Category Archives: Current Events

Swarfcast Ep. 56 – The Screw Machine Guy, Part 2

By Noah Graff

Today’s podcast is part 2 of an interview we did with Wes Szpondowski, plant manager at Wyandotte industries, a 60-year old screw machine shop in Wyandotte Michigan founded by his grandfather.

Wes talks about his aspirations to keep Wyandotte relevant for the next forty years. He also discusses the fatal traps a machining company can fall into if it’s not careful.

Scroll down to listen to the podcast.

Main Points of the Interview

(3:18) Wes discusses Wyandotte’s preferred quantities for jobs. He says the company’s sweet spot is 15,000 to 20,000 pieces, as opposed to million piece orders.

(4:08) Wes talks about Wyandotte’s automotive work. He says the company is Tier 2 or Tier 3. He says that American car companies always try to take every cent they can from suppliers, while Japanese automakers are less greedy and gravitate toward forming longterm partnerships.

(7:20) Wes says the shop has no plans to buy million dollar machines. It doesn’t have the work to justify those machines or the stomach for the risk. He says that the company can’t survive running mostly Acmes, not because of the inferiority of the machines but because it will be too difficult to get the next generation to work on them.

(10:10) Wes says he plans to buy LICO machines for Wyandotte. He says they are like Brown & Sharps that can do more sophisticated parts with a quick setup time. He said LICOs are much faster than typical CNC lathe and he thinks it’s a machine that young people would enjoy running. He thinks that $250,000 to $350,000 is a price range that is sensible for his company.

(17:40) Wes says he likes to examine the course of events that led machining companies to go out of business. He calls it “auction forensics.” He says people often repeat the same story—the grandkids ran the company into the ground and the company bought expensive equipment that did not pay off.  As a grandson of Wyandotte’s founder, Wes says the story gives him extra impetus to work hard and make responsible equipment decisions.

(21:52) Wes talks about his first job at Wyandotte. He had to work his way up from the bottom and was not even given a full-time shift to start. Some of his coworkers liked him, and others felt threatened by him.

(25:50) Wes gives his thoughts on whether or not he will have partial ownership of Wyandotte in the future. He says ownership is a possibility, but in any case, he is grateful for the privilege of working at the company for so long and being plant manager.

(27:00) Wes says he is able to relate to the company’s employees because he started from the bottom.

(28:10) Wes talks about his admiration for his uncle who owns Wyandotte. He respects that he is almost 80 years old and still comes to work everyday.

(30:30) Wes likes his role as plant as plant manager at the company. He sees himself working as plant manager for the foreseeable future because the company does not have a replacement with his skills both for working with the machines and with the employees.

Question: Do you think we’re headed for a recession?

Share this post

The Auction Deal

By Lloyd Graff

Today, I thought it was time to write something that I actually know something about.

Why are some of the big players in the machining business selling out or being auctioned off these days?

One of the biggest screw machine sales in years is coming up in November at Triumph Manufacturing in Tempe, Arizona, just outside of Phoenix. Triumph’s owner Chris Mueller went into business in the late 1960s after coming to America from Switzerland as a Tornos employee. Mueller built Triumph into a strong player in long run parts and has been running the company with his daughter in recent years. He has had many ups and downs over the years but always managed to survive because of his technical acumen and resourcefulness. He was on the verge of selling to numerous operating groups but never seemed to get a deal that worked for all parties.

A person who is familiar with Mueller and Triumph Manufacturing told me he thinks Mueller felt an American was probably incapable of running his many Swiss and German screw machines effectively. I have also heard that he preferred Hilco as an auction firm because he liked their prominence in Europe. I believe that Triumph would have sold for quite a bit more money several years ago, but Mueller always believed he would turn the company around—a trap many entrepreneurial owners fall into.

