The Lehmann Letter ©
Here’s the publication schedule for some of July 2009’s most important economic indicators.
PUBLICATION SCHEDULE
July 2009
Source (* below……Series Description……Day & Date
Quarterly Data
BEA…………………………GDP………...……Fri, 31st
Monthly Data
ISM……….Purchasing managers’ index……….Wed, 1st
BLS…………….Employment………… Thu, 2nd
Fed…………Consumer credit…..(Approximate).Tue, 7th
Censu……...Balance of trade………………Fri, 10th
Census……...Retail trade…………………….Tue, 14th
Census……...Inventories……………………..Tue, 14th
BLS………….Producer prices……………….Tue, 14th
Fed………..Industrial production………….Wed, 15th
Fed……….Capacity utilization…………….Wed, 15th
BL………….Consumer prices……………...Wed, 15th
Census……..Housing starts………………….Fri, 17th
Conf Bd…….Leading indicators…………….Mon, 20th
NAR…………Existing-home sales…….…….Thu, 23rd
Census……..New-home sales……………….Mon, 27th
Conf Bd…….Consumer confidence…………Tue, 28th
Census…….Capital goods……………….…..Wed, 29th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
© 2009 Michael B. Lehmann
Tuesday, June 30, 2009
Barn Sour
The Lehmann Letter ©
There’s a general consensus that we’ve hit bottom and the economy will now recover. But recovery is not synonymous with rebound, and the key question remains: How swiftly will the economy snap out of recession?
Take a look at the consumer-price-index, interest-rate and housing-starts charts before 1990. Notice the strong inverse relationship between interest rates and residential construction.
Consumer Prices
(Click on chart to enlarge)
(Recessions shaded)
Housing Starts
(Click on chart to enlarge)
(Recessions shaded)
The Federal Reserve let interest rates fall whenever inflation subsided. Building activity immediately expanded, stimulating the entire economy. But escalating inflation soon prompted the Fed to raise interest rates and constrict residential construction. That depressed the economy and instigated recession. Inflation soon shrank, leading to a new round of rate cuts and building activity.
Think of that economy the way you’d think of a frisky horse. The economy broke into a gallop (boom) as soon as the rider (the Fed) let the reins dangle (low interest rates). But the economy came to a halt (recession) when the Fed pulled back on the reins (high interest rates), only to shoot forward again when the Fed relaxed its grip. Consequently those recessions were V-shaped, with sharp downturns and equally sharp recoveries.
The 1990-91 and 2001 recessions departed from this stereotype. The 1990-91 recession is associated with the first Persian Gulf War. That downturn came to an end when soaring computer and software expenditures led to the 1990s dot-com boom. The dot.com boom collapsed when full employment boosted wages and salaries, thereby constricting profit margins and business capital expenditures.
The Fed, in a traditional response, depressed interest rates from 2000 through 2003. The consequent real-estate bubble, and that bubble’s demise, led to the current recession. Once again the Fed dangled the reins, hoping the horse would gallop forward. But this horse remains exhausted from its 2002 – 2006 run. It’s barn sour and requires rest. It won’t break into another run for quite a while.
Tumbling real-estate is at the heart of the present crisis, and falling interest rates will not pull us out. Building won’t recover until the foreclosures cease and home prices stabilize. When the number of vacant homes begins to dwindle, builders’ confidence will return and construction will start to recuperate in earnest.
That means we can’t expect another V-shaped recovery. Right now we’re on the horizontal bar of an L, hoping at some point it will turn into a U. If rising real estate won’t pull us out of the ditch, what will?
Technology? It pulled us out of the 1990-91 slump. Unfortunately there’s nothing on the immediate horizon that resembles the PC and internet revolution of the dot-com boom.
Government stimulus? It will definitely start the recovery, and we’re much better off with it than without it. But it is not and will not be large enough to restore full employment. For that to occur, the private sector must come back and right now there are no signs that the private sector will snap back the way it did so many times before.
The horse is in the barn.
© 2009 Michael B. Lehmann
There’s a general consensus that we’ve hit bottom and the economy will now recover. But recovery is not synonymous with rebound, and the key question remains: How swiftly will the economy snap out of recession?
Take a look at the consumer-price-index, interest-rate and housing-starts charts before 1990. Notice the strong inverse relationship between interest rates and residential construction.
