Many analysts in many business sectors are considering the writing on the wall, as we approach what could be a rocky downward business cycle. We have issues in the Auto Manufacturing Sector, Transportation and Retail Sectors. Some in the retail sector understand the crunch that the increased gasoline prices at the pump are having on the American Consumer and how this will decrease any potential upward projections on the Christmas Gift retail season for 2005. Some large box store manufacturers are already considering a discount strategy. Employment number are holding and that means even though the consumers and American Families are running redline with $100 per week average increases in their gasoline budgets; that they have some Christmas shopping monies available and will feel comfortable reloading more short-term debt on their credit cards to fund the Chinese War Machine and military. As retailers discount they will be buying cheaper goods to secure and sustain current profit projections to bump up stock prices and keep shareholders happy, thus they will be buying Chinese Goods. Rising Oil prices on top of the increased outflows to foreign lands will affect our forward momentum along with increased interest rates, which are necessary as well. This increases savings in banks by citizens and of course the Federal Reserve also understands that runaway housing bubbles can spell a disaster in the real estate market. So far the slow interest steady rate increases have proven very wise and a few more may indeed follow to curb inflation as so many Americans have jobs and are spending. We see prices rising on many things, but much of this is artificial inflation and not an elective of consumer choice with money abounding the pockets of average Americans. American Auto Makers held up our economy and assisted in retail sales figures during the last economic slump thus shallowing out the bottom of the business cycle along with strong housing demands. Everyone seemed to be out buying new cars and new homes and/or refinancing to pay off credit card loans and other onerous short-term high interest rate debt. We will not have those plays this time around as we are at a top in the real estate market meaning that folks may end up with negative equity situations unable to borrow on their homes. Such is dangerous due to walk away foreclosures adding too much supply as new housing in some regions slows to a trickle. Inflation may be a savior and a demon in many regards as those with homes find new equity, yet also find themselves tapped out and reduced buying power against the cost of living increases, most of which is due to higher energy and fuel prices, weather related crop losses and artificial inflation. All this is manageable and we are already working on the simplification of tax codes. But it is obvious that this business cycle is dipping slighting and moving onto the back side of a slow rolling hill, as it adjusts to take another run up the other side in a few years. This is not to be considered good or bad. It just is and the upside is that the downside might be much more shallow than expected and that is a good thing for all businesses and people in this great nation. Think on this. |