Finally, a few months ago, he made the decision to let go and allow the auction process to proceed. Competitors quickly grabbed all the major contracts. Auction groups formed almost overnight to bid on the project. I chose not to be involved in the bidding because I saw the market weakening in Europe for the Swiss and German machines. With a falling Euro, I did not have the stomach for the risk, but many others did.

From a screw machine dealer’s viewpoint the seventeen 20mm 8-spindle Tornos machines are the key element in the sale. If they go at retail prices the sale will be a triumph. If not, c’est la vie. I wish them well.

Questions:

Do you like buying at Auctions?

Do you feel you are a more disciplined buyer bidding online?

Share this post

Talking to Strangers

By Noah Graff

Not long ago our company made a deal to purchase a significant amount of machinery outside the United States. The deal seemed like a great opportunity, but we thought the sensible thing would be to visit the seller before making any purchase because he was someone who we had never met before.

I traveled a long way to meet him, and we spent several days together looking at machines. He brought his wife along with him for the whole trip. We had dinners together during which they told me about their children. His wife repeatedly acted like a concerned mother when she noticed my runny nose. They seemed like decent people, and they gave us a good price so we made a significant deposit on some machines. In the end, things did not go as planned. The company attempted to pocket the deposit and did not send any machines.

We felt dumb. We asked ourselves, how could we not have realized we were being conned?

I recently finished listening to Malcolm Gladwell’s new book, Talking to Strangers, which sheds some light on our experience. The thesis of Talking to Strangers is that the majority of people are incapable of judging the true character of others based solely on “getting to know” them. The book contains many powerful examples of people who seemed genuine but then turned out to be liars, along with other examples of people who seemed suspicious but turned out to be innocent.

Talking to Strangers - What We Should Know About The People We Don’t Know, by Malcolm Gladwell.Early in the book, Gladwell tells a story about multiple double agents in the CIA who spied for Cuba for many years before being uncovered. The agents who were supposed to be spying on Cuba were in actuality spies for Cuba! U.S. Intelligence agents who were supposed to have been “experts” on judging the honesty of other people were made to look like complete fools.

Gladwell discusses another example of flawed human character assessment in a passage about judges in New York whose job is to choose which suspects should be released on bail and who is too risky to let out of custody. Several elite computer scientists, a Harvard economist and a bail expert from the University of Chicago created a computer program to research the ability of the judges for discerning which suspects should be released. From 2008 to 2013 550,000 defendants were brought for arraignment to the group of New York judges, and the judges released just over 400,000.

The researchers built an artificial intelligence system and fed it the same information that had been given the judges in the 550,000 arraignment cases, mainly the defendant’s age and criminal record. The artificial intelligence system chose its own 400,000 defendants to be released over that time period to see which 400,000 releasees committed the fewest crimes on bail and made their trial date. The 400,000 released by the computer were 25% less likely to commit a crime than those chosen by the judges. The computer program only had the defendant’s age and rap sheet to make its judgment, while the judges also got to hear the arguments from the lawyers and look the defendants in the eye.

Gladwell also writes about Neville Chamberlain misjudging Hitler after meeting him several times. He writes about the people who misjudged Bernie Madoff and sex offenders such as Jerry Sandusky and Larry Nassar.

Gladwell says that the usual inclination of people is to “default to truth.” People want to trust other people because that trust is what makes society function. If the default opinion of a youth sports team coach is that they are a pedophile nobody would let their child play on a team, and nobody would take a job as a coach.

If my default opinion of every person selling machines is they are trying to cheat me, I will never be able to make any deals. Business must go on, and life goes on because I know most people are relatively honest. Going forward I will try to keep my guard up, and I won’t put as much stock into looking people in the eye.

Questions:

Do you trust most people you do business with?

Have you ever been conned?

Share this post

Baseball Hug

By Lloyd Graff

By the end of the phone conversation, we were both in tears. My daughter, Sarah, and I were lamenting the collapse of the Chicago Cubs again this year, right after they had blown their fifth game in a row in the last inning. It wasn’t the pain of the loss that caused the tears 2,000 miles apart during our cell phone hug. It was the raw emotion of the moment shared that epitomized thousands of moments of exultation and despair over a team that we both love.

