“The Future is Your Decision” August 2010 Presented By: Institute for Trend Research Alan Beaulieu [email protected]

“The Future is Your Decision”

August 2010Presented By:

Institute for Trend Research

Alan Beaulieu

[email protected] www.ecotrends.org

2

US, Michigan & the Midwest Annual GSP Growth Rate

-6

-3

0

3

6

9

12

15

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10

U.S. Michigan Great Lakes

3

US, Illinois & the Great Lakes Annual GSP Growth Rate

-2

0

2

4

6

8

10

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10

U.S. Illinois Great Lakes

4

US Industrial Production to Gross Domestic Product3/12 Rates-of-Change

-15

-10

-5

0

5

10

15

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

-15

-10

-5

0

5

10

15

GDP

US IP

5

12MMT = 18.70

12MMT = 18.97

Example: Revenue 12MMT

3MMT = 4.63

3MMT = 5.14

3MMT = 4.98

12MMT = 17.54

8.2%

5

3MMT = 4.223MMT = 3.953MMT = 4.24

Jun July Aug Sep

Oct Nov Dec

Jan Feb Mar

Apr May Jun

1.471.511.651.75

1.761.641.71

1.741.541.44

1.241.261.74

09090909

090909

101010

101010

12MMT:

6

ANNUAL MOVING TOTAL (12MMT) AS OF 7/10ANNUAL MOVING TOTAL (12MMT) AS OF 7/09

= 1/12

3-MOS MOVING TOTAL (3MMT) AS OF 7/103-MOS MOVING TOTAL (3MMT) AS OF 7/09 = 3/12

= 12/12

ACTUAL MONTHLY DATA AS OF 7/10ACTUAL MONTHLY DATA AS OF 7/09

RATE-OF-CHANGE

7

8Unemployment Rates

2

3

4

5

6

7

8

9

10

2000 2002 2004 2006 2008 2010 2012

U.S. Michigan

9Michigan Construction Industry Employment

Thousands of Units

-60

-50

-40

-30

-20

-10

0

10

20

'96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

100

125

150

175

200

225

250

275

300MMA

-14.6

120.050

-7.1

12MMA

3MMA

3/1212/12

10Unemployment Rates

2

3

4

5

6

7

8

9

10

2000 2002 2004 2006 2008 2010 2012

U.S. IL

11Illinois Construction Industry Employment

Thousands of Units

-32

-24

-16

-8

0

8

'96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

180

220

260

300

340

380MMA

-14.8

205.2

-10.2

12MMA

3MMA

3/12 12/12

12

50

60

70

80

90

100

110

120

130

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

50

60

70

80

90

100

110

120

130

US Industrial Production IndexForecast Through December 2011

Annual Average Index

Debt

Interest Rates

Unemployment

Inflation

Credit Crunch

International scope

Elections

Oil

Home Prices

Source: ITR’s EcoTrends®

Monthly Economic Report

13

Commercial & Industrial Loans at Commercial BanksRates-of-Change

-20

-15

-10

-5

0

5

10

15

20

25

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12-20

-15

-10

-5

0

5

10

15

20

25

3/12

12/12

Two to three year period of adjustment

14

Delinquency Rates for C&I Loans3/12 &12/12 Rates-of-Change

-80

-40

0

40

80

120

160

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12-80

-40

0

40

80

120

160

3/12

12/12

25.0%

77.8%

15

Consumer Loan Delinquency Rates

-2

0

2

4

6

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12-2

0

2

4

6

3/12

12/12

16Consumer Credit Potential Availability to Consumer Credit Demand

Net Percent Positive Respondents

-50

-25

0

25

50

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12-50

-25

0

25

50

Potential

Demand

17

-25

-20

-15

-10

-5

0

5

10

15

