a bit, and he’s been very willing to ask the vital dumb question.

There’s no such thing as mastery in this business. The secret is refining your guesses. Noah is constantly probing me, Rex and my brother Jim on values. He asks why a machine is worth X or Y and we say, “because that’s what we think it’s worth.” And then he says “why” again and the concentric circles of guessing provokes yet another annoying “why.” The repetitive “why” imparts rigor into our discussions, but eventually it becomes vexing and then infuriating. When there is no “right” answer, punting often becomes the answer and the indecision becomes a de facto decision. I think that for young people a “no decision” is hard to accept. Often I recommend to defer until more information filters in. Procrastination on a decision, if it is made with intent to eventually decide a tough question rather than just duck, can be positive.

This is the Jerry Reinsdorf approach. Reinsdorf is the principal owner of the Chicago White Sox and Chicago Bulls. He told me that the secret of his success was procrastination, which he defined as waiting long enough to allow proper decisions to become clear.

One lesson I’ve been trying to teach Noah, and relearn myself, is to “know enough to know what you don’t know.” In business we need to avoid the dummies who don’t know what they don’t know – or to take advantage of their hubris.

My brother Jim and I constantly debate the virtues of playing for the long ball or settling for singles. Noah listens to the arguments and tests me on my positions. When I’m not swinging for the fences I tell him the importance of consistent cash flow. When I move towards Jim’s “always make a deal” posture, as I often do, Noah winces. I know how easy it is for deals to fall apart so I often urge him to make the deal when it is within reach.

I find that the sheer quantity of detail, which fills in the texture of a deal can be confusing, even overwhelming for Noah. The business demands a huge cumulative memory for detail to go with an array of relationships to call upon. He cannot manufacture these elements. They come from observations, immersion, and hard work. I want him to achieve mastery in a year when it has taken me 40 to learn so little myself. But Noah made a sale today, of a 1” Wickman screw machine, mostly by himself. It’s coming together. I’m grateful.

Question: How long did it take before you thought you knew what you were doing in your job?