This is the time of year Sarah and I talk sermons and baseball. She is a rabbi in the Bay Area, and her congregants know that somehow she will make a Cubs reference in her most listened to sermon of the year on Yom Kippur. For me, it is a treasured opportunity to reconnect with my first-born child, who I love deeply and respect so much.

How many of those ineffable shared moments do you get in a lifetime, when you both realize that there is just a finite number of those precious times left and you’d better grab and squeeze it like it’s a long fly ball that you have to leap for at the ivy in Wrigley Field and hold on to as you hit the bricks?

Sarah doesn’t know every batting average or the meaning of all of Javy Baez’s tattoos, or the kinds of cancers Jon Lester and Anthony Rizzo beat early in their Major League careers, like I do. But she has the love, the passion, and the hurting of a true fan.

Sarah’s husband, Scott, who I often text with during games, shares the whole Cubs thing with me, too. When Scott got back home last Sunday after attending a high school reunion in the suburbs of Chicago over the weekend, one of the first things he did was call me to commiserate over the implosion of our beloved Cubs to the hated Cardinals.

I love Scott as a person, as a husband for Sarah, and a wonderful father,  but as lifelong bleeding Cubbie blue fans, we have something very special that few in-laws have—that sharing of moments, the jumping for joy feeling that makes up for those terrible emotions of watching a walk-off homer for the opposition in the ninth inning.

When I read the morning sports page, I often wonder why I spend so much time on the Cubs. Why do I still feel like Ernie Banks is my first cousin? Why do I still think of the Chicago Cubs when I bring up the memory of my mother, Thais Graff?

It’s the moments. It’s the moments that turn memory into feeling tears. You don’t know when they will come, but when you experience them, picture them, place them in the frame of your life, they bring a special joy that punctuates the everyday hurly burly.

This season has been a disappointment for me and the Cubs. It has been a long, often sad journey, but it has given me so many marvelous moments to share with Sarah and Scott and my wife, Risa, who has become a fan in her 60s, and Noah, and my granddaughters.

When I experience one of those shared moments, when I feel welling tears of shared emotion that don’t require any words, I feel so grateful to have my Cubs.

Question: Do you bond with your family over sports?

Share this post

My Other Country

By Lloyd Graff

As I write this piece, Tuesday’s election in Israel is too close to call. Bibi Netanyahu and Benny Gantz are running neck-and-neck again. This is the second election because Netanyahu could not form a government after the first one in April, though he had a tiny majority of the seats in the 120-seat parliamentary free-for-all.

Why does this election mean a lot to me?

Israel is my country, almost as much as America is.

It was born when I was three, in 1948. Its wars were my wars. Much more than Vietnam, which was my war to fear and despise, Israel’s wars in 1948, 1956, 1967, and 1973 were the wars I felt in my bones. These wars were the wars where I prayed for victories. These were the wars that absolutely could not be lost, because that would have meant death to the heart and soul of the Jewish people.

I’m sure it is very hard for most people to understand how I feel about Israel – even for many younger Jews today

I am not a Holocaust survivor. I am not the child of a survivor, but I truly identify with their suffering. The passion of the survivors to build something great out of the ashes of their parents and relatives, as well as the passion of the children of the early settlers from Eastern Europe who did not come to America but lived the dream of making something wonderful out of the sand and dirt of the Holy Land, was a feeling I always connected with.

I have always been extremely emotional about Israel. I am sure I have mythologized it since I read Leon Uris’ book Exodus and watched Paul Newman in the movie. My wife and I named our first son Ari, the name of Newman’s character in the movie.

For most of my adult life my biggest charitable contributions have been to support Eretz Yisrael, the Hebrew name for Israel. I have only visited twice, but I think and dream about Israel often.

