Equipment Finance Industry Confidence Shows Signs of Improvement

Washington, DC, October 22, 2010 –- The Equipment Leasing & Finance Foundation (the Foundation) releases the October 2010 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today.  Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $521 billion equipment finance sector.   Overall, confidence in the equipment finance market is 58.8, an improvement from the September 2010 index of 56.9.

When asked about the outlook for the future, survey respondent Russell Nelson of Farm Credit Leasing, said, “Continued uncertainty and volatility in domestic and foreign markets, mixed economic data and forecasts, political impact of November elections, ongoing regulatory issues, and pending lease accounting changes will change the operating landscape and the number of players during the next 12 to 24 months.  Institutions with strong capital, diversified customer/industry base, operational discipline, and creative/talented/energetic workforce will be rewarded with significant increase in demand for financing of necessary asset growth and replacement of aging equipment.”

October  2010 Survey Results:

The overall MCI-EFI is 58.8, an improvement from the September index of 56.9.

§         When asked to assess if their current business conditions would remain the same over the next four months, 26.8% of executives responding said they believe business conditions will improve over the next four months, a slight decrease from 27.9% in September. 7.3% believe conditions will get worse (compared with 4.7% in September), and 65.9% believe business conditions will remain the same over the next four months.

• 34% of survey respondents, up from 32.6% in September, believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, while 61%, up from 55.8% in September, believe demand will “remain the same” during the same four-month time period, and 4.9%, a significant drop from 11.6% in September,  believe demand will decrease.

• 78% of survey respondents indicate they expect the “same” access to capital to fund business, a significant increase from 67.4% in September.  22% of executives expect more access to capital to fund equipment acquisitions over the next four months. 4.7% expect “less” access to capital.
• When asked, 22% of the executives reported they expect to hire more employees over the next four months, up from 20.9% in September, and 70.7% expect no change in headcount over the next four months, while 7.3% expect to lay off employees, up from  4.7% in September.

• 100% of the leadership still evaluate the current U.S. economy as “poor” or “fair.”  In September, 68% rated the economy as “fair” and 32% rated the economy as “poor”.

• 17% of survey respondents believe that U.S. economic conditions will get “better” over the next six months. 75.6% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 69.8% response in September. 7% believe economic conditions in the U.S. will worsen over the next six months.

• In October, 36.6% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 27.9% in September.  63% believe there will be “no change” in business development spending.

October  2010 MCI Survey Comments from Industry Executive Leadership:

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

Bank, Large Ticket

“The leasing industry will continue to be challenged in the near future due to upcoming lease accounting changes, modest client demand and excess liquidity.” CEO, Large-ticket, bank owned company

Captive, Small Ticket

“Depending on the accounting and tax situation, I think the future of the industry is uncertain.” CEO, Small-ticket Captive

Bank, Middle Market

“[The Industry] remains challenged as businesses are carefully regarding their commitment to capex spending.”  Elaine Temple, BancorpSouth Equipment Finance

 

Why an MCI-EFI?

Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?

The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies.  The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity.  Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry's confidence.

How is the MCI-EFI designed?

The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment

How may I access the MCI-EFI?

Survey results are posted on the Foundation website, http://www.leasefoundation.org/IndRsrcs/MCI/, included in the Foundation Forecast newsletter and included in press releases.   Survey respondent demographics and additional information about the MCI are also available at the link above.

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The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at http://www.leasefoundation.org/.  

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Going green- A coming of age for renewable energy?

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Bring on the Renewable Energy projects!

Forecasted by many international energy institutions- Investments in "New Technologies", including finance is expected to surpass $325 billion by 2018. We like that!!!

U.S. Infrastructure Spending: No Time to Get Cheap

Infrastructure outlays not only improve the public well-being but also boost returns for the private sector, says columnist Chris Farrell

By Chris Farrell

It's hard to imagine at the moment, with America's fractious and politically vicious midterm elections drawing near, but the outline of Round Three in the federal government's efforts to stimulate the economy is becoming clearer.

