Transcript No Slide Title

November 6, 2009
Dr. Loren C. Scott
Loren C. Scott & Associates, Inc.
www.lorencscottassociates.com
The National Economy
Recession (NOT Depression)
Environment
RGDP Forecasts(10/09)
Quarter
08-I
08-II
08-III
08-IV
09-I
09-II
09-III
09-IV
10-I
10-II
10-III
10-IV
Moody’s
-0.7
1.5%
-2.7%
-5.4%
- 6.4%
-0.7%
3.5%
2.5%
1.1%
1.8%
2.4%
3.0%
Consensus
-0.7
1.5%
-2.7%
-5.4%
-6.4%
-0.7%
3.5%
2.7%
2.7%
2.8%
2.9%
3.1%
RGDP Forecasts(10/09)
Quarter
08-I
08-II
08-III
08-IV
09-I
09-II
09-III
09-IV
10-I
10-II
10-III
10-IV
Moody’s
-0.7
1.5%
-2.7%
-5.4%
- 6.4%
-0.7%
3.5%
2.5%
1.1%
1.8%
2.4%
3.0%
Consensus
-0.7
1.5%
-2.7%
-5.4%
-6.4%
-0.7%
3.5%
2.7%
2.7%
2.8%
2.9%
3.1%
Index of Leading Economic Indicators:
Up
6
Straight
Months
2004=100
Source: Conference Board
RGDP Forecasts(10/09)
Quarter
10-I
10-II
10-III
10-IV
11-I
11-II
11-III
11-IV
Moody’s
1.1%
1.8%
2.4%
3.0%
3.8%
4.8%
5.4%
5.7%
Job Killers: Congress & Obama
Administration
• Higher taxes
• Pro-union
• Anti-Free trade
– Restrictions on Mexican trucks coming into U.S. in
violation of NAFTA
– “Buy American” provision of stimulus bill
– 35% tariff on Chinese tires
– Carbon tariff as part of House passed cap & trade bill
– Must-make-cars-in-America part of auto bailout
package
Add tariffs: Guess what always
happens?
Retaliation!
Job Killers:
Congress & Obama
Administration
•
•
•
•
•
•
Higher taxes
Pro-union
Anti-Free trade
Extreme pro-green
More regulation
Government-run health care
Wait Times? What Will
America Tolerate?
AVERAGE WAIT TIMES: U.S. versus Canada
Type of
Appointment
U.S. Wait Times
Canada Wait
Times (requires
referral)
Cardiologist
15.5 Days
51.1 Days
Orthopedic
Surgeon
16.8 Days
256.9 Days
Family Practice
Visit
20.5 Days
31.7 Days
Dermatology
22.1 Days
121.1 Days
OB-GYN
27.5 Days
112.7 Days
NOTE:
English National
Health Service
(NHS) and
Department of
Health (DH) have
set TARGETED
WAIT TIMES of 18
weeks (126 days)
for all specialist
appointments and
hospital
treatments.
As of 1/1/2009,
they were well
short of this goal.
Four NBER Indicators
Fig. 1: Monthly Change in US Employment
1200
Since 1/08:
-6,929,000 Jobs
(-5.2%)
Ur = 9.8%
9/09: -263,000
Thousands
800
400
0
-400
-800
1980
1985
1990
1995
2000
Source: Bureau of Labor Statistics
2005
U.S. Industrial Production Index
120
110
2002=100
100
90
80
70
Up last 3 months
60
50
1980
1985
1990
1995
2000
2005
Real Manufacturing & Trade Sector Sales
1100000
Millions of 1996 Dollars
1000000
900000
800000
700000
Up last 3 months
600000
500000
400000
1980
1985
1990
1995
2000
2005
Fig. 5: Real Personal Income Minus Transfer Payments
10000
Billions of 2000 Dollars
9000
8000
7000
6000
Up 2 of last 3 months
5000
4000
1980
1985
1990
1995
2000
2005
Another Big Problem
The credit crunch
The TED Spread
• Fear and distrust between financial institutions.
– LIBOR rate (opaqueness v transparency)
• Fear among average consumers
– 3-Month T-Bill rate
• The TED spread (normally 10-12 basis points)
– Was 4.64 (4.75-0.11); now 0.21 (0.28-0.07)
• Financial institutions are different depending on
where they are
Interest Rates Still Favorable
Fig. 2: 30-Year Fixed Mortgage Rate
18
16
2009-II - 2011-IV:
+202 basis points
Rate
14
12
10
8
6
4
1975
1980
1985
1990
1995
2000
2005
Source: Moody's Economy.com, 9/09
2010
Oil Price Forecasts
The “Onagistic” Approach
Fig. 4: Oil Prices
100
Price per Barrel
80
2010
Average $85
Low
$70
High
$100
60
2011
$85
$70
$100
40
20
0
1975
1980
1985
1990
1995
2000
2005
2010
Weekly Spot Price of Oil - US
140
Price per Barrel
120
100
80
60
40
20
50
100
150
1/2/04 to 1/23/09
200
250
Fig. 7: Price of Natural Gas
10
Price per MMBTU
8
6
Average
Low
High
2010
$4.50
$3.80
$6.00
2011
$4.50
$3.80
$6.00
4
2
0
1975
1980
1985
1990
1995
2000
2005
2010
Supply Side Considerations
• U.S. gas production: The Shale Plays
–
–
–
–
–
–
–
2003:
0.9%
2004:
–2.7%
2005:
-3.0%* (hurricane effect)
2006:
2.4%
2007:
3.3%
2008:
5.9%
First ½ 09: 1.6%
• Barnett Shale-Texas (29tcf?)
