The scuttlebutt in the machinery business is that the Branford Group and partners made a bundle on the Bronson Products auction a week ago. It had been a hotly contested bid by several auction groups to buy the machinery and tooling and accessories. Branford and partners allegedly had about $9 million in the deal. Knowledgeable observers think they did extremely well on the deal with the aggressive bidding and buyers premium. How did the competition miss the upside on a deal like that?
My sources tell me that a Korean buyer had been interested in buying the package but was not interested in everything, so he passed on the deal. Later he leased the building, took on several contracts, and became a super aggressive bidder for key pieces in the auction. With big machines like Kuraki boring mills already in place he virtually had to buy many of the pivotal pieces in the auctions. It was a deal made in heaven for Branford and partners.
While prices at Bronson Products went high, generally auction prices and machinery prices have softened. With IMTS coming up, buyers with money may be waiting for advantageous pricing just before or at the show. Machine tool builders and their distributors are cutting prices with the strong dollar and weak market. The oil and gas price softening has proven to be a disaster for the machine tool market, new and used. We are seeing it in weak prices all over.
While oil and gas and mining does not comprise a large percentage of the total machinery market, it has been enough to tip machine tool prices into a steep downturn. It appears that today’s rebound to $50 oil is not robust enough to change the pessimism in the oil patch. Tesla and Nissan may still be struggling to move the needle with their electric cars, but the market makers on oil prices are still holding the market at near $50.
It is fascinating to watch the tug of war in the financial markets. The Templeton Funds, a major player out of California, are buying oil stocks like crazy. They believe that $50 oil cannot hold and the market could retrace it’s steps back to $100. Maybe they are right, but I doubt it. With Iran back in the market, the Russians desperate for cash, and the American frackers hot to get back on track, I think we will be in the $40-$55 range for years, and then trend lower.
But $50 oil is the consensus now and the consensus is often wrong, as it has been on interest rates this year, when all the “smart people” were sure we were headed much higher with Fed tightening. Today the 10-year U.S. Treasury is around 1.50%.
The consensus view was also quite wrong on the Bronson Products auction.
The summer solstice combining with a full moon is a rare occurrence in the northern hemisphere. So is a Brexit vote to break up the European Union and the Russian track team being banished from the Olympics. And Donald Trump is running against Hillary Clinton? Strange time.
I am struggling to be optimistic. It is an up-hill battle.
Politically, I see an epic debacle for the Republican Party. It is hard to see Trump winning more than a few states — Alabama, Mississippi, and West Virginia, probably. There just are not enough angry white guys to tip most states.
The only way I can envision the Republicans winning the White House in 2016 is if Trump dies, becomes incapacitated, or quits the race. They are all possible but remote happenings. I envision a last ditch effort to persuade the Donald to quit if his numbers indicate a 35-40% Trump vote, which would be enormously humiliating for him especially if he brought down the Republican majorities in the House and Senate and enabled Hillary Clinton to have several Supreme Court picks who could be confirmed. The potential upheaval in the High Court could put enormous social media pressure on Trump to step aside for his vice presidential pick to save the party and even win the race.
This could all happen very quickly but probably not before the Convention. Trump wants his coronation. After all, he did win the nomination. May he not pick Newt Gingrich for his Vice President.
Question: Would you like to vacation in England?