Market Status Update...

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Well don't know if anyone has been looking at the news recently but the economy is in the can. Some people are seeing this time as now being a buying opportunity, but I am not so sure. I have bought some PM stock and VTI shares, but otherwise I am keeping about half of my money off of the table. Why, because well I am observing my environment.

Fact is I was laid off just a month and a half ago from what I do still think is a well run company. While I will not share the company's name, I will reveal their business, which is paint. Paint is a lovely commodity that can instantly give an investor a clear picture of one clear customer, the American Consumer. Let me explain a little bit further, paint covers everything a buyer really wants: appliances, mowers, home hardware, power tools, windows, cars, and mailboxes. Traditionally it is all that stuff you buy within six months of buying a house. The housing market dried up two years ago, and it started affecting the paint business six months after. Then the market sort of flattened out and paint was still being made, just at a lower rate. I recently learned that paint orders have basically just dropped off the face of the planet. That is a hair raising bad thing to hear.

I have a good ear to construction and agriculture equipment as well. I thought that when I left the con/ag situation a couple of years ago, things were going to start to fall off. I was wrong then, but look as if I am getting more right now. The Caterpillers, Deere, and CNH's of the world have actually started showing signs of slowing. I always think that when these companies as a collection start showing weakening returns, then that shows a slow down in all construction: residential, commercial, or government. To me that means funding is really drying up, loans are becoming much more scarce to build not only what is wanted but what is needed. Or even worse, industrial improvement operations have ceased and companies are now in waiting game mode.

So what does look good. Well during my interview process for a new job, I think that I found the industrial sectors that are doing well. Railroad car manufacturers cannot produce enough cars to keep up with demand. Increase costs in shipments by truck has led to a mini boom in railroad cars. Companies are working 7 days a week to keep up. I worry some about the railroad industry as the economic structure falters though for the industry, gas keeps falling as well too. Food ingredient companies are hiring and spending lots of money. My new job sells a certain type of equipment to various food, petrochemical, and industrial sectors. Well a quick scan of orders shows who is really spending cash, and food is in. They are going about spending smartly as well by expanding operations at current plants to state of the art systems that can reach a lot of profitable returns. I have been looking at Kroger (KR) but I think now companies like Kraft and Del Monte may be a good bet.

The economy is still in rough shape however, a lot of good people have made some bad decisions and more foreclosures are still coming over the next 2 -4 years as these 3-5 ARM's expire and change rates. Remember that unemployment rates are not necessarily showing the big picture either. For every job lost or plant closed, there is someone with a customer lost, and then some money on their paycheck is lost and so on and so forth. It's not just the unemployed's missing funds, but the ripple affect will move on to contractors, salesmen, commission jobs, and small business. That in turn will hurt the big businesses that much more. I think we are six months to a year before this truly bottoms out.

Government is focused on the day to day lending and borrowing but truly what will save the common American is working with the mortgages that they are upside down in. I think that what will end up saving us is a forcing of a low interest rates on banks loans for those who screwed up and in turn lower the borrower's monthly payments. I don't care if they make them 40 year fixed or whatever, banks will be in a lot better shape with a steady payment and by extending the loan years will ensure that they still get their money in the long run. Foreclosures are not working, and bailing out banks is a Band-Aid. Rooting out a solution for the actual mortgage issue should be the top priority. I think people will start spending again once they know that they can make the payment for the month and their family is safe.

I guess we will all see. Be careful out there and keep some money back.