Category Archives: Finance

Botox Matters to the Machining World

One of the best early indicators of the American economy may be breast implants, tummy tucks and LASIK procedures. According to the December 8th Wall Street Journal, cosmetic surgery is a dead-on indicator of consumer confidence. Confidence is not a perfect match for consumer behavior, but uninsured cosmetic procedures are expensive, put off-able acts like car buying and condo shopping.

The Journal tells us that breast building is soft, and the fat has been sucked out of the liposuction racket for the moment, so we can expect the stock market to droop.

Cutera, the Brisbane, California laser maker, says that their earnings picture has darkened like liver spots, which may translate into weaker house remodeling sales and affect our world adversely.

Never underestimate the importance of Botox. It’s one more wrinkle in understanding the path of the machining world.

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The China Syndrome

Two decades ago, a cashmere sweater was a soft symbol of wealth and status warn by pipe smoking duffers at the club. Eventually women also wanted to wear the wool from the shaggy goat. The boosted demand beyond the capability of shepherds filled in the production shortfall.

But the sharp folk in Bentonville Arkansas who run Wal-Mart believed that cashmere was not the exclusive wool for the rich, and decided cashmere sweaters should be brought to the masses. It was the perfect Christmas present. They asked the disintermediating question, “Why not sell a $49 cashmere women’s sweater, or a $39 or even a $29 one?”

And the Shepherds in China and Mongolia heard them. A herder with 30 goats living in a tent soon had 300 grazing goats. He did what capitalists everywhere do – expand to meet the demand. And shepherds reaped the reward of Wal-Mart’s audacious bet on the desires of its customers to have buttery sweaters for $30 to $40. And soon the Asian shepherds had small homes and televisions and toilets and life was good.

Except 10 times more goats ate all the green grass, and the bigger herds needed to move to greener pastures. The old land turned to dust and the wind blew. Huge clouds of dirt miles long and wide lifted off the ground, browning the local air and ultimately circling the earth. The shepherds had to leave their newly built homes to search for new grass, and China and the world was a dirtier grittier place. But Wal-Mart got their cheaper wool, and you and I got our comfy cardigans.

The net gain for the Chinese economy was real in this case. New sweater factories were built. Girls got jobs at the sewing machines after fleeing the poverty of rural China. The sewing machine firms sold product and the machine guys sold them components for bobbins and stitches. The shepherds tasted prosperity and the goats found more company. But the gains were diminished by the communal degradation of the air pollution. That is not in the Chinese growth statistics, but the people  on the ground know it’s real. This is the yin and yang of “Wild East” growth. Eventually the Chinese people will not take it anymore.

By the numbers, growth will slow and the markets will no longer fawn over the Chinese stocks. The Olympics will come and go. Wal-Mart will still sell cashmere sweaters. I don’t know if they’ll cost more or less than they do today

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Gene Haas and Michael Vick — Tragedies of Character

Two young men still at the top of their games copped pleas on August 27, 2007. They will both be going to Federal Prison despite their fabulous wealth and instant name recognition. They gambled their freedom and careers with bizarre acts of recklessness abetted by cronies without the strength to say no to them.

Gene Haas, the unlikely billionaire of American machine tools, and Michael Vick, the quarterback who redefined the position in the NFL, both saw their freedom slip away when their associates flipped to the prosecution. Even the shrewdest legal talent money could buy couldn’t keep them out of jail.

Haas’ hubris led him to tax evasion to cheat the U.S. treasury out of millions of dollars because he thought he was wronged on a patent dispute. Vick electrocuted pit bulls which he had gambled on and buried the bodies on his land.

Haas and Vick were both single men who defied the conventional wisdom of their games. Haas told the world he would build a vertical machining center in L.A., sell it for less than the Japanese builders, cut the price year after year and service it like the Maytag repairman.

Vick said the quarterback was a running back who scored points with his feet. He destroyed defenses built to thwart skilled white boys who played the vertical passing game.

Haas and Vick are iconoclasts in their respective worlds. They broke the defining rules of their peers and they were vilified by the established players. Both guys loved to stick it to the reigning authorities who mocked their unorthodoxies and said they had to fail because they were different and too difficult.

Maybe when you keep showing up everybody else in your field, make huge money, and travel the country in private jets, you think that society’s rules are for the little people. You’re going to do what you’re going to do, and you’re untouchable. It’s so Macbeth.

But in America, Presidents get impeached, and billionaires do go to jail, and quarterbacks plead. The judicial system is still painfully stacked towards the rich and famous, yet on August 27, two of our richest and most famous men conceded their freedom at federal court houses. Haas and Vick — two four letter words synonymous with greatness — and utter stupidity.

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