Round One came in late 2008 with the Bush Administration's bank bailout and the Federal Reserve's easing of monetary policy. The defining initiative of Round Two was the Obama Administration's nearly $800 billion fiscal stimulus package signed into law on Feb. 17, 2009 (along with more Fed easing).
Round Three is largely based on—who else—the Fed taking steps to bring down long-term interest rates even more by buying up U.S. Treasury securities, the so-called quantitative easing. The fiscal lever this time around? A boost in infrastructure spending.
The latter initiative is vulnerable, of course. The Obama Administration on Oct. 11 proposed a $50 billion up-front investment in highways, roads, and the air transport system. That's on top of the $68 billion infrastructure spending that was part of the 2009 fiscal stimulus bill, money earmarked for highways, rail, transit, broadband, school modernization, water treatment, and airport improvement. The Administration has also proposed an "infrastructure bank" to cut down on duplicate projects and to attract private capital as co-investors in various initiatives.

Worries About Fiscal Policy

Large capital projects on infrastructure traditionally appeal across party lines since so many constituents benefit from the investment. But that traditional political calculation may not hold in an era when the Tea Party movement is repelled by the federal government's red ink and even a silent majority of more mainstream political participants seems to share a common worry about the soundness of fiscal policy.The backlash against government spending carries over to the state level.For instance, New Jersey Governor Chris Christie cited the cash-strapped state's finances when, on Oct.7, he cancelled its participation in an $8.7 billion-plus train tunnel project under the Hudson River.
But the embrace of fiscal conservatism, while understandable, risks ignoring what should be a top priority for the nation's long-term economic health. For one thing, the Aug. 1, 2007, tragic collapse of the I-35 bridge in Minneapolis vividly signaled the nation's deteriorating infrastructure. The investment need is there. For another, it's the kind of government spending that not only yields public quality-of-life benefits; it also raises private rates of return.
And with the government's cost of investment capital extremely low—taken a look at Treasury yields recently?—and heading even lower, the hurdle rate for a positive rate of return on government expenditures won't be hard to reach.
"Spending now on infrastructure stimulates the economy in a way that will help provide for long-term higher economic growth that will increase future tax revenue and bring down the debt-to-GDP ratio," says David Aschauer, economist at Bates College. He's the author of an influential set of research papers from the late 1980s and early 1990s on the effect of infrastructure spending on national productivity. "It's real supply-side economics." (One of Ashauer's better-known articles, "Why Is Infrastructure Important?" is available on the Boston Fed's website.The late Edward Gramlich, economist and former Federal Reserve Board governor, wrote a critical review of the infrastructure/productivity literature of the time in "Infrastructure Investment: A Review Essay," which can be found on the World Bank's site.)

Read more: http://www.businessweek.com/investor/content/oct2010/pi20101014_543655_page_2.htm

Solar Energy- Plastic Solar Cells

Physicists at Rutgers University in New Jersey have found new properties in an organic semiconductor material that could lead to efficient and inexpensive plastic solar cells.
“Organic semiconductors are promising for solar cells and other uses, such as video displays, because they can be fabricated in large plastic sheets,” said Vitaly Podzorov, assistant professor of physics at the university.
“But their limited photovoltaic conversion efficiency has held them back. We expect our discovery to stimulate further development and progress,” he continued.
Mr. Podzorov and his colleagues learned that excitons can travel a thousand times farther in a pure crystal organic semiconductor called rubrene.

Excitons are particles that consist of an electron and an electron hole and are formed when a semiconducting material absorbs photons or light particles. They generate a photo-voltage when they hit a semiconductor boundary or junction, which is how power is generated in a solar device.

Typically, excitons can only travel less than 20 nanometers in organic semiconductors, placing them at a disadvantage with inorganic solar cell materials such as silicon or gallium arsenide.
If excitons diffuse only tens of nanometers, only those closest to the boundaries would generate photo-voltage. This accounts for the low electric conversion efficiencies of current organic solar cells.
However, the excitons in the rubrene crystals are capable of travelling farther, thus generating more photo-voltage for a higher electric conversion efficiency.
Since excitons are not charged, they are hard to measure using traditional methods. The researchers developed a technique based on optical spectroscopy called polarization resolved photocurrent spectroscopy to dissociate excitons at the rubrene’s surface, revealing a large photocurrent.
The researchers speculate that the technique can be applicable to other possible organic semiconductor materials.