'94 '96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0MMA

3.928

3.00.9

Sep '08

Sep '07

Jul '95

M2 Money SupplyTrillions of 82$

12MMA

Actual

12/12

1/12



18

Crude Oil Futures PricesLight & Sweet $ per Barrel

-300

-200

-100

0

100

200

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

-40

40

120

200

280

360MMA

19.5

77.1

13.7

Jun '07

Jul '05

Apr '07

Aug '06

1/12

12/12

Actual12MMA

19Consumer Price Index to Crude Oil Futures Prices

12/12 Rates-of-Change

-1

1

3

5

7

9

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

CPI

-90

-50

-10

30

70

110OIL

CPI

OIL



20

Short-Term Interest Rates to US Gov’t Long-Term Bond YieldsAnnual Data Trends

0

4

8

12

16

20

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '120

4

8

12

16

20

Short-Term Interest Rates

Long-Term Bonds

21

Mortgage Rates to Federal FundsRaw Data

-2

2

6

10

14

18

22

1975 1980 1985 1990 1995 2000 2005 2010 2015-2

2

6

10

14

18

22

Mortgage Rates

Federal Funds

22

President Obama’s 10-Year Deficit Projections(Baseline of Current Policy)

Billions of Dollars

-2000

-1500

-1000

-500

0

500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Based on an Average GDP Growth of 5.04 Percent perYear from 2010-2019

236128

-158

-378-413

-318 -248-161

-455

-1552-1449

-1173

-939 -938-955 -925 -988-1013

-1031-1145

Source: A New Era of Responsibility, Table S-2, budget.gov

23

Global Industrial Production Indices12/12 Rates-of-Change

-25

-20

-15

-10

-5

0

5

10

15

'00 '02 '04 '06 '08 '10 '12

-25

-20

-15

-10

-5

0

5

10

15

10.2 - SE Asia

-4.6 - Europe

3.0 - Japan

-0.6 - Mexico

6.5 - Brazil

-0.9 - US

24

2009 Exports from Michigan to World

43.3%

10.6%9.6%

6.6%

5.2%

4.2%

20.4%

336 _Transportation Equipment

325 _Chemical Manufactures

333 _Machinery Manufactures

331 _Primary Metal Manufactures

334 _Computers & Electronic Prod.

211 _Oil & Gas Extraction

All Others

25

2009 Exports from Illinois to World

23.1%

15.0%

11.1%9.7%5.9%

5.4%

29.8%333 _Machinery Manufactures

325 _Chemical Manufactures

334 _Computers & Electronic Prod.

336 _Transportation Equipment

311 _Processed Foods

335 _Elec. Eq., Appliances & Parts

All Other

26

Demographics

Winning Demographics

USA ~ 300 Million grows to 400 – 500 Million

India

Indonesia

Australia

Spain

Negative Demographics

China

Europe

Japan

RussiaSource: United Nations

27

Net Migration – Top 15

NVOR

TN

CO SCFL

NC

TX

UT AL CA VA

WA

AZGA

-10

10

30

50

70

90

110

130

150

170

190

210

230

Thousands

US Census Bureau, Annual Population Estimates, Net Migration 1 July 2008 - 1 July 2009

28

Net Migration – Bottom 15

MI

NY

OH

NJMD

RI AK VT

ND NE WI MS NH HI

ID

-100

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10Thousands

US Census Bureau, Annual Population Estimates, Net Migration 1 July 2008 - 1 July 2009

29

15

25

35

45

55

65

75

1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012

15

25

35

45

55

65

75

Services

Goods

GOODS & SERVICES AS A PERCENT OF GDP (real) w/o structures

30

-24

-18

-12

-6

0

6

12

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

40

90

140

190

240

290

340MMA

-0.9

Oct '07

Mar '08

May '02

Jan '01

89.9

8.2

US Total Industrial Production Index2002 = 100, S.A.