I am interested in the current election but not excited about it. From a practical standpoint, there is not that much to distinguish between the leaders, Netanyahu and Gantz, on the issues I care so deeply about, except that Gantz is allied with the secular parties.

They are both warriors who achieved their fame and importance through military service. Bibi Netanyahu spent part of his childhood in America and achieved a name partly from the valor of his brother who died on the Entebbe raid to free the Israelis whose plane was hijacked to Uganda.

Benny Gantz was a top general in the Israeli Defense Forces. They both stand for Israeli strength in the face of hundreds of millions of Arabs who hate the tiny Jewish Nation.

Netanyahu has the luster of presiding over the economic stardom of the country in recent years, as a cheerleader of “Startup Nation.” He has also been tarnished by pettiness, corruption, nasty politics, and unholy alliances with ultra-Orthodox religious parties.

Gantz and the opposition coalition have made the election about Bibi, just as the Democrats will make 2020 about Donald Trump, one of Netanyahu’s fans.

I have been listening lately to Steven Pressfield’s stunning book, The Lion’s Gate, about Israel and the 1967 six-day war against the Arabs led by Gamal Abdel Nasser.

Reading about the incredible valor and brilliance of 20-year-old Israel with 2.7 million people fighting alone for survival against the Russian-equipped armies of Egypt, Jordan, Syria, and Iraq is inspiring. I know Israel is not pure and unblemished. No country is. But I love it to my core. It is an integral part of my life. I really don’t care who wins the election as long as Israel always wins.

Question:  Does Israel mean something to you?

 

Share this post

Swarfcast Ep. 53 – Chris Manning on the Beauty of Bar Loaders

By Noah Graff

On today’s podcast we’re talking about bar loaders for multi-spindle screw machines. Our guest is Chris Manning. Chris has been installing and repairing integrated bar loaders around the world for 20 years, primarily Cucchi bar loaders. Integrated loaders, usually those made by Cucchi or IEMCA, replace the traditional stock reels on multi-spindles.

Scroll down to listen to the podcast.

Bar loaders may sound like a boring topic, but they are actually quite expensive and complex equipment. One integrated loader can enable a single machinist to run three machines at a time.

Main Points of the Interview

(3:10-8:05) Chris talks about his career path. He started as a chipper at a machine shop in Ohio in the ‘80s. Eventually he graduated to running and setting up cam multi-spindles. In the late ’90s he went to work at Gosiger, a machine tool distributor in Dayton, Ohio, where he sold Euroturn multi-spindles and Cucchi bar loaders. Later, he worked with Luca Lanzetta who took over distributing Cucchi. Since then he has worked for various other machine tool firms and started his own company Bar Loader Services.

(10:10-10:45) Chris explains that integrated loaders are best suited for long parts such as shafts and typically cost around $125,000.

(11:42-13:50) Chris discusses the mechanical process of integrated bar loaders. He says that if they are properly implemented in a shop, a Cucchi or IEMCA bar loader can enable one person to run three multi-spindles at a time.

(15:20) Chris explains the differences between Cucchi loaders and IEMCA loaders. He says the fingers on Cucchi loaders enable it to absorb vibration well and that they are far superior at running hex stock. He says he prefers IEMCA loaders for running very small diameters, 1/8” or smaller.

(20:10-21:30) Chris talks about the main technical problems he encounters in the field when bar loaders are poorly maintained.

(21:30-22:25) Chris speaks highly about the new MBL bar loaders produced by INDEX. He says they seem like a cross breed between IEMCA and Cucchi, taking the best characteristics of each.

(22:34) Chris says he is seeing more and more shops in the United States replacing multi-spindles with single spindle CNCs and CNC turning centers.

(26:45-29:05) Chris discusses the process of replacing a stock reel on a multi-spindle with an integrated loader. He says it is harder to replace a bar loader with a stock reel than to replace a stock reel with a bar loader.

Question: Do businesses need fewer people today?