Consumer Prices
(Click on chart to enlarge)
(Recessions shaded)
Federal Funds Rate
(Click on chart to enlarge)
Federal Funds Rate
(Click on chart to enlarge)
(Recessions shaded)
Housing Starts
(Click on chart to enlarge)
(Recessions shaded)
The Federal Reserve let interest rates fall whenever inflation subsided. Building activity immediately expanded, stimulating the entire economy. But escalating inflation soon prompted the Fed to raise interest rates and constrict residential construction. That depressed the economy and instigated recession. Inflation soon shrank, leading to a new round of rate cuts and building activity.
Think of that economy the way you’d think of a frisky horse. The economy broke into a gallop (boom) as soon as the rider (the Fed) let the reins dangle (low interest rates). But the economy came to a halt (recession) when the Fed pulled back on the reins (high interest rates), only to shoot forward again when the Fed relaxed its grip. Consequently those recessions were V-shaped, with sharp downturns and equally sharp recoveries.
The 1990-91 and 2001 recessions departed from this stereotype. The 1990-91 recession is associated with the first Persian Gulf War. That downturn came to an end when soaring computer and software expenditures led to the 1990s dot-com boom. The dot.com boom collapsed when full employment boosted wages and salaries, thereby constricting profit margins and business capital expenditures.
The Fed, in a traditional response, depressed interest rates from 2000 through 2003. The consequent real-estate bubble, and that bubble’s demise, led to the current recession. Once again the Fed dangled the reins, hoping the horse would gallop forward. But this horse remains exhausted from its 2002 – 2006 run. It’s barn sour and requires rest. It won’t break into another run for quite a while.
Tumbling real-estate is at the heart of the present crisis, and falling interest rates will not pull us out. Building won’t recover until the foreclosures cease and home prices stabilize. When the number of vacant homes begins to dwindle, builders’ confidence will return and construction will start to recuperate in earnest.
That means we can’t expect another V-shaped recovery. Right now we’re on the horizontal bar of an L, hoping at some point it will turn into a U. If rising real estate won’t pull us out of the ditch, what will?
Technology? It pulled us out of the 1990-91 slump. Unfortunately there’s nothing on the immediate horizon that resembles the PC and internet revolution of the dot-com boom.
Government stimulus? It will definitely start the recovery, and we’re much better off with it than without it. But it is not and will not be large enough to restore full employment. For that to occur, the private sector must come back and right now there are no signs that the private sector will snap back the way it did so many times before.
The horse is in the barn.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2009 Michael B. Lehmann
Thursday, June 18, 2009
The President’s Plan
The Lehmann Letter ®
President Obama’s plan to reorganize and modernize our nation’s financial-regulatory system will institute a big improvement over the status quo.
Think of these two issues:
1. With proper regulation, would as many homeowners have faced foreclosure? Would they have been cajoled, enticed and just plain encouraged to take on a mortgage-burden they could not afford? Suppose new regulations institutionalize reasonable down payments and other strictures that prevent irresponsible lending and borrowing, can we reduce the likelihood of another disaster?
2. With proper regulation, would financial intermediaries have been able to securitize those mortgages and pedal them around the globe? Would those toxic assets have found a market? Suppose new regulations impose reasonable restraints upon securitization?
It could have been different. The new regulations should prevent a repeat performance.
Some critics are saying the proposed changes will stifle innovation. Perhaps. Just remember that sub-prime mortgages and mortgage-securitization were innovations. Not all innovations are of equal social value.
Other critics say the new regulations will slow financial markets’ functioning. Perhaps. That would be a cost. But the benefits will likely be worth it.
© 2009 Michael B. Lehmann
President Obama’s plan to reorganize and modernize our nation’s financial-regulatory system will institute a big improvement over the status quo.
Think of these two issues:
1. With proper regulation, would as many homeowners have faced foreclosure? Would they have been cajoled, enticed and just plain encouraged to take on a mortgage-burden they could not afford? Suppose new regulations institutionalize reasonable down payments and other strictures that prevent irresponsible lending and borrowing, can we reduce the likelihood of another disaster?
2. With proper regulation, would financial intermediaries have been able to securitize those mortgages and pedal them around the globe? Would those toxic assets have found a market? Suppose new regulations impose reasonable restraints upon securitization?
It could have been different. The new regulations should prevent a repeat performance.
Some critics are saying the proposed changes will stifle innovation. Perhaps. Just remember that sub-prime mortgages and mortgage-securitization were innovations. Not all innovations are of equal social value.
