Business Core Capex Spending May 3, 2007 5:00pm by Barry Ritholtz We last looked at this in mid April, so the most recent data is worth reviewing:> click for larger chart > Courtesy of Bronson Capital Markets Research Spread the wealth. twitter facebook linkedin What's been said: Discussions found on the web: Eclectic commented on May 3 Barrinugo, You caun alsso teake’ye capXXu=-0-=p-ex655499 an//d stiiick it!!!!!!877 — B8099Tw, Ihopo-‘ave fyt-allen in,,,,, L=l743dx-ove 78nbwitTh-Tkh A=mmy. Y–ou aureere soouc-h as-weet saavage. Eclectic commented on May 3 http://tinyurl.com/y5feun johntron commented on May 3 That chart is the consequence of T. Friedman’s much too repeated “flat world,” IMHO. Why should IBM invest in a second tier research area like Austin, when it can invest in Bangalore….or why should C invest in back office facilities in a second tier office market, when it too can move to Bangalore or Manila or Bucharest. Repeat this for nearly every American multinational. Sam Zell had it spot on with his thesis that tertiary office markets in the US are going to suffer some tough times. wally commented on May 3 Why should Goldman-Sachs office in NYC when they could do so more cheaply in South Dakota? Eclectic commented on May 3 http://tinyurl.com/2o9ohg …see side 2, Rumble Strip Remix. Mike M commented on May 3 Send this chart to CNBC. They will be giddy with it’s bullish implication. me commented on May 3 To continue with the IBM example, they fired 1315 US workers for “routine skills re-balancing”. Ever wonder why there is never any skills re-balancing in Europe, Brazil or India? Winston Munn commented on May 3 What is really interesting is that if you turn these charts upside down you get the charts of U.S. multinational capex invested out of country. mhm commented on May 3 Why Goldman-Sachs keep offices in NYC? Because they have tax incentives. They could very well use their mostly empty building across the river in Jersey City. Restaurant selection is a also good reason to keep out of JC… NotLereah commented on May 3 Clicking on the Bronson Capital Markets Research link and seeing all his articles, it is clear he is a perma-bear. Is he right about this particular thing, not sure, but for someone so biased he is hard to give credence to anything. Winston Munn commented on May 3 Odd comparison: the decline in capex seems to match the decline in new credit creation. Richard Daughty writes, “Almost predictably – since new credit is not being created…the latest figures for M2 show that the money supply is predictably declining, and is down a little, to about $7.2 trillion” This decline in credit seems confirmed by this comment of Daughty’s, “…Things are getting weird with required reserves in the banks, too, which have dropped back to a measly $39.6 billion!…almost down to the record low set in March 2001…” So if capex spending is off and credit demand is waning, where did this money go and why? Daughty again writes, “…the banks financed about $60 billion in repurchase agreements last week! Annualized, that would come to over $3 trillion a year! A quarter of GDP!” Could it be the big bubble on the brink? Peter Schiff writes, “Despite its recent eclipse of 13,000, the Dow now buys 30% fewer euros than it did then back in 2000…buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and 90% fewer pounds of uranium.” Did it now take $60B simply to sustain the bubble? Who were the borrowers, I wonder. Winston Munn commented on May 3 Note to self: Do NOT buy puts during hyperinflation. johntron commented on May 3 Not to belabor the obvious, but GS stays (and will always stay) in Manhattan because NYC-based GS employees are the high productivity-high revenue generating employees that want to be in NYC….and the executive staff want to be in NYC because of quality of life, proximity to Westchester/CT, airports, proximity to financial community/decision makers (naturally tax incentives don’t hurt). GS rank and file (the bankers/traders) went into near revolt when the idea of moving across the Hudson was mulled. C’mon…have you ever waited in line at the Holland Tunnel? It’s the back office personnel (re. middle America/stereotypical middle class) that gets screwed in the flat world because back office work is too expensive for NYC. Back office could have been run in SD, but now offshore is much cheaper due to cheap broadband/tech. Watch….soon (if not already) all those credit card payments to Wilmington DE/Sioux Falls SD will be processed by a back office in *insert appropriate low cost offshore jursidiction*. Hence one force behind the lack of business capex in US. Eclectic commented on May 4 http://tinyurl.com/2b2g5k Star Light Star bright, …The first star I see tonight, I wish I may, I wish I might, …Have the wish I wish tonight. — My only wish tonight is that I could see the next 3 stars! Eclectic commented on May 4 http://tinyurl.com/2b2g5k Run that chart from Oct 2006 to May 2007, and tell me where the next 3 stars will be. We’ll get the first of the 3 in just a few hours (It’s 3:08 AM EST as this is written). Barringo, it’s that time again… time to play the game we love so well. It’s ‘Over or Under’ time! What’s the consensus?…100,000? I don’t think there’s any figure that we could see that would derail the market except for a day or two, unless we actually see a loss of jobs… and even then the spin would be back to being for a bullish Fed rate cut, or that the figures were temporarily distorted for whatever reason, or that the worst was “over.” The spin later today will be bullish no matter what. In any event, there is no figure, period, that would get the public’s attention, even if the non-financial media were to run it in big headlines. The public has a proxy, but they’re not ready to vote it themselves yet. Nevertheless, I’m taking the under, and assuming as in a couple of prior monthly reports that employment must ultimately demonstrate statistically significant evidence of a downturn, and when it does… it’ll be written in the stars. Craig commented on May 4 Man I LOVE EUPHORIA! Eclectic and his goofy girlfriend, Bondie are out painting the town green…. Poor drunken fools. I’m partying-on until I see signs Eclectic and Bondie’s beautiful carriage is going to turn back into a pumpkin. Then I’m grabbing that slipper and my gold and heading for the mouse hole they are going to try to get that pumpkin through. In the meantime I have to go polish my gold and cheer on