Don't mention the 'r' word

December 20, 2007
By: Dan Davis

I went to see my family"s financial adviser on Monday. My wife has some cash left over from a flexible spending account that was set up to pay for my son"s braces. She wants to roll the cash into a 403(b), sort of a 401(k) for
teachers, because she wants something to supplement her pension, which may or may not be there depending on weird
political shenanigans that go on in Springfield, Ill.

Overall, we are doing OK. We"ve got some money set aside in individual retirement accounts; some stocks given to us as part of an inheritance; and my one share of stock from The Limited, which I bought after my summer working in the stockroom at Victoria"s Secret in Baton Rouge, La., in 1989. (That"s a story for another day.) The investments we have made have done well for us over the past year.

The news made me want to scrap one of the two questions I had for the financial adviser: Is it time for us to put all of our money into gold?

Despite all the news about the possibility of the dreaded r word—recession—most people still are positive about 2008. There"s no doubt that industries closely connected to the residential housing market find themselves in recessionlike times, but the truth is, that is not the case for other industries.

In fact, the economy is coming off growth of 4.9 percent in the third quarter of 2007. That will be much lower in the fourth quarter of this year and the first quarter of 2008, but that type of performance does not a recession make.

The Institute for Supply Management is actually predicting a very robust year for manufacturing in 2008. Its survey of approximately 400 purchasing and supply management executives revealed that they believe manufacturing revenue will increase 6.8 percent in 2008. The same survey respondents believe that revenue related to service businesses will increase only 2 percent next year.

So the r word for manufacturing might stand for robust. Hearkening back to the Metals Service Center Institute Economic Summit: Forecast 2008 in September,
presenters painted a pretty optimistic picture for industries such as aerospace, commercial transportation,
agricultural equipment, heavy-duty construction equipment, nonresidential building construction, and power generation. Even the appliance industry was expected to see a slight boost in units shipped in 2008 because of
remodeling fever in the U.S. The only segment with real troubles was the automobile industry, where the Detroit Three look to transition away from gas-guzzling sports utility vehicles and the Asian automakers want more market
share, usually forgetting to include domestic parts manufacturers in their expansion plans.

Rob Marelli, president, Seconn Fabrication, Waterford, Conn., said his company is looking to tap into some very large metal supply chains in the coming year. He"s taking on only a portion of the new business he might be able to because he wants to ensure that the new business doesn"t overwhelm his current manufacturing capacity. He"s confident enough about 2008 that he"s actually expanding his 35,000-square-foot facility by another 24,000 square feet and adding an automated laser machine cutting cell and a new powder coating line with automated guns and a five-stage pretreatment washer.

Chris Kuehl, managing director of Armada Corporate Intelligence and contributor to the Fabricators & Manufacturers Association"s Fabrinomics economic report, probably would agree with Marelli"s strategy.

Kuehl told the crowd gathered for The FABRICATOR"s Industry Forecast Breakfast at November"s FABTECH© International & AWS Welding Show that he believes that the U.S. GDP would fall to 1.5 percent to 2 percent for the
fourth quarter of 2007 and first quarter of 2008, but then spring back to 3 percent to 3.5 percent by the second quarter of 2008.

Even if he"s off the mark, that"s not too bad. And it"s not a recession by any means.

By the way, the other question I wanted to ask my financial adviser was How do you get paid? Because we received such good news from him, I didn"t want to bring up this matter and risk making him angry. It"s like my relationships with doctors and mechanics: I don"t care how they do it, just as long as they do it right.

Dan Davis

Dan Davis

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8281