Other critics say the new regulations will slow financial markets’ functioning. Perhaps. That would be a cost. But the benefits will likely be worth it.
© 2009 Michael B. Lehmann
Tuesday, June 16, 2009
Housing Rebound?
The Lehmann Letter ®
Today the Census Bureau announced that May housing starts rebounded to 532,000.
The chart below reveals that starts remain below all other post-WWII troughs. It’s still too early to declare victory.
Housing Starts
(Click on chart to enlarge)
Moreover, the foreclosure crisis continues unabated. Each month more existing homes are dumped on the market by lenders who have foreclosed on them.
New homes, whose construction has just begun, will also add to the total pool of available structures. That does not help resolve the crisis.
A construction turnaround would be more welcome if it did not exacerbate the glut of homes on the market.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2009 Michael B. Lehmann
Today the Census Bureau announced that May housing starts rebounded to 532,000.
The chart below reveals that starts remain below all other post-WWII troughs. It’s still too early to declare victory.
Housing Starts
(Click on chart to enlarge)
(Recessions shaded)
Moreover, the foreclosure crisis continues unabated. Each month more existing homes are dumped on the market by lenders who have foreclosed on them.
New homes, whose construction has just begun, will also add to the total pool of available structures. That does not help resolve the crisis.
A construction turnaround would be more welcome if it did not exacerbate the glut of homes on the market.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2009 Michael B. Lehmann
Monday, June 15, 2009
Consumer Credit
The Lehmann Letter ©
Earlier this month the Federal Reserve released April data for consumer credit:
http://www.federalreserve.gov/releases/g19/Current/
It shrank be $188.4 billion at a seasonally adjusted annual rate.
The following chart puts that in perspective.
Consumer Credit
(Click on chart to enlarge)
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2009 Michael B. Lehmann
Earlier this month the Federal Reserve released April data for consumer credit:
http://www.federalreserve.gov/releases/g19/Current/
It shrank be $188.4 billion at a seasonally adjusted annual rate.
The following chart puts that in perspective.
Consumer Credit
(Click on chart to enlarge)
(Recessions shaded)
After years of solid growth averaging over $100 billion per month, consumer credit is now contracting.
The table below reports consumer credit at the end of the month. You can derive the monthly change by subtracting one month from the next and multiplying by 12.
Jan... 2008 ...2,526.0
Feb ... 2008 ... 2,536.9
Mar ... 2008 ...2,549.0
Apr ... 2008....2,555.8
May... 2008... 2,565.5
Jun ... 2008...2,574.1
Jul ... 2008...2,581.8
Aug... 2008... 2,575.8
Sep ... 2008... 2,582.8
Oct ... 2008...2,578.1
Nov ... 2008 ...2,568.8
Dec... 2008...2,562.3
Jan ... 2009... 2,567.1
Feb...2009...2,556.2
Mar... 2009... 2,539.7
Apr ... 2009 ... 2,524.0
You can also see that consumer credit grew until last summer and has been falling since. When people feel good, they borrow and spend. When they don’t, they don’t. The economy won’t rebound until this number grows again.
After years of solid growth averaging over $100 billion per month, consumer credit is now contracting.
The table below reports consumer credit at the end of the month. You can derive the monthly change by subtracting one month from the next and multiplying by 12.
Jan... 2008 ...2,526.0
Feb ... 2008 ... 2,536.9
Mar ... 2008 ...2,549.0
Apr ... 2008....2,555.8
May... 2008... 2,565.5
Jun ... 2008...2,574.1
Jul ... 2008...2,581.8
Aug... 2008... 2,575.8
Sep ... 2008... 2,582.8
Oct ... 2008...2,578.1
Nov ... 2008 ...2,568.8
Dec... 2008...2,562.3
Jan ... 2009... 2,567.1
Feb...2009...2,556.2
Mar... 2009... 2,539.7
Apr ... 2009 ... 2,524.0
You can also see that consumer credit grew until last summer and has been falling since. When people feel good, they borrow and spend. When they don’t, they don’t. The economy won’t rebound until this number grows again.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2009 Michael B. Lehmann
Thursday, June 11, 2009
More Good News
The Lehmann Letter ©
Today the Census Bureau released April sales and inventory data as well as the inventory/sales ratio:
http://www.census.gov/mtis/www/mtis_current.html
The ratio continues to fall, and that’s good news.
(Click on image to enlarge.)
Today the Census Bureau released April sales and inventory data as well as the inventory/sales ratio:
http://www.census.gov/mtis/www/mtis_current.html
The ratio continues to fall, and that’s good news.
