There was some disbelief here and there when Buffett said that he thought unemployment
could get down to 6% within a few years. (Presumably he meant the government's officially reported unemployment rate – and he wasn’t suggesting that more than, say, half of all adults of employable age would have paying jobs of some sort.) The thinking seemed to be that either (a) he was nuts, if not an overly optimistic cheerleader, or (b) he had some visibility into things through Berkshire’s wide array of businesses that the vocal element of the reporting world didn’t have.
With events like the Borders liquidation – and its sudden loss of 11,000 jobs in one quick shot – it’s not easy to be all that optimistic - or believe we'll really see a turnaround. If nothing else, the housing supply overhang looks hopeless, right?
Here are just a handful of recent statistics that the ‘glass half full’ folks might take interest in. There may have been a suspension, over the past few years, of the normal replacement of depreciating assets. In quite a few categories the ages of the remaining in-service assets are reaching - or have already hit - record levels. Could it be that we may be looking at a surge coming down the line? Or is that wishful thinking?
Again, these are just a few examples:
AC units. Major HVAC provider Watsco will be reporting second quarter results this morning, and the guess here is that the conference call tone will be upbeat, if not euphoric. They provide units to the actual contractors who do the installation. What they will say, I’m guessing, is that there are 70-80 million HVAC installations now over 10 years old – some kind of record – and that the industry’s installation rate is an insufficient 4-5 million per year, and they not only had a quarter that approached record levels, but they see a huge demand ahead. Maybe I’m wrong, but we can see for ourselves soon enough (10am) http://investors.watsco.com/phoenix.zhtml?c=94992&p=irol...
Railroad cars. Check out this chart of number of new railrod cars (and fleet age), and new locomotives. Sure, there are thousands of cars still in reserve, that were pulled out of service and are still not utilized, but replacement activity really has stalled.
Year.......NewCars..FleetAge..NewLocomotives
2005 68,600 22.3yrs 827
2006 74,700 22.5yrs 922
2007 63,200 22.7yrs 902
2008 60,000 22.7yrs 819
2009 21,700 23.3yrs 460
2010 16,500 24.4yrs 259
Stretch limousines. We can debate whether or not the world really needs custom stretch limousines – but fleet replacement has come to a stand-still the past few years. These specialty vehicles have useful lives of 3 to 5 years before they are replaced by the original purchaser, depending on type of service usage, and according to a trade source normal replacement has been dramatically suspended. Of course, any resumption in customization isn’t going to have any meaningful impact on jobs – but it’s a glimpse at a trend – as with railroad cars and who-knows-what-other-segments.
Years NewVehicles
2003 2755
2004 3500
2005 2650
2006 3100
2007 2975
2008 2235
2009 375
2010 350
Hydraulics, etc. Check out the just-released results for Eaton, the folks who make the motors and pumps used in making manufacturing equipment which will, in turn, support end-user manufacturing.
ww.eaton.com/ecm/groups/public/@pub/@eaton/@corp/documents/c...
All this doesn’t mean we’re out of the woods, of course. But it might suggest that when things finally do turn, there will be a surge in delayed replacement that will surprise us.
could get down to 6% within a few years. (Presumably he meant the government's officially reported unemployment rate – and he wasn’t suggesting that more than, say, half of all adults of employable age would have paying jobs of some sort.) The thinking seemed to be that either (a) he was nuts, if not an overly optimistic cheerleader, or (b) he had some visibility into things through Berkshire’s wide array of businesses that the vocal element of the reporting world didn’t have.
With events like the Borders liquidation – and its sudden loss of 11,000 jobs in one quick shot – it’s not easy to be all that optimistic - or believe we'll really see a turnaround. If nothing else, the housing supply overhang looks hopeless, right?
Here are just a handful of recent statistics that the ‘glass half full’ folks might take interest in. There may have been a suspension, over the past few years, of the normal replacement of depreciating assets. In quite a few categories the ages of the remaining in-service assets are reaching - or have already hit - record levels. Could it be that we may be looking at a surge coming down the line? Or is that wishful thinking?
Again, these are just a few examples:
AC units. Major HVAC provider Watsco will be reporting second quarter results this morning, and the guess here is that the conference call tone will be upbeat, if not euphoric. They provide units to the actual contractors who do the installation. What they will say, I’m guessing, is that there are 70-80 million HVAC installations now over 10 years old – some kind of record – and that the industry’s installation rate is an insufficient 4-5 million per year, and they not only had a quarter that approached record levels, but they see a huge demand ahead. Maybe I’m wrong, but we can see for ourselves soon enough (10am) http://investors.watsco.com/phoenix.zhtml?c=94992&p=irol...
Railroad cars. Check out this chart of number of new railrod cars (and fleet age), and new locomotives. Sure, there are thousands of cars still in reserve, that were pulled out of service and are still not utilized, but replacement activity really has stalled.
Year.......NewCars..FleetAge..NewLocomotives
2005 68,600 22.3yrs 827
2006 74,700 22.5yrs 922
2007 63,200 22.7yrs 902
2008 60,000 22.7yrs 819
2009 21,700 23.3yrs 460
2010 16,500 24.4yrs 259
Stretch limousines. We can debate whether or not the world really needs custom stretch limousines – but fleet replacement has come to a stand-still the past few years. These specialty vehicles have useful lives of 3 to 5 years before they are replaced by the original purchaser, depending on type of service usage, and according to a trade source normal replacement has been dramatically suspended. Of course, any resumption in customization isn’t going to have any meaningful impact on jobs – but it’s a glimpse at a trend – as with railroad cars and who-knows-what-other-segments.
Years NewVehicles
2003 2755
2004 3500
2005 2650
2006 3100
2007 2975
2008 2235
2009 375
2010 350
Hydraulics, etc. Check out the just-released results for Eaton, the folks who make the motors and pumps used in making manufacturing equipment which will, in turn, support end-user manufacturing.
ww.eaton.com/ecm/groups/public/@pub/@eaton/@corp/documents/c...
All this doesn’t mean we’re out of the woods, of course. But it might suggest that when things finally do turn, there will be a surge in delayed replacement that will surprise us.