• Fayetteville Shale-Arkansas (11 tcf)
• Haynesville Shale-Louisiana (234tcf!!)
Haynesville Shale
• One estimate: 234tcf of natural gas
• Largest natural gas field in U.S.
• Well production
–
–
–
–
Conventional gas well: 2-3 mmcfd
Fayetteville Shale: 5 mmcfd
Marcellus Shale: 9.8–12 mmcfd
Haynesville Shale: 22-24 mmcfd!!
Obama’s Energy Policy
• $33 billion tax on the extraction industry
– Eliminate expensing of intangible drilling costs
– Eliminate allowance for percentage depletion
Oil Companies Don’t Pay Taxes
• Robert Shapiro and Nam Pham study of oil
company stock ownership
• 43% owned by mutual funds and asset management
companies that have mutual funds
– 55 million Americans
– Medium income: $68,700
• 27% owned by other institutional investors like
pension funds
– 2004: 2,600+ pension funds run by federal, state and local
governments held $64 billion in oil company shares
• 14% held in IRA’s and personal retirement
accounts held by 45 million Americans
Fig. 20: Louisiana Weekly Rig Count: July 2008 - July 200
200
190
Weekly Rig Count
180
170
160
X 4/09
150
140
130
120
5
10
15
20
25
30
35
40
45
50
Obama’s Energy Policy
• $33 billion tax on the extraction industry
– Eliminate expensing of intangible drilling costs
– Eliminate allowance for percentage depletion
• HR 2454: American Clean Energy & Security
Act
– National Petroleum & Refiners Association
• $330 mm a year for a 100,000 barrel a day refinery
• ExxonMobil in Baton Rouge $1.65 billion
– Passed by 219-212 in House; Senate unlikely to
pass
New Orleans
Fig. 14: New Orleans MSA Non-Farm Employment
Forecast: 2010-11
620
600
Thousands
580
560
540
-8.3%
Decline
520
2010: +3,000 (0.6%)
2010: +2,500 (0.5%)
Worst in state
500
2005-06:
-133,700 jobs
(-21.8%)
480
460
1980
1985
1990
1995
2000
2005
2010
NO Future
• $9.3 billion in construction projects
– But watch Marathon
– Many earlier announcements on hold & iffy
• Manufacturing iffy
– Lockheed Martin (1,700 to 300-600?)
– NG, Textron stable
– Trinity Marine gone
• Tourism?
– Convention business (-)
– Casino revenues Oct-Sept down 5.2%
– Six Flags (+)
Fig. 16: Baton Rouge MSA Non-Farm Employment
Forecast: 2010-11
400
Thousands
360
Statewide
Recession:
-9.0%
BTR: -2.2%
-4,800 Jobs
2001:
-3,900 Jobs
(-1.1%)
320
280
2010: +4,000 jobs (1.1%)
2011: +5,500 jobs (1.5%)
#3 in state
Five Parishes Added X
240
200
1980
1985
1990
1995
2000
2005
2010
Future “+”
• $5.1 billion in construction activity
• SNF Polymer Project: Iberville Parish
– $362 mm capex
– 500 jobs (100in 2011; 100 each additional year)
• Digital media company
– 105 jobs as of 8/09
– Will be at 250 by end of 2010
• Shaw: keep its HQ in BTR and add 150 a
year btw now and 2018
Future “+”
• Staples: at 154 jobs; must add 100 in 2010 &
2011 as well
• Old Tembec Paper Mill sold to PanAmerican;
reopened as Renew in 7/09
• 200 new jobs initially
• To 400 w/I three years
Losses in BTR
• Dow Plaquemines:
– -160 (permanent)
– -400 contractors (temporary)
•
•
•
•
IFC: -516 jobs 3/09
Capital One: -180
Trinity Marine: -190 (temporary?)
Excide Batteries: -132 jobs temporarily (3/09)
Concerns
• State government?
• Chemicals/Refineries?
– Cap & Trade?