Share this post

Trade War 7th Round

I keep trying to make sense out of the trade war with China. It isn’t easy. I use metaphors to describe the tariffs and the tit-for-tat jabbing of the two major powers. It is a bit like Ultimate Fighting Championship, but it is much more complicated. Donald Trump has an election battle coming up, and a booming economy is his biggest asset going into 2020. China’s Xi has no election, but he has Communist cronies who are not all fawning stooges.

Trump has immigration woes that he is trying to turn into a positive politically, but it isn’t working well.  Xi has Hong Kong mass demonstrations, which are now more than an annoyance to his regime. It is a problem that is a public relations horror and potentially could spark rebellion within China, despite its rigidly controlled press. Just like a million people leaving Central America desperately knocking on the door of a country built by immigrants is a problem without an easy solution here, the longing for freedom in Hong Kong ultimately overflowing into China is a problem that just won’t evaporate.

China under Xi wants to overwhelm the United States in every way other than a shooting war. Manipulating outdated trading norms developed by Kissinger and Clinton and maintained without a whimper by every administration since then out of convenience and laziness has served China beautifully as it has eviscerated American industry and workers in exchange for $5 t-shirts at Walmart and Target. The Obama Administration timidly objected to the Chinese trade bullying, but had no taste for a trade war which would have been rather uncomfortable and unpopular.

Pugnacious Donald Trump was looking for a fight. He seems to thrive on nonphysical, non-shooting warfare. Advisors convinced him that it was a winnable war if he played it right. Tariffs were his weapon of choice.

Tariffs probably hurt China a bit more than they hurt the United States because we buy a lot more from them than they buy from us, and if the farmers take a fist to the jaw, Trump and Congress can cushion the hurt with subsides. If t-shirts bump up $0.50, Walmart can eat a little bit and the richer American workers can absorb their annoyance with fatter paychecks. China can manipulate its currency to cheapen its goods and the Fed can manipulate interest rates to make mortgages cheaper.

This is why, after two years of trade war, the American economy is still quite good and China’s economy is still growing.

The mavens in the press here have exaggerated the impact of the tariffs, and some are trying to talk the country into a recession for political purposes. It is having an effect: capital spending is slowing, and big business bureaucrats are becoming fearful because they tend to be sheep. Machine tool sales are weakening. Japanese production of machine tools is soft.

Was Trump right in picking this fight with China? Short-term, politically, it was dumb. Since most politicians only think in terms of the next election, it was a stupid aberrant move in their eyes. He hurts his base in rural America. Any gain for American industry is far away and foggy.

Barack Obama saw the same things as Donald Trump, but was afraid of confrontation. Trump relishes confrontation, but appears to lack a coherent strategy. The Chinese want to outlast Trump and may succeed, but Xi may be in trouble at home amongst his enemies because Trump has not folded yet. Hong Kong is potentially very dangerous for the regime with the Chinese home economy softening, and China’s ambitious plans for a Belt and Road initiative to aid developing countries seeming to have faltered.

Trump’s Huawei gambit has given Xi a black eye, but the company evidently has some attractive 5G products at good prices, which will allow it to weather the storm.

Put it all together and the two fighters have fought a draw through six or seven rounds of a 15-round bout. China has not given in on intellectual property theft, and America keeps jabbing them with tariffs.

I do not see a knockout or surrender in the foreseeable future. The stock market will be a yo-yo. Big business will play defense. Growth in both countries will gasp a little, but keep on going.

Is the battle worth the trouble? The Chinese certainly think so. Do we?

Question: Where were you on September 11, 2001?

Share this post

Swarfcast Ep. 52 – Harry Eighmy of ATP on Running High Volume Work Successfully

By Noah Graff

On today’s podcast we discuss how to run a profitable high volume machining business. Our guest is Harry Eighmy, co-owner and C.O.O. of American Turned Products (ATP) in Erie, Pennsylvania.

