As I write these lines, the Dow is at 11,463.27, down about 90 points from what it was on September 3. That’s not exactly what you could call a stock market crash. I’ll grant you, the month has definitely been quite a roller coaster ride, but then, the DOW is always a roller coaster. We need to remember that.
There’s another interesting number that’s not making headlines, but could be much more important over the next few months. Oil closed yesterday (September 8) at $97.88 a barrel, up 72 cents for the day but down almost $50.00 from the mid-July high. For most manufacturing companies, that number will prove to be a lot more significant over the next few months if it remains stable, because the price of oil directly affects the price of raw materials and, of course, logistics on the other end.
(By the way, many experts think the price per barrel will fall to around $70 before too long, based on the fundamentals at work.)
A third important number that’s not getting much attention is the exchange rate for the Euro, which stands as I write this at $1.44. People planning a vacation in Italy next summer don’t like it, but it’s a great number for manufacturers who want to sell into the European market.
So, in spite of the genuine catastrophes suffered by some of the icons of American business this last week, we are not facing disaster, provided the government acts responsibly.
And it is.
I was particularly heartened to see CNN images featuring some of the most conservative and most liberal members of our government gathered around the same table and – wonder of wonders – listening to one another.
It’s important to see the looming mega-bailout they were talking about (and the ones that have already taken place) in the proper perspective. To state that a government bail-out would somehow put tax payers’ money at risk and reward poor management (the so-called “moral hazard doctrine) is to grossly misrepresent the situation. The truth is, there are so many should-haves and shouldn’t-haves in this situation that if we published them all, it would probably crash this whole site.
There will be plenty of time to assign blame down the road. For now, what’s needed is action. The government should do whatever it takes to stabilize and restore confidence in the financial system at every level.
If that doesn’t happen, the next time you go to the bank to borrow some money for a new CNC machine, the money won’t be there. In fact, the bank might not be there either.