Fig. 21: Lafayette MSA Non-Farm Employment
Forecast: 2010-11
160
2010: 700 jobs (0.5%)
2011: 1,000 jobs (0.7%)
Only New Orleans worse
150
Thousands
140
130
120
110
100
-19.4%
Decline
X Acadia & St. Landry Dropped
90
1980
1985
1990
1995
2000
2005
2010
Lafayette Future
• Lethargic Extraction big problem
• $474.2 million in construction
– Much done in 2010
•
•
•
•
Stuller adding 100
Acadian Ambulance adding 25
TransComm: +700
Flight Safety International:
– $120 mm, 70,000sq ft flight simulator facility (about
finished)
– 50-60 jobs @ $60,000
• TETRA creating 140 new jobs @$35k: start 11/09
Fig. 23: Houma MSA Non-Farm Employment
Forecast: 2010-11
100
Thousands
90
80
1997: New Record
(10 Years)
X
70
2010: 900 jobs (0.9%)
2011: 800 jobs (0.8%)
#6 in state
60
50
1980
-24.6%
Decline
1985
1990
1995
2000
2005
2010
Houma Future
• Lethargic extraction sector
• Shipbuilding a plus
– Edison Chouest: at least +1,000
– Bollinger: stable
• Fabricators: If hit on contracts
– Gulf Island: +350
– J. Ray McDermott: +250
• $184.6 million in road & coastal restoration
Good News for Houma
• Performance Energy
– $26 mm investment at Port of Terrebonne
– Start 09-III; complete mid 2010
– 350 new jobs; retain existing 800 jobs
• Fourchon: $14 mm bulkhead completed by fall 09
to attract new companies
– Expert Risers adding firm there
– CalDive new facility there
– Building another 1100’, already full of committed
companies.
– New $11 mm helicopter facility at South Lafourche
Airport.
Fig. 25 Lake Charles MSA Non-Farm Employment
Forecast: 2009-11
100
Casino
Bump
Thousands
90
80
1990: Cameron Added X
70
1992
Boeing
Closure
60
2010: 1,000 jobs (1.1%)
2011: 1.700 jobs (1.8%)
#2 in state!
-17.9%
Decline
50
1980
1985
1990
1995
2000
2005
2010
Lake Charles Future
• Sugarcane Bay Casino (1,600-1,800)
– (Casino revenue Oct-Sept up 6.3%)
•
•
•
•
•
•
•
Global Modular Solutions (+1,400)
Aeroframe (+250)
NG: some additions?
$350 mm a year in maintenance at petrochem plants
$108.7 mm highways & coastal restoration
Leucedia? $1.8 billion
But cap & trade???
Fig. 27: Monroe MSA Wage & Salary Employment
Forecast: 2010-11
85
80
Thousands
75
70
2010: +1,900 jobs (2.5%)
2011: +1,500 jobs (1.5%)
#1 in state
65
60 1990: Union Added X
X 1989: New Record
55
50
1980
1985
1990
1995
2000
2005
2010
Monroe Future?
•
•
•
•
•
Foster Farms (+1,600)
$634 mm V-Vehicle plant (+1,400)
Chase Mortgage (+250)
Gardner Denver Thomas (+280)
Just outside MSA
– Conagra: $155 mm capex; 275 jobs
Fig. 29: Alexandria MSA Non-Farm Employment
Forecast: 2010-11
70
65
2010: +600 jobs (0.9%)
2011: +600 jobs (0.9%)
#5 in state
Thousands
60
55
50
45
40
X Grant Parish added
Alexandria Future
•
•
•
•
Cleco Rodemaker plant done
Union Tank Car rehire 250?
$208 mm in road projects
$100 mm to replace O.K. Allen Bridge:
bids let 2010
• Rebounding lumber industry?
• Dresser Industries down 75
Fig. 31: Louisiana Non-Farm Employment:
2010-11
2000
2009: -11,000 jobs (-0.6%)
1900
Thousands
1800
1700
2010: +17,800 Jobs (0.9%)
2011: +18,000 Jobs (0.9%)
1600
1500
1400
1980
1985
1990
1995
2000
2005
2010
The Clash of Ideas
Karl Marx
• “From each according to his abilities, to
each according to his needs”
• “The theory of Communism may be
summed up in one sentence: Abolish all
private property.”
Adam Smith
• “Competition alone can regulate prices
with equity; it alone restricts them to a
moderation which varies little; it alone
attracts with certainty provisions where
they are wanted or labour where it is
required.”
The Competition
begins July 27, 1953
• North Korea (2003)
– GDP per capita $1,300
– % below poverty - NA
– % Ag – 30.2%
• South Korea (2003)
– GDP per capita- $17,800
– % below poverty – 4%
– %Agriculture 3.6%
But these are just technical
economic measures
Is there another indicator of
economic health?
Another measure of an Economy
November 6, 2009
Dr. Loren C. Scott
Loren C. Scott & Associates, Inc.
www.lorencscottassociates.com