Scroll down to listen to the podcast

Harry and his brother Scott believe it is important to invest heavily in high-end turning equipment such as INDEX multi-spindles and Hydromat rotary transfer machines for large volumes. They also make sure to balance their high volume work with smaller run jobs using CNC Swiss and turning centers, such as Tornos DECOs and INDEX C200s.

Main points of the interview

(3:03) Harry discusses American Turned Products’ focus on high volume machining, but also the company’s ability to machine smaller run prototype parts in order to win high volume jobs.

(5:05) Harry talks about the history of his family’s machining businesses, starting with a Brown & Sharp shop started by his grandfather around 1955. The family’s business evolved into a higher volume model using ACME-GRIDLEYs in 1970s.

(6:40) Harry says that the company doesn’t have a huge amount of customers, but it tries to do a variety of jobs for those it has. The company has no customer with more than 25% of its business.

(8:00-14:40) Harry talks about the Davenport shop in El Paso, Texas, his family started in 1990, which he ran for five years starting at age 26.

(16:30) Harry talks about his father, Jerry Eighmy, who had the foresight in the late ‘90s to sell off all of the company’s ACMEs. The company upgraded to all European multi-spindles, particularly Index CNC multi-spindles.

(23:00-26:00) Harry talks about ATP’s reliance on INDEX CNC multi-spindles and turning centers, Hydromat rotary transfer machines, and Tornos CNC Swiss. He says that to justify buying a $500,000 to $2 million machine a company has to run it at least 100 hours per week.

(31:00) Harry talks about the importance of having a vision for the company going forward. He says that the quality of people a company does business for is one of the most important factors for success.

Question: Is high volume production too risky these days?

Share this post

PTSD 11 Years Later

By Lloyd Graff

Of all the weeks in the year this is the one I dread the most.

I suffer from post-traumatic stress disorder which was triggered by my almost catastrophic heart attack that occurred 11 years ago this week.  It is also the week that my mother died suddenly in 1993.

I think about the heart attack every day of my life, wondering how I survived, why I survived, and when the final shoe might drop.  I don’t try to not think about it, because that only causes me to think about it even more.

The strange thing is that it wasn’t all that terrible for me when it happened, because most of the time I was drugged. I had collateral heart circulation developed over 25 years of dedicated running, so even though my most important heart artery was 99% blocked I could still function, if only in a painful and sickly way.  I had trouble breathing and thought I had pneumonia.  My wife, Risa, and I drove 55 minutes August 29, 2008, to see a friend who was an infectious disease doctor, and I walked into his office at the hospital while Risa parked.  He was treating a kid while I waited.  I remember him checking me out in the waiting area, putting a stethoscope on my chest, and saying Lloyd, I’m wheeling you to the emergency room myself.  I remember somebody yelling, “Can I cut his underwear off?” and then nothing.

Lloyd on a flatbed truck 11 years later

Then the nightmare really started for Risa and my children and many, many people who rushed to the St. Francis Hospital in Evanston to be with her.

Somehow by good fortune that morning a heart surgeon Dr. Muhammed Akbar was available to insert a stent into my blocked artery, known as the “widowmaker.”  When asked after the emergency surgery how he did it he simply pointed skyward, Risa recalls.  Without the longshot stent insertion I had virtually no chance of survival.  Bypass surgery at that point was almost certain to fail.  The hope was that I would gain strength over the Labor Day weekend, and they would do a quadruple bypass on Tuesday.

Risa and my children and sister slept in the waiting room for those four nights.  I mostly slept and got stronger.  I was unaware of what was happening.  I wasn’t worried, as best I can remember.  They suffered and waited but also had wonderful family togetherness moments.

I strengthened over the long weekend.  I was hooked into tubes and had a mask that prohibited me from speaking.

My family regaled me with songs for 45 minutes before the surgery.  I am sure it helped them and me, but I can’t remember the singing.  The only thing I think I can remember is that the Cubs were on the radio, and I heard the score was 9-6 just before I went into surgery, and they cracked my chest open.

