• 722 days Will The ECB Continue To Hike Rates?
  • 722 days Forbes: Aramco Remains Largest Company In The Middle East
  • 724 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,124 days Could Crypto Overtake Traditional Investment?
  • 1,129 days Americans Still Quitting Jobs At Record Pace
  • 1,131 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,134 days Is The Dollar Too Strong?
  • 1,134 days Big Tech Disappoints Investors on Earnings Calls
  • 1,135 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,137 days China Is Quietly Trying To Distance Itself From Russia
  • 1,137 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,141 days Crypto Investors Won Big In 2021
  • 1,141 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,142 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,144 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,145 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,148 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,149 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,149 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,151 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Metalworking Business Index Trends

Steve Kline who produces the Metalworking Business Index survey, shared an email with me from a correspondent who wanted to raise capital to expand, but could not get the loan. Let's take a look.

Steve,

An emerging trend this year is the sudden scarcity of capital from banks & machine tool finance companies. We planned to purchase two new machine tools this year. It now appears that we can obtain financing for just one, in spite of a spotless corporate credit record and continued sales growth. The lenders seem to be over-tightening because of the recent credit crisis. As I told my banker, "You guys seem frightened of your own shadows!"

MBI Sub-Indices

New orders are up from May but still in contraction. The increase from May is led by an increase in exports. Prices received are still rising, but not as material prices.

The statement "You guys seem frightened of your own shadows!" is an interesting thought. However, it misses the big picture. Banks are not lending because they are too cash strapped to lend. Many banks are technically insolent and can't lend.

As for the would be borrower, things have been going so well for so long that he must think the odds of a sustained contraction are low. I believe he is wrong. In effect he is saying "It's different here", missing the inevitable slowdown in virtually everything.

Auto Sales Are Dismal At GM, Toyota, Ford, Chrysler, and they are going to remain dismal. The US is in recession. Eurozone Manufacturing Is Contracting. The U.K. is on the verge of collapse. U.K. Manufacturing Has Contracted Most Since 2001. Indeed, Deflationary Hurricanes Will Hit U.S. and U.K.

The table shows Future Business Expectations to be expanding in the face of contracting orders, contracting production, contracting employment, and contracting backlog. Finally, China, India, and Vietnam are all overheating and will have to slow. Ramping up capacity in face of the above factors is quite a dangerous thing to do.

Future Business Expectations optimism is unwarranted.

 

Back to homepage

Leave a comment

Leave a comment