The annual meeting of the Control System Integrators Association (www.controlsys.org) got underweigh last night with a huge reception held by Anixter and all their vendor partners: Red Lion, Eaton, Belden, Hirschman, Lantronix, and more. This is the largest CSIA conference ever, with more than 400 registered attendees, of whom more than 200 are themselves executives and owners of control system integration firms.
One of the traditions of the CSIA conference has always been "the shirt." I have a large collection of polos and dress shirts with the logo and the date of the conference. I have worn them at other conferences and user groups as a way to help CSIA grow, so I was dissapointed to learn that members of the press weren't getting "the shirt" this year. Oh, well.
Most of the integrators I've talked to are saying that business is not only good, but it is booming. Some of them are saying that they are finally getting the business they bid in 2007 and 2008, but others are saying that they are seeing real new projects. Nobody has a long face around here about business and revenue.
This morning we are listening to Alan Beaulieu of the Institute for Trend Research, who is the most dismal economist I know, with the unfortunate ability to be right. According to Beaulieu, 2011 through first half of 2013 will be good, with a growing economy. However, in the last half of 2013 to 2014, we will enter a moderate to severe recession that will be US-centric with little effect on the rest of the world.
Oil prices will moderate at about $95/bbl until 2012, and then we will see oil prices rise sharply, along with many commodities like copper and rare metals...this will be one of the drivers for the recession that's coming.
Inflationary pressures are growing around the world as the emerging economies of China, India, Brazil and Russia overheat.
Banks are beginning to lend, but it isn't going to be like it was, when if you had a pulse you got a loan.
Eventually the housing market will recover... commercial debt is lower than 2004 and trending down.
Eventually the Fed will be forced to raise interest rates. Because of global inflationary pressures. Inflation will move up for the next 25 years or so.
Businesses are leaving China because of costs. GE Appliance is moving back to Kentucky because of cost and the fact that the market is here.
Inflation will make us change how we do things. Find a way to raise prices. Raise your wage rate. Pay your people more. Higlight quality, cntent, service for competitive advantage. Borrow now--fixed interest for as long a term as possible because inflation favors debtors.
Lower your fixed costs, and increase variable costs for increased flexibility. Re-assess domestic sources (inflation will be imported) and have rigorous cost controls. Do R&D for substitute products and materials. Move liquid assets offshore. Hire now, and lock in labor rates.
Select price indices that magnify inflation when negotiating with customers.
Sell offshore. Sell lots offshore.
The deficit is not a political issue. "I'm an equal opportunity slanderer myself," Beaulieu said.
We are at close to 100% debt/GDP. Soon we will have only enough money to pay for entitlements and not much else.
This isn't a Democrat problem, this isn't a Republican problem-- it has been going on for two decades and neither party has done anything about it.
This will drive very high inflation and a weaker and weaker dollar. And if you think the government is going to shrink soon, consider the impact of health care legislation. Financial reform will also increase the size of government.
How about some good news?
Latin America is a very hot business sector. They grow their own food, They are independent in energy. Go into business in Brazil as a JV to avoid legal and tax complications.
Europe is in an ugly dog contest with the US...but Eastern Europe is growing. Poland is now the 20th largest economy in the world. Yes. Poland.
Australia is hot...India is slowing down dramatically, but it will pick up again. There is no inflationary pressure in India. Long term investment in India will pay off.
Beaulieu says he is very concerned about the well-being of Russia as an economy. Russia is heavily dependent on oil and gas, and as that faces, this will cause serious pressures which may include political unrest.
Corporate profits are up. No rightsizing will be going on. Household net worth as % of disposable income is where it was in the 80s and 90s, even the 50s and 60s. We're the same people, we just survived two great bubbles, but they were like a wild college weekend. Now we're back to normal.
If you can, buy real estate. Go to Ft Myers and buy a house. Take your checkbook so the realtor will make you an offer. You won't have any neighbors.
Studies have shown that 13% of the population of Russia want to leave the country, which makes it sound a lot like Michigan.
Beaulieu described a whole series of economic trends and markers to watch. All these markers point to a recession in the 2013-2015 range.
The savings rate is growing. Saving is good.
Housing rates of change are still moving down. Housing will come back in about 2014-- and it is purely a demographic issue.
Industrial production will incredase through 2012. But the economy is starting slowly to cool off.
Even the IT industry will cool off in 2013 and 2014.
2011- Slower rate of recovery
2012 Ongoing recovery
2013 Flattens out- recession begins
2014 Recession
2015 and beyond Opportunity.
59% of customers will leave a vendor because of poor customer service. Beaulieu recommends two books:
Creating Competitive Advantage
America's Customer Service Meltdown