Crude Rebounds On Weaker Dollar

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Farming Industry Outlook - Best in 2 1/2 Decades

According to Bloomberg Business Report, this year is going to be the best year American farmers have had in two and a half decades. The next big winners are the fertilizer companies and farm-equipment manufacturers.

Sales of farm equipment are correlated to growers' cash receipts, which should rise 24 percent to $118.4 billion for major crops in the 2010-2011 season, Ann Duignan, an analyst at JPMorgan in New York, said in an Oct. 8 report.

Farmers are taking advantage of low interest rates to buy land and machinery.

In September, sales of four-wheel-drive tractors in the U.S. were 21 percent higher than at the same time last year, and sales of combine harvesters jumped 12 percent, the Association of Equipment Manufacturers said Oct. 13.

Brandon Hunnicutt, who farms about 3,600 acres of mostly corn and soybeans in Giltner, Nebraska, said he may spend more on fertilizer and improve equipment.

"Some of those purchases maybe you were hoping you could make we should be able to make now because you have $5 corn," said Hunnicutt, who's also the president of the Nebraska Corn Growers Association. "Five-dollar corn makes it a whole lot easier to justify some of that."http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/10/18/bloomberg1376-LAG0670UQVI901-3A01I3BCV2AGHGHB0OSSM1C8UC.DTL&ao=2#ixzz12pIrlZDN

Mazuma Capital Funds Renewable Energy Initiative for Top National Communications, Media and Automotive Services Enterprise - WAFB Channel 9, Baton Rouge, LA |

Mazuma Capital Funds Renewable Energy Initiative for Top National Communications, Media and Automotive Services Enterprise - WAFB Channel 9, Baton Rouge, LA

Dollar's Swoon Opens Door

By JAMES R. HAGERTY

The slumping U.S. dollar is opening new sales opportunities abroad for American manufacturers, who are worried about a sputtering economy but also concerned about how to cope with a volatile currency market.
Many U.S. companies—from coal miners to a producer of tugboat clutches—are seeing stronger demand in Europe and Asia as the weak dollar makes U.S. goods cheaper there.

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Tim Harrison for the Wall Street Journal

A Logan Clutch employee works on clutch parts for airport snowblowers.

Economists say the dollar's swoon, which started in mid-September following a summer rally, will provide a modest boost for U.S. exports, but they caution that it means American consumers and businesses will pay more for imported goods and raw materials.
The weak dollar is helping Consol Energy Inc., a big Pittsburgh-based coal and natural-gas producer, compete with South African and Australian miners for coal sales to the key Chinese market, says Bob Pusateri, Consol's executive vice president for marketing. To improve its export prospects, Consol opened offices this year in Shanghai, Beijing, Seoul, Tokyo and Zug, Switzerland, through a partnership with a trading firm.