The bypass surgery worked amazingly well.  Afterwards, the surgeon said I should be good for 20 years.  I’ve held on to that comment desperately for the past 11 years.

Now it’s 4017 days later, and I’m feeling pretty darn good.  But the event haunts me – every day.  It affects every big decision.  I think about it every time I plan a vacation or blow out birthday candles.  The memory still lingers of being wheeled into emergency surgery and not exactly being terrified, just being in shock and amazement and almost amused about being asked whether I cared if they cut my underwear off.

Will I ever forget that day, those crazy weird moments?  No, unless I lose my memory.

My PTSD is not horrible.  I live my life, often with great joy.  I am not depressed, most of the time.  But I am stuck with that memory tattoo of August 29, 2008.  The day I probably should have died, but didn’t.

Question: Do you have post-traumatic stress disorder?

Share this post

Condo or College?

For most of my life I have made my good living by buying and selling physical things.  My line of credit with my bank is still directly related to the financial institution’s belief in the value of inventory, machines, and cash on hand in relation to money owed to them.

This is the traditional bible of finance.  Our statistical yardsticks of wealth, both individually and as a country, are based on measurable, identifiable things.  But increasingly I am doubting a lot of these old rubrics which the college Economics texts are based on.

I am not the only one who is questioning the ancient axioms.

About a week ago I heard one of the chief decision makers at BlackRock, one of Wall Street’s largest money managers, announce that he and BlackRock have been wrong in predicting that interest rates and inflation had to go up because unemployment was at a record low and wages were rising.  He said the old playbook was wrong, and they were throwing it away.

The chief investment guru of PIMCO, who has had an awful time betting on higher interest rates, took the blame for his terrible year a couple of days ago, but he is staying with the strategy that placed him in the lowest 7% of money managers.  He bet on rising mortgage rates.

This is not an idle academic argument.  I think it is important for the machining world for several reasons.

The people in our world make stuff for people who want stuff.  We use machines and steel and oil.  We employ people and use physical space and ship goods to customers.

What if stuff, things, physically measurable items are gradually becoming less important each day?

Mortgage rates are dropping like a stone, currently, as the 10-year U.S. Treasury interest rate hovers around 1.5%.  Yet there is no rush by young people to buy homes or condos.  Renting is popular today, not buying.  One big reason for that is that young people have big college debts they are paying off monthly.  They have consciously, or unconsciously, made the deduction that education is more important to them than home ownership.  Whether this will prove to be a good or bad economic gamble, long term, is an unknown, but it is affecting the purchase of real estate, and I expect this trend to continue.

I think we are seeing the same choices in vehicles.  Young people are investing in day care and gym memberships and restaurants rather than a Harley or a convertible.  For city people, Uber, a bicycle, or the subway are limiting car buying.  This doesn’t mean that people are poorer today because they do not own a car.  They are making different choices.

People are also veering into different spending choices in food and vacations.  We are seeing more folks opt for restaurant food or delivered menus.  People are spending on travel experiences rather than buying a cabin at a lake in Northern Michigan or Wisconsin.

Warren Buffett recently admitted he made one of his worst mistakes by buying Heinz and its tired old brands.  Same with Kraft and Campbell’s.  Tired old brands are not selling.  Panera and plant-based meat are working.

I’ve been bouncing around in this article, but the theme running through it is that the bankers and investors who have followed the ancient rules are losing.  The manufacturers who have done well making parts for home faucets and sedans are beginning to fade.  Real value lies in intellectual capital, but it can also evaporate quickly.  The numbers that bounce the markets around like yo-yos are obsolete.  GDP does not measure air quality, creativity, or life expectancy.  Employment does not measure automation improvements.  The markets are volatile because people look at conflicting numbers.  And the numbers they look at are yesterday’s.

Question: Is college a better investment than a house?

Share this post