(Click on image to enlarge.)
The ratio is heading south because goods on the shelf are declining faster than total sales. Once goods on the shelf reach an irreducible minimum, management will have to revive production in order to replenish them.
That may take a while. You can see how swiftly the ratio rose in 2008. It will take some time to drop back down.
When it does and production revives, that will be the true turning point.
© 2009 Michael B. Lehmann
That may take a while. You can see how swiftly the ratio rose in 2008. It will take some time to drop back down.
When it does and production revives, that will be the true turning point.
© 2009 Michael B. Lehmann
Wednesday, June 10, 2009
Less Borrowing. Less Spending
The Lehmann Letter ©
See today’s New York Times for an excellent article by David Leonhardt about the federal deficit and why it’s so hard to shrink it:
http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html?_r=1&ref=todayspaper
But even if we could reduce the deficit, another difficulty arises: Who will borrow and spend? If the government won’t, will we?
Because the fact of the matter is that our economy depends upon borrowing and spending, and less borrowing equals less spending.
So we’re damned if we do and damned if we don’t. We don’t want to resume our profligate ways, but we need that profligate spending to keep the engine humming. We don’t want to mortgage our future, but how else are we going to buy those homes and cars? And if we don’t buy the homes and cars, and then ask the government to cut back, too…………
We’re in a jam.
© 2009 Michael B. Lehmann
See today’s New York Times for an excellent article by David Leonhardt about the federal deficit and why it’s so hard to shrink it:
http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html?_r=1&ref=todayspaper
But even if we could reduce the deficit, another difficulty arises: Who will borrow and spend? If the government won’t, will we?
Because the fact of the matter is that our economy depends upon borrowing and spending, and less borrowing equals less spending.
So we’re damned if we do and damned if we don’t. We don’t want to resume our profligate ways, but we need that profligate spending to keep the engine humming. We don’t want to mortgage our future, but how else are we going to buy those homes and cars? And if we don’t buy the homes and cars, and then ask the government to cut back, too…………
We’re in a jam.
© 2009 Michael B. Lehmann
Friday, June 5, 2009
345,000
The Lehmann Letter ©
Go to http://stats.bls.gov/ to see today’s lead story on the Bureau of Labor Statistics web site. The economy lost 345,000 jobs in May, a welcome relief from the 600.000+ average for most recent months. But the unemployment rate rose to 9.4%.
Job Growth
(Click on chart to enlarge)
Go to http://stats.bls.gov/ to see today’s lead story on the Bureau of Labor Statistics web site. The economy lost 345,000 jobs in May, a welcome relief from the 600.000+ average for most recent months. But the unemployment rate rose to 9.4%.
Job Growth
(Click on chart to enlarge)
Recessions shaded
You can see the seriousness of the situation. Few recessions – certainly no recent ones – have generated 500,000+ job losses. We’re glad May’s figure is only 345,000, but that’s as bad as the worst of the dot-com bust.
It will be some time before the economy enjoys job gains. Meanwhile the unemployment rate will rise.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of Economic Indicators.)
© 2009 Michael B. Lehmann
You can see the seriousness of the situation. Few recessions – certainly no recent ones – have generated 500,000+ job losses. We’re glad May’s figure is only 345,000, but that’s as bad as the worst of the dot-com bust.
It will be some time before the economy enjoys job gains. Meanwhile the unemployment rate will rise.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of Economic Indicators.)
© 2009 Michael B. Lehmann
Thursday, June 4, 2009
A Reader Writes
The Lehmann Letter ©
A reader raised the following issue regarding the federal stimulus:
“When private parties borrow from banks, the money is partially
from such things as deposits, but then multiplied by a factor of 20 or
so as the banks "create" money. If the people borrowing can pay the
money back with interest, because their businesses are profitable or
they have a healthy income, everybody is happy. But if consumers can no
longer buy your products at the hoped for level, and people lose their
jobs, then you and they can't repay the loans, and the banks fail.
“If, as you have shown, the government now replaces private
borrowers and lenders, it too creates money, but instead of investing it
in production of things people will buy (various kinds of widgets), it
invests in "infrastructure", which nobody buys. It creates or maintains
jobs; but the people getting paid are not producing anything that
directly generates revenue.
“I guess the theory is that people with those government created
jobs will buy things, and this will stimulate the private sector to get
back into profitable production. Maybe this will work. But I don't have
confidence that where the private sector fails in investing and
managing, "the government" is somehow going to do better.”
