Category: Manufacturing

How the F-35 Will Go Together

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Stephen Trimble, of Flight International, got an approved for public release Powerpoint snap shot of the manufacturing process for the F-35.

It was too large to post, but I managed to work around Microflaccid’s image export utility without editing the registry (the trick is that you change the page size to ginormus), and so you can look at the full chart as a gif (994K) by clicking on the image.

As the good Mr. Trimble notes, this process is how thousands of JSFs are supposed to be manufactured over the next few years.

Germany: Old Economy Doing Just Fine

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For the past couple of years, Germany has been the engine of the Euro zone economy.

Turning bolts, Germans were told – often by other Germans – had no future in Germany. The persistence of heavy manufacturing symbolized the country’s inability or unwillingness to transform itself into a modern, services-oriented economy like the United States or Britain, two oft-used yardsticks.

Today, the manufacturing sector in Germany is growing as a proportion of the country’s total economic output, and Germany looks set to outpace far larger economies like China and the United States as the world’s largest merchandise exporter for the fourth year running.

In addition, making all manner of valves, motors, machine tools and robots is providing Germans with something rare in the global economy: shelter from the storm. Thanks to bolt-turning, the German economy grew at an annual rate of 6 percent in the first quarter of this year.

In the US, we are told it’s all services baby. Sell houses (like that’s working), or sell securities (the revenue model is vanishing in a puff of smoke), or maybe sue people for patents on stuff you never made….

Not working so well, and that’s because brokering is essentially a parasitic activity. We have been taking other’s people money and we’ve been….I don’t know…I guess employing no account coke head brothers-in-law or something.

Our economy is far closer to Spains during the height of its colonies now than it was in 1929. Then we had a robust manufacturing sector that could power a recovery, once demand picked up.

Right now, however, what does the US really make?

Damned if I know.

Economics Update

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I guess for those of us in the US, the big 3 are employment, energy prices, and real estate. So, going in that order, we have:
nitial jobless claims rising to 371,000 last week, though as I always state, this is a noisy number, and you need a few weeks, or better yet months to extract real meaning, but, quoting the article, “The trend in claims is still upwards and we expect new highs over the next few months.”

Matt Trivisonno has the withholding tax numbers, you know the social security taxes that employers take out of wages below about $104K, and they are way down too.

Here are the pretty pictures:


Trending Down on a daily basis


And on a quarterly basis


And on a yearly basis.

As to why these numbers fell? Because no one is making anything in the US in April. Industrial production fell -0.7% in the US. The consensus estimate was -0.3% down, and March output was ajusted to +0.2%, down from +0.3%. Not good.

In energy, Crude fell below $122/bbl, which is good, but Gas hit a new record, $3.776 a gallon, the 8th record in 8 days.

In real estate, we have the inevitable article calling the light at the end of the tunnel, when it is more likely an oncoming train, in Orlando, Florids, one of the worst hit areas. Inventory fell slightly, and sales are up a bit (0.2%), and the rate of decline of existing home sales is a bit better.

Me, I’ll go with National Association of Home Builders/Wells Fargo monthly index, which fell again. The home builders are in the business.

I would also note that even with the Fed rate cuts, mortgage rates fall seem to be pretty stubborn about staying above the 6.0% line, so there won’t be any help for the market there.

Europe, on the other hand, appears to be doing fairly well, with GDP increasing 0.7% across the Euro Zone in the first quarter, led by a sizzling, for the developed world anyway, 1.5% increase for Germany.

This makes it far less likely that the ECB will cut rates. Actually it makes it more likely that the ECB will raise rates, and as a result, the US dollar is down today.

Economics Update

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Clickable Image

In terms of economic indicators, we have 4 today, one up, and three down.

FWIW, the Jobless claims are noisy, but overall the numbers are trending up, and the LEI typically does not mean anything until you get three in a row.

The Dollar hit a new low vs. the Euro, $1.5982:€.

As an aside, I spend a fair amount of time on currency, because I believe that it will be the final nail in the proverbial coffin, much like it was in the Asian and Argentine financial crises.

In banking, investment and otherwise, we have
Merrilly Lynch announcing a $6.5 billion write down and massive layoffs.

Across the pond, we have the Bank of England announcing that it had three times as many bids for its cash auction as it was offering, implying that credit is still pretty frozen, and the prospect of massive bank failures in Germany as a result of the subprime crisis, which truth be told extends well into the prime mortgages too.

Finally, in another sign of the apocalypse, my predictions regarding the countrywide sale, that Bank of America was throwing good money after bad, appear to be coming true, as , “Continued credit deterioration at Countrywide Financial Corp. could raise concern among investors about the final sale price of the mortgage lender to Bank of America Corp., a Lehman Brothers analyst said Thursday.”

Economics Update

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Note that this has been, for whatever reason, a busy news day, so this does not include news related to real estate or to the bond insurance crisis. Those will be posted later.

We have downward pressure on the dollar, because additional Fed rate cuts are anticipated.

Basically, the thought is that Fed rate cuts lead to lower interest rates, which make the dollar less attractive, because rates of return are less.

If I had the money, I would bet against this, because, as the latest rate cuts have showed, the Fed can no longer move rates down. We are in a Japan style liquidity trap.

We also have a type of investment that I have never heard of before, auction rate securities, which were sold as being as liquid as cash. They work by regularly re-auctioning the securities on a fairly frequent basis, allowing for people to sell easily, and for the rates to adjust to suit market conditions.

These are now becoming increasingly illiquid, with thousands of auctions failing, and Goldman Sachs refusing to let investors withdraw money from their investments when auctions fail to attract buyers.

UBS has notified its 8200 US brokers that it will not support these securities if the auction fails either.

FWIW, Paul Krugman has a very good editorial, even by his own ordinarily high standards, describing what is going wrong, and the consequences of this failure in terms that a layman like me can understand.

Related is the news that Citigroup is suspending withdrawals from its CSO Partners hedge fund.

In terms of the real economy, as opposed to high finance, we have the New York Federal reserve reporting that its Empire State Manufacturing Index fell nearly 21 points, from +9.03 in January to -11.72 in February. It was expected to fall, but only to +5.75.

The Financial Times is reporting that banks are being advised to walk away from the private equity deals that they are funding, because the penalties are far lower than the potential losses.

This would stop private equity buyouts in their tracks.