by Neil Chaundhry
Some say it’ll be 2011, some say “later this year”, while others have no idea. I say, the first quarter of 2010. Based on the fact that this will allow time for the financial system to recover, stimulus to kick-in and the new administration to figure out what they are doing. Based on that assumption, the markets will hit bottom the first quarter of 2009, a good 9
to 12 months ahead of the “end of the recession”,or so we hope!
We are in the midst of the worst global recession most of us have ever seen. Our biggest strength – our financial system – has become our biggest liability. It’s financial engineering GONE WILD! The Housing bubble burst leaving exposed the toxic sub-prime bundled instruments of the financial engineers. The investment banking industry has been wiped out for good. So, what does this mean for the investment casting industry or the casting industry in general? At buyCASTINGS, we believe that there are greater opportunities today than we have seen in the last two decades. The risks might appear high but the reward may be greater if one is willing to invest in the future, in innovation.
The United States is a great country that offers entrepreneurs the opportunity to succeed, create jobs and create wealth for owners, shareholders and employees. Free market capitalism works most of the time. Here is what’s wrong with our system that’s leading to a major upheaval in our today, in my humble opinion…
We have abandoned the industry that created the real wealth in this country for over a century – the manufacturing sector. Instead choosing to let the Far-East countries make the cheap products for us. We had also abandoned the alternative energy sector. Instead choosing to buy the ‘cheap oil’ from the middle-east countries. We lost mfg jobs, ran-up the deficit, and chose for the past three decades to focus on our Service Industry – the financial industry being the biggest one. All this has happened because our system encourages (actually it makes it necessary) for our corporations to go to where ever we can find the cheapest products, supplies, and commodities. Whether it’s China for cheap toys, Japan for the quality automobiles, India for low cost IT workers or Saudi Arabia for the cheap oil….All this is done
because the goal is to maximize shareholder value and in a Free Market Capital system, the corporations have to go where their costs are lowest to maximize profits…We DEPEND ON IT to compete, to survive, and to grow. Hence the biggest transfer of wealth - to the producing nations, like China and Saudi Arabia from the consuming nation, the United States.
How do we break out of this? The reason this has happened is SHORT TERM THINKING! Most of our corporations make decisions based on short term results. Government has to encourage longer term investment. The Government is partly to blame for our current addiction to oil AND for allowing manufacturers to move to China. If decisions were based on investing in technology, automation, productivity and cost reduction for the long-haul vs the immediate profits then perhaps we would not be in the biggest economic mess. If the Government encouraged investments that pay longer term – solar, wind, geothermal, even drilling for oil or building refineries and nuclear plants then perhaps we would not be losing jobs or worrying about security risks and energy dependence.
On its own, the private sector is NOT going to make investments that have a long pay back period unless there are incentives to do so. We need long term policies that don’t go away every four years when new politicians come in the office! However, we do see a movement back to infrastructure, energy, manufacturing, hard goods, technology, and productivity. Maybe a focus on tangibles, civil engineering rather than financial engineering and services…Which is ALL GOOD for the metal casting industry…Let’s hope so!