Actual

12MMA

12/121/12



31

US Industrial Production to Fabricated Metal Products Production12/12 Rates-of-Change

-20

-15

-10

-5

0

5

10

15

1975 1980 1985 1990 1995 2000 2005 2010 2015

US IP

-20

-15

-10

-5

0

5

10

15Metals

US IP

Fabricated Metals

32

US Industrial Production to Plastics Products Production12/12 Rates-of-Change

-18

-12

-6

0

6

12

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

US IP

-18

-12

-6

0

6

12

Plastics

US IP

Plastics

33

US Industrial Production to Equipment & Software Investment12/12 Rates-of-Change

-16

-8

0

8

16

24

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

US IP

-20

-10

0

10

20

30Investment

US IP

Investment

34

US Industrial Production to Tourism12/12 Rates-of-Change

-12

-8

-4

0

4

8

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

US IP

-24

-16

-8

0

8

16Tourism

US IP

Tourism

35

-80

-60

-40

-20

0

20

40

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

R-O-C

400

600

800

1000

1200

1400

1600

MMT

0.0

19.5

$676.429

Nondefense Capital Goods New Orders w/o Aircraft Billions of $

12MMT

3MMT

3/12 12/12



36

The Eco 8

Current Cycle Leading Cycle

Nonresidential Construction

New Orders

Financial

Sales

Housing

Production

Prices

Foreign



37

US Industrial Production to Corporate Bond Prices12/12 Rates-of-Change

-15

-10

-5

0

5

10

15

1975 1980 1985 1990 1995 2000 2005 2010 2015

US IP

-30

-20

-10

0

10

20

30Bonds

US IP

Corporate Bonds



38

-40

-20

0

20

40

60

80

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12-40

-20

0

20

40

60

80

1/12

12/12

Dec '09

Dec '08

Purchasing Managers IndexISM



39

-24

-18

-12

-6

0

6

12

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

R-O-C

65

80

95

110

125

140

155MMA

7.08.4

106.8

U.S. Composite Leading Indicator1996 = 100

12MMA

Actual

12/121/12



40

-90

-60

-30

0

30

60

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

R-O-C

200

1000

1800

2600

3400

4200MMA

16.111.6

1090.1

Aug '09

Sep '07

Sep '09

Dec '07

Stock Prices IndexS&P 500,1941 – 43 = 10

12MMA

Actual

12/12

1/12



41

-21

-14

-7

0

7

14

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

R-O-C

1.00

1.75

2.50

3.25

4.00

4.75

MMT

-0.1

2.6

$2.043

May '06

Jul '05

Retail Sales Excluding AutomobilesTrillions of 82-84$

12MMT 3MMT

3/1212/12



42

New Homes Sales Median Price to Stock Prices IndexData Trends

0

50

100

150

200

250

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Homes

0

300

600

900

1200

1500

Prices

New Homes

Stock Prices Index

43Consumer Expectations and Retail Sales

40

60

80

100

120

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Expectations

1.2

1.6

2.0

2.4

2.8

Sales

Expectations

Retail Sales

44

Light Vehicle Retail Sales to Consumer Expectations12/12 Rates-of-Change

-30

-20

-10

0

10

20

30

40

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

Consumer

-30

-20

-10

0

10

20

30

40Sales

Consumer Expectation

Automobile Sales

45

Consumer Price Index to Gold12/12 Rates-of-Change

-4

-2

0

2

4

6

8

10

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

Consumer

-20

-10

0

10

20

30

40

50Gold

Consumer Price

Gold Prices

46

Stock Prices Index to Consumer Expectations Index1/12 Rates-of-Change

-60

-45

-30

-15

0

15

30

45

60

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

Prices

-80

-60

-40

-20

0

20

40

60

80Index

Stock Prices

Consumer Index

47Building Permits12/12 Rates-of-Change

-50

-40

-30

-20

-10

0

10

20

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

-50

-40

-30

-20

-10

0

10

20

U.S. Michigan

48Building Permits12/12 Rates-of-Change

-60

-50

-40

-30

-20

-10

0

10

20

30

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

-60

-50

-40

-30

-20

-10

0

10

20

30

U.S. Illinois

49

-90

-75

-60

-45

-30

-15

0

15

30

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12

R-O-C

0.2

0.7

1.2

1.7

2.2

2.7

3.2

3.7

4.2

MMT

-10.2

11.5

0.592

Mar '06

Feb '08

Sep '09

Mar '01

Housing StartsMillions of Units

12MMT3MMT

3/1212/12



Don’t forget about long-term demographics