I responded by saying (edited for locale):
“It's not so much that the government is going to do better, as it is that the private sector ground to a temporary halt. So, for the time being, it's a choice between nothing (private sector) and something (government). When the private sector recovers, the government can and should pull back.
“In general the government does not do a good job providing goods and services to the market. That's why the private sector provides the vast majority of our goods and services and most of the goods and services the government provides are public goods (light houses, police, fire, national defense, streets, parks, etc.), public works (Shasta Dam, California Water Project, Bonneville Dam, San Francisco Bay Bridge, etc.), natural monopolies that private enterprise abandoned (San Francisco Municipal Railway, NY subways, etc.) and services that society wanted but the private sector did not adequately provide (public schools, postal service, etc.). I don't support the government taking over activities the private sector does well, e.g. the city taking over our local electric and gas company. But I generally believe the public/private mix makes sense given the economic and historical and societal forces at play. So I don't see danger in a temporary government surge.
“To me, the far greater danger in the current situation is the erosion of the private sector's balance sheet: Particularly the huge ratio of debt to liquid assets. Our economy now depends on private borrowing and spending that is imperiled by existing debts. Public borrowing and spending is no permanent substitute because the public sector can't endlessly incur more debt. So who's going to spend? It's a real problem.”
© 2009 Michael B. Lehmann
A reader raised the following issue regarding the federal stimulus:
“When private parties borrow from banks, the money is partially
from such things as deposits, but then multiplied by a factor of 20 or
so as the banks "create" money. If the people borrowing can pay the
money back with interest, because their businesses are profitable or
they have a healthy income, everybody is happy. But if consumers can no
longer buy your products at the hoped for level, and people lose their
jobs, then you and they can't repay the loans, and the banks fail.
“If, as you have shown, the government now replaces private
borrowers and lenders, it too creates money, but instead of investing it
in production of things people will buy (various kinds of widgets), it
invests in "infrastructure", which nobody buys. It creates or maintains
jobs; but the people getting paid are not producing anything that
directly generates revenue.
“I guess the theory is that people with those government created
jobs will buy things, and this will stimulate the private sector to get
back into profitable production. Maybe this will work. But I don't have
confidence that where the private sector fails in investing and
managing, "the government" is somehow going to do better.”
I responded by saying (edited for locale):
“It's not so much that the government is going to do better, as it is that the private sector ground to a temporary halt. So, for the time being, it's a choice between nothing (private sector) and something (government). When the private sector recovers, the government can and should pull back.
“In general the government does not do a good job providing goods and services to the market. That's why the private sector provides the vast majority of our goods and services and most of the goods and services the government provides are public goods (light houses, police, fire, national defense, streets, parks, etc.), public works (Shasta Dam, California Water Project, Bonneville Dam, San Francisco Bay Bridge, etc.), natural monopolies that private enterprise abandoned (San Francisco Municipal Railway, NY subways, etc.) and services that society wanted but the private sector did not adequately provide (public schools, postal service, etc.). I don't support the government taking over activities the private sector does well, e.g. the city taking over our local electric and gas company. But I generally believe the public/private mix makes sense given the economic and historical and societal forces at play. So I don't see danger in a temporary government surge.
“To me, the far greater danger in the current situation is the erosion of the private sector's balance sheet: Particularly the huge ratio of debt to liquid assets. Our economy now depends on private borrowing and spending that is imperiled by existing debts. Public borrowing and spending is no permanent substitute because the public sector can't endlessly incur more debt. So who's going to spend? It's a real problem.”
© 2009 Michael B. Lehmann
Tuesday, June 2, 2009
June Publication Schedule
The Lehmann Letter ©
Here’s the publication schedule for some of June 2009’s most important economic indicators.
