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Projecting When Business Cycles Will Change
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Projecting When Business Cycles Will Change

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    • 1. March 2006 “ Projecting When Business Cycles Will Change” Presented By: The Institute for Trend Research Brian Beaulieu [email_address] www.ecotrends.org AGMA & ABMA
    • 2. US Industrial Production Index Forecast Through December 2008 Annual Average Index Source: ITR’s EcoTrends TM Here today Tipping Points- Hard Landing – 2009-2010 Debt Interest Rates Demographics Inflation Inventories China – WTO Elections Oil Home Prices
    • 3. US Industrial Production to Textiles Production Annual Average Indices
    • 4. 315 -49.8 Apparel 3353 -10 Electrical industrial apparatus 322 -8.2 Paper & paper products 3335 -1.9 Metalworking machinery 33611 5.6 N.A. Light vehicles 3339 10.3 General purpose equipment 333111 19.8 Farm equipment 325 21.6 Chemicals 336411 30.5 Commercial aircraft 332510 32.2 Appliances (excluding electronics) 3365 32.7 Railroad rolling stock 3363 34.2 Motor vehicle parts 336112 & 336120 34.4 Medium & Heavy duty trucks 33313 35.3 Mining equipment 333611 46.9 Turbines 336611 47.6 Ships 3391 70.2 Medical equipment/supplies 3341 393.8 Computers & related equipment 3344 2556.9 Semiconductors & related equipment NAICS % Change ’95 to ’05 Industry
    • 5. US Industrial Production to Oil & Gas Extraction Production Annual Data Trends
    • 6. China Money Supply Current account deficit High Energy Costs Interest Rates (mild rise) New Orders Commodity Prices Purchasing Managers Index Stock Prices Retail Sales Housing Starts Inventories US Leading Indicator ITR Leading Indicator Negative Signals Upside Signals
    • 7. Exports by Nation Percentage of Total World Exports of Goods and Services Source: IMF 10.1 5.9 4.8 4.7 3.8 3.4 9.4 5.7 0 2 4 6 8 10 12 US Germany China Japan France UK Italy Canada 0 2 4 6 8 10 12
    • 8. China Today and Tomorrow (Aka The Dirty Dozen)
      • Social Costs vs. Infrastructure
      • Skilled Labor
      • Raw Materials
      • $5 fresh capital to $1 incremental output
      • Relational Government
      • FDI – SARS – No Guarantees
      • Banking System
      • Negative Demographics
      • Floating the Yuan
      • Global Competitiveness
      • WTO EU denied China Market Status
      • Pollution 7 of the 10 most polluted cities
    • 9. Employment – Civilian Labor Force Annual Data Trend
    • 10. GOODS & SERVICES AS A PERCENT OF GDP (real) w/o structures
    • 11. Example: Revenue 12MMT Mar Apr May June Jul Aug Sep Oct Nov Dec Jan Feb Mar 05 05 05 05 05 05 05 05 05 05 06 06 06 1.47 1.51 1.65 1.75 1.76 1.64 1.71 1.74 1.54 1.44 1.24 1.26 1.74 12MMT: 3MMT = 4.63 3MMT = 5.14 3MMT = 4.98 3MMT = 4.22 3MMT = 3.95 3MMT = 4.24 12MMT = 17.54 12MMT = 18.54 12MMT = 18.70 12MMT = 18.97 8.2%
    • 12. RATE-OF-CHANGE ANNUAL MOVING TOTAL (12MMT) AS OF 2/06 ANNUAL MOVING TOTAL (12MMT) AS OF 2/05 = 1/12 3-MOS MOVING TOTAL (3MMT) AS OF 2/06 3-MOS MOVING TOTAL (3MMT) AS OF 2/05 = 3/12 = 12/12 ACTUAL MONTHLY DATA AS OF 2/06 ACTUAL MONTHLY DATA AS OF 2/05
    • 13. US Total Industrial Production 12/12 Rate-of-Change Source: ITR’s EcoTrends TM
    • 14. Company L to US Industrial Production 12/12 Rates-of-Change
    • 15. US Industrial Production to Canadian Industrial Production 12/12 Rates-of-Change
    • 16. US Industrial Production to Japan Industrial Production 12/12 Rates-of-Change Source: ITR’s EcoTrends TM
    • 17. US Industrial Production to China Industrial Production 12/12 Rates-of-Change
    • 18. China Cutting Machine Tools to China Industrial Production Index 12/12 Rates-of-Change
    • 19. US Industrial Production to Asia Industrial Production 12/12 Rates-of-Change
    • 20. India Industrial Production Index to India Machinery & Equipment excluding Transport Production Index Rates-of-Change
    • 21. US to Europe Industrial Production Annual Average Data Trends Source: ITR’s EcoTrends TM
    • 22. Indicator Sequence
    • 23. Four Phases