50Michigan Building Permits

Thousands of Units

-100

-80

-60

-40

-20

0

20

40

60

'96 '98 '00 '02 '04 '06 '08 '10 12

R-O-C

-10

10

30

50

70

90

110

130

150MMT

3.3

8.353

27.7

12MMT3MMT

3/12

12/12

51Michigan Housing Price Index

Year over Year % Change

-15

-10

-5

0

5

10

15

20

25

'78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

-15

-10

-5

0

5

10

15

20

25

Raw

52Illinois Building Permits

Thousands of Units

-100

-80

-60

-40

-20

0

20

40

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 11 12

R-O-C

-5

25

55

85

115

145

175

205

MMT

-14.9

12.209

32.1

12MMT3MMT

3/12

12/12

53Illinois Housing Price Index

Year over Year % Change

-10

-5

0

5

10

15

20

'78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

-10

-5

0

5

10

15

20

Raw

54

US Industrial Production to Private Non-Residential Construction12/12 Rates-of-Change

-24

-16

-8

0

8

16

24

32

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 12

Construction

-15

-10

-5

0

5

10

15

20US IP

Private Construction

US IP

55Company WRates-of-Change

Compute Your Rate-of-Change

-75

-50

-25

0

25

50

75

100

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

-75

-50

-25

0

25

50

75

100

3/12

12/12

56Company W to US Industrial Production

12/12 Rates-of-Change

How do I fit into the economy?

-15

-10

-5

0

5

10

15

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

US IP

-75

-50

-25

0

25

50

75Company W

US IP

Company



57

Phase A Phase B Phase C Phase DPhase A

A A

Phase A Phase B

A

B

A

B

Phase A Phase B Phase C

A

B C

A

B C

Phase A Phase B Phase C Phase D

A

B C

D A

B C

D

Make Your Move

Bankrupt

Expansion

58

Phase Management ObjectivesTM:

Phase Late D – Recession Early A - Early Recovery

1. Prepare training programs

2. Negotiate union contracts if possible

3. Develop advertising & marketing programs

4. Enter or renegotiate long-term leases

5. Look for additional vendors

6. Capital expenditures & acquisitions considered in

light of market-by-market potential

7. Make acquisitions – use pessimism to your

advantage

8. People will be scared – lead with optimism and “can

do” attitude

59

Phase Management ObjectivesTM :

1. Positive leadership modeling (culture turns into behavior)

2. Establish goals: tactical goals which lead to strategic achievement

3. Develop a system for measurement and accountability re: #2

4. Align compensation plans with #2 and #3

5. Process standardization

6. Judiciously expand credit

7. Check distributions systems for readiness to accommodate

increased activity

8. Review and uncover competitive advantages

9. Invest in customer market research (know what they value)

10. Improve efficiencies with investment in technology and software

Phase Late A - Recovery:

60


1. Accelerate training

2. Check the process flow for possible future bottlenecks

3. Continue to build inventory

4. Increase prices

5. Consider outside manufacturing sources if internal

pressures becoming tight

6. Find the answer to “What next?”

7. Open distribution channels (your own or outsource)

8. Use improved cash flow to improve corporate operations

9. Use cash to create new competitive advantages

10.Watch your debt-to-equity ratio and ROI

11.Maintain/pursue quality: don’t let complacency set in

Phase Early B - Growth:

61


1. Stay in stock on A items, be careful with C items2. Consider selling the business in a climate of maximum “goodwill”3. Penetrate new selected accounts4. Develop plan for lower activity in traditional, mature markets5. Freeze expansion plans (unless related to

“what is next”)6. Spin off undesirable operations7. Consider taking on subcontract work if the backside of the cycle

looks recessionary8. Stay realistic – beware of linear budgets9. Begin missionary efforts into new markets10.Communicate competitive advantages to maintain margins

Phase Late B Early C - Prosperity:

For follow-up questions, spreadsheet,TrendCastTM or Forecast information

please contact:

[email protected]

Documents

“The Future is Your Decision” August 2010 Presented By: Institute for Trend Research Alan Beaulieu [email protected]