PUBLICATION SCHEDULE
June 2009
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BLS………………..…………Productivity…………………..Thu, 4th
BEA……………………Balance of Payments……………..Wed, 17th
BEA…………………………GDP……………………...……Thu, 25th
Monthly Data
BEA..........….Personal Income & Consumption………….Mon, 1st
ISM………………….Purchasing managers’ index……….Mon, 1st
Fed……………………..Consumer credit…...(Approximate).Fri, 5th
BLS………………………….Employment………………… Fri, 5th
Census……………………...Balance of trade………………Wed, 10th
Census……………………...Retail trade…………………….Thu, 11th
Census……………………...Inventories……………………..Thu, 11th
BLS………………………….Producer prices……………….Tue, 16th
Fed…………………………..Industrial production………….Tue, 16th
Fed………………………….Capacity utilization…………….Tue, 16th
Census……………………..Housing starts………………….Tue, 16th
BLS………………………….Consumer prices……………...Wed, 17th
Conf Bd…………………….Leading indicators…………….Thu, 18th
NAR…………………………Existing-home sales…….…….Tue, 23rd
Census……………………..New-home sales……………….Wed, 24th
Census…………………….Capital goods……………….…..Wed, 24th
BEA..........….Personal Income & Consumption…………….Fri, 26th
Conf Bd…………………….Consumer confidence…………Tue, 30th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
© 2009 Michael B. Lehmann
Here’s the publication schedule for some of June 2009’s most important economic indicators.
PUBLICATION SCHEDULE
June 2009
Source (* below)…………Series Description…………Day & Date
Quarterly Data
BLS………………..…………Productivity…………………..Thu, 4th
BEA……………………Balance of Payments……………..Wed, 17th
BEA…………………………GDP……………………...……Thu, 25th
Monthly Data
BEA..........….Personal Income & Consumption………….Mon, 1st
ISM………………….Purchasing managers’ index……….Mon, 1st
Fed……………………..Consumer credit…...(Approximate).Fri, 5th
BLS………………………….Employment………………… Fri, 5th
Census……………………...Balance of trade………………Wed, 10th
Census……………………...Retail trade…………………….Thu, 11th
Census……………………...Inventories……………………..Thu, 11th
BLS………………………….Producer prices……………….Tue, 16th
Fed…………………………..Industrial production………….Tue, 16th
Fed………………………….Capacity utilization…………….Tue, 16th
Census……………………..Housing starts………………….Tue, 16th
BLS………………………….Consumer prices……………...Wed, 17th
Conf Bd…………………….Leading indicators…………….Thu, 18th
NAR…………………………Existing-home sales…….…….Tue, 23rd
Census……………………..New-home sales……………….Wed, 24th
Census…………………….Capital goods……………….…..Wed, 24th
BEA..........….Personal Income & Consumption…………….Fri, 26th
Conf Bd…………………….Consumer confidence…………Tue, 30th
* BEA = Bureau of Economic Analysis of the U.S. Department of Commerce
* BLS = Bureau of Labor Statistics of the U.S. Department of Labor
* Census = U.S. Bureau of the Census
* Conf Bd = Conference Board
* Fed = Federal Reserve System
* ISM = Institute for Supply Management
* NAR = National Association of Realtors
© 2009 Michael B. Lehmann
Monday, June 1, 2009
Goodbye GM
The Lehmann Letter ®
In 1965 GM was the industrial paragon: Best managed, most efficient, most profitable, and a company that paid good wages to its workers. As the biggest of the Big Three, it was untouchable. Its position was impregnable.
Who could enter the industry? How could they amass sufficient capital? And even if they did they’d have to sell so many cars that they’d ruin the market for everyone, themselves included. Foreign competition? Forget it! At the most, niche players.
But management fought seat belts, emissions reduction, safety features and fuel economy. When imports appeared, they were dismissed as junk made by pauper labor.
Eventually it became all too clear: Management wanted to market the cars they wanted to make. They wanted to inflate the product (bigger and heavier) to realize fatter margins, and then advertise it into our driveways.
How the chickens have come home to roost. How the warnings were ignored. How the decades were squandered.
Too bad. It didn’t have to end this way.
© 2009 Michael B. Lehmann
In 1965 GM was the industrial paragon: Best managed, most efficient, most profitable, and a company that paid good wages to its workers. As the biggest of the Big Three, it was untouchable. Its position was impregnable.
Who could enter the industry? How could they amass sufficient capital? And even if they did they’d have to sell so many cars that they’d ruin the market for everyone, themselves included. Foreign competition? Forget it! At the most, niche players.
But management fought seat belts, emissions reduction, safety features and fuel economy. When imports appeared, they were dismissed as junk made by pauper labor.
Eventually it became all too clear: Management wanted to market the cars they wanted to make. They wanted to inflate the product (bigger and heavier) to realize fatter margins, and then advertise it into our driveways.
How the chickens have come home to roost. How the warnings were ignored. How the decades were squandered.
Too bad. It didn’t have to end this way.
© 2009 Michael B. Lehmann
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