    • 24. Phase Management Objectives TM : 1. Start to phase out marginal opportunities 2. Build inventories in the system 3. Continue placing capital equipment orders 4. Hire "top" people 5. Implement training programs 6. Add sales staff 7. Introduce new product lines 8. Begin advertising and sales promotions 9. Implement plans for facilities' expansion 10. Update standard costs Phase Late A - Recovery:
    • 25. Phase Management Objectives TM : 1. Accelerate training 2. Continue to build inventory 3. Increase prices 4. Find the answers to “what next” 5. Consider outside manufacturing sources if internal resources becoming tight 6. Check the process flow for possible future bottlenecks 7. Open distribution centers 8. Use improved cash flow for corporate governance. Phase Early B - Growth:
    • 26. Phase Management Objectives TM : 1. Stay in stock 2. Penetrate new OEM accounts 3. Develop plan for lower activity in traditional, mature markets 4. Begin missionary efforts into new markets 5. Consider taking on subcontract work if the backside of the cycle looks recessionary 6. Freeze all expansion plans in current core business units 7. Spin off undesirable operations 8. Stay realistic – beware linear budgets 9. Consider selling the business in a climate of maximum “goodwill” Phase Late B Early C - Prosperity:
    • 27. Phase Management Objectives TM : 1. Begin work force reductions 2. Reduce advertising 3. Cut training 4. Weed out inferior products 5. Reduce inventories 6. Avoid long-term purchase commitments – late in the price cycle 7. Set budget reduction goals by dept. 8. Encourage distributors to decrease inventory 9. Concentrate on cash and the balance sheet 10. De-Emphasize commodity products/services in anticipation of diminishing margins Phase Late C - Warning:
    • 28. US Industrial Production to General Purpose Machinery Production 12/12 Rates-of-Change
    • 29. US Industrial Production to General Purpose Machinery Production Annual Data Trends
    • 30. US Industrial Production to Paper & Products Production 12/12 Rates-of-Change
    • 31. General Purpose Machinery Production to Manufacturing Utilization excluding Hi-Tech Industries Annual Data Trends
    • 32. US Industrial Production Index to Industrial Machinery Production 12/12 Rates-of-Change
    • 33. US Industrial Production to Machinery New Orders 12/12 Rates-of-Change
    • 34. US Industrial Production to Equipment & Software Investment 12/12 Rates-of-Change
    • 35. Nondefense Capital Goods New Orders to Material Handling Equipment New Orders 12/12 Rates-of-Change
    • 36. Interest Rate Comparison
    • 37. Short-Term Interest Rates to US Gov’t Long-Term Bond Yields Annual Data Trends
    • 38. Mortgage Rates to Federal Funds Raw Data
    • 39. US Industrial Production to Corporate Bond Prices 12/12 Rates-of-Change Source: ITR’s EcoTrends TM
    • 40. Corporate Bond Prices to General Purpose Machinery Production 12/12 Rates-of-Change
    • 41. M2 Money Supply to Retail Sales 12MMT(A) Data Trend Comparison
    • 42. U.S. Composite Leading Indicator 1996 = 100 12MMA Actual 12/12 1/12 Source: ITR’s EcoTrends TM
    • 43. Purchasing Manager’s Index to General Purpose Machinery Production 12/12 Rates-of-Change
    • 44. ITR Leading Indicator to General Purpose Machinery Production Raw Data to 12/12 Rate-of-Change
    • 45. New Homes Sales Median Price to Stock Prices Index Data Trends
    • 46. Retail Sales Excluding Automobiles Trillions of 82-84$ 12MMT 3MMT 3/12 12/12 Source: ITR’s EcoTrends TM
    • 47. Higher Education Expenditures to Retail Sales excluding Autos 12/12 Rates-of-Change
    • 48. Housing Starts to Inventory Ratio
    • 49. Casino Gambling Expenditures to Housing Starts 12/12 Rates-of-Change
    • 50. US Industrial Production to Non-Residential Construction Data Trends
    • 51. Fed. Government Cash Account to US Industrial Production Index Data Trends
    • 52. Consumer Price Index to Crude Oil Futures Prices 12/12 Rates-of-Change Source: ITR’s EcoTrends TM
    • 53. Nondefense Capital Goods New Orders excluding Aircraft to Steel Scrap Producer Price Index 12/12 Rates-of-Change
    • 54. GDP , Bils of US $, Current Prices Percent of World GDP

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