The timing of the dollar's drop has been especially favorable for Consol. China is showing a renewed interest in building up [its] commodity inventories," Mr. Pusateri says. Consol's coal sales to China are likely to total nearly three million tons both this year and in 2011, up from 500,000 tons in 2009, he says. The sagging dollar also is helping Consol in Europe and Latin America.
Last week, the Commerce Department reported that U.S. imports grew much more rapidly than exports in August, widening the trade deficit and further damping the dollar. Expectations that the Federal Reserve will create more currency to buy bonds also are driving down the dollar's value.
The rapidity of the dollar's drop has some companies on edge. "The volatility is what really kills manufacturing," says Ron DeFeo, chief executive of Terex Corp., a big maker of cranes, excavators and other construction equipment, based in Westport, Conn. "We can plan for a certain bandwidth of currency variation," he says.
For instance, the company uses forward contracts, which lock in currency-exchange rates on certain future dates, and it buys parts in a variety of currencies. "We're fine for now," Mr. DeFeo says, as currency rates haven't reached "extremes." But a further, sustained drop in the dollar would force Terex to rethink where it buys some of its parts and where it makes certain products. The executive says the last thing he wants to see is "a yo-yo situation," with currencies bouncing up and down.
A strong dollar tends to help Terex, making it easier to sell machinery it makes in Europe to U.S. customers. But Terex also exports machinery from the U.S. With plants in both places, Mr. DeFeo says, to some extent "we have a natural hedge" against currency swings.
But Mr. DeFeo says governments shouldn't see a weaker currency as a cure for their economies: "Currency weakness is not an export strategy, in my opinion." Though a weak currency can help exports, at least in the short run, he would rather see a strong dollar "because it's a reflection of the U.S. economy" and its overall health.
Despite the weak dollar, Joshua Shapiro, chief U.S. economist for MFR Inc., an economic advisory firm in New York, expects U.S. export growth to slow to a range of 4.5% to 5% next year from an estimated 8.4% in 2010 because buyers of manufactured goods have largely rebuilt depleted inventories.
Ken Matheny, a senior economist at Macroeconomic Advisers LLC in St. Louis, is more bullish. He says the recent drop in the dollar will help keep export growth robust in the next couple of years and help buoy overall U.S. economic growth.
Andrew Logan, president of Cleveland-based Logan Clutch Corp., a maker of clutches for industrial and marine equipment, including tugboats and snow-removal equipment, began carting its products to trade shows in Asia and Europe 18 months ago. His efforts paid off. Exports at the family-owned company this year are running at about 20% of sales, nearly double the rate last year, Mr. Logan says.
"When the dollar started to slide and stay there, we had more European customers interested in our products," says Mr. Logan. Some overseas customers believe the dollar will stay weak for a long spell, and that means "they're more willing to make a commitment" to buying Logan clutches, which are designed to cut energy costs, he says.

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Reuters/Sukree Sukplang

A Bangkok bank employee counts U.S. hundred dollar bills.

With oil priced in dollars, one risk is that oil producers could push up their prices to compensate for the decline in the dollar value of their products, says Joseph LaVorgna, chief U.S. economist for Deutsche Bank AG in New York. Higher energy costs could shatter American consumers' already-fragile confidence, and thus drag down manufacturers, which also would be hurt by higher energy costs.
Business confidence already is wavering amid signs the economy remains anemic. A Business Council survey of CEOs, released last week, showed one-third expect improving business conditions over the next six months, down from two-thirds in May.
Despite the gloom, says Larry Kantor, global head of research for Barclays Capital in New York, the weak dollar "is a net plus for the U.S. economy." In the absence of free-trade agreements,A weaker dollar "is one of the few ways you can get exports going," says Mr. Kantor, who thinks many U.S. energy, industrial and agricultural companies will benefit.
For global companies based in the U.S., the impact of currency swings can be muted because they have factories in many countries and costs in a variety of currencies. At St. Paul, Minn.-based 3M Co., whose products ranging from dental supplies to films used in computer screens, the weaker dollar provides only a small boost, says Steven Winoker, an analyst at Sanford C. Bernstein & Co. He recently lifted his forecast of 3M's 2011 earnings to $6.20 a share, compared with his forecast of $5.54 in 2010. The 2011 forecast is about three cents more than it would have been without the dollar's drop.
A 3M spokeswoman declined to comment.
"We tend to manufacture where we sell our products," says Glenn Eisenberg, chief financial officer at Timken Co. The Canton, Ohio-based maker of roller bearings, gear boxes and other industrial goods has manufacturing plants in 12 countries. As a result, he said, currency swings "tend not to be a big issue," but the company does try to "immunize" itself against them by using forward contracts. In the first half of 2010, Timken says, currency fluctuations added about 1% to its global sales in dollar terms.
For some smaller companies, the dollar's weakness offers greater potential benefits because they are growing from a small base. Ron Overton, president of Overton Industries Inc., a tool-and-die company in South Mooresville, Ind., recently hired a marketing company in Chicago to help find more buyers in Japan and elsewhere in Asia.
With the dollar on the ropes, "We have a little bit of a price advantage," says Mr. Overton, whose company traditionally has relied on North American for nearly all its sales.
At Webco Industries Inc., a maker of metal tubes based in Sand Springs, Okla., the weak dollar helps in another way. Along with spurring exports, it makes its products less expensive than imports. It is "going to help us be insulated against foreign competition," says Mike Howard, chief financial officer.