2H2022 – November Macro Highlights

As the famous Charlie Munger once said, “The best thing a human being can do is help another human being know more.”

From the business side:

Cost Reduction is top focus. Since Q1.

Reducing spending & minimizing discretionary expenses (ones we can control) “cutting excess & fat”

Restructuring – streamlining supply chain & possible vertical integration to reduce costs further – either in the beginning at raw material or in the delivery/fulfillment.

Increasing efficiency is esp important as productivity is compressed and reduced.

Productivity – output/$ is down. It costs more to produce a single unit.

Challenge that needs solution!

Our industry news. Research demonstrates Autonomous equipment for heavy equip, robots, systems & software appears to be a solution to increase productivity, safety, reduce costs & efficiency in operations!

We are in a new world. Challenges lead to innovation and birth new leading industries. Necessity is the mother of invention

Rise in cost of capital & debt, production, labor (Not only nominal wages, employment fees – IAS surcharge, etc)

Dilution of Value.

Supply chain delays still present so bal between maintaining higher inventories to avoid delays for order completion & keeping accounts payable down. Plus there is uncertainty about future orders.

There are Compressed margins – costs may have come down from peak but still elevated.

Many Revenues held up by incr prices & inflation rather than higher output/vol.

Earnings are under pressure – margins squeezed with diminished future valuations & slowed growth

Global slowdown – manuf indexes (forward indic for earnings) are lower – New Orders down, lower business outlook.

As REAL Demand comes down, less output is required, less need for workers.

Real incomes & spending are weaker so business sales are also weaker.

Excess production is finding its way into inventory build. And w/o sales growth it is unsustainable.

Global demand is suppressed. Shift from supply to more Demand constrained market.

Concern is as I mentioned before: lower demand with rising inventory levels.

Our customer base has also changed to larger companies, Fortune 500 as well as completely different industries/sectors. More consumer staples, industrials, food, medical, etc.