Is the economic tornado blowing over?

By Lloyd Graff,

At least three times per summer we hear the sirens blare, signaling the possibility of a tornado in our vicinity. We take cover in the basement or the safest corner and wait for it to pass over. We listen for the “all clear” signal and the absence of thunder.

For the machining industry, particularly in the Midwest, the tornado sirens keep shrieking and the all clear has yet to sound. Since September a lousy recession has become a depression worthy event for anybody who cuts or bends metal. The only hiding places have been in guns which are going nuts as people fret about an Obama weapons law, and medical which has held up partly because people shoot at each other occasionally. The big winner is still orthopedic implants which save the bodies of aging baby boomers.

The stock market has been signaling that the financial system is stabilizing. Houses are selling with the huge price drops and the inducements of low interest mortgages and assorted subsidies. The stimulus package, though diluted by transfer payment funding is going to kick in soon. The Fed has poured liquidity into the banking system and the corporate bond market has strengthened. Inventories are paltry in the bins and semiconductors, the guts of electronic tools are making a comeback.

It appears that the economy is beginning to get its legs back. Auction prices are in the toilet. Much of the equipment that goes to sale does not meet the reserves which ultimately depresses prices further. It seems like it cannot get worse and then it keeps getting worse in machining. We probably will get no clear bottoming signal. Some very sharp economists who know our world are predicting an uptown—next March.

Hang in there. Unfortunately I have no economic Doppler radar. It will get better, but we won’t hear any “all clear” horns go off.

Question: Do you think the tornado will ease up soon?

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3 thoughts on “Is the economic tornado blowing over?

  1. Steven Horn

    Until the economic tornado is dealt with it will continue to grow. Those politicians that are not taking responsibility are feeding the storm with the extremely lose money. We have to allow those companies & banks that are bad to die (GM, Citibank). Until the day of reckoning comes for those banks & companies that placed the bad bets the storm will continue to grow. The real problem is President (Goodwrench) and the current congress would rather appease those that don’t work than to work with business to get the economy going. The more money they pump into the system the worse the storm will become.

     
  2. Bryan Willman

    Something close to what Steven Horn said, but more about systemic rather than political effects.

    The housing bubble created fictional value on various household and corporate and govt balance sheets. People and institiutions thought they were richer than in some sense they really were.

    So tell me when the rate of non-performing loans on houses, cars, etc. stops growing, and I’ll tell you when the down slide is mostly over. Tell me when the rates return to sort of normal, and I’ll tell you when the upturn will soon begin. I think real estate in my market (Seattle metro) has quite a ways to go….

    See Richard Koo’s talk:
    http://8.7.97.206/090326_koo.wvx

    I don’t know that he has the “whole story” but some broader phenomenon related to what he describes is going on. Stimulus may “blunt the pain” – but the hangover has to clear the bloodstream before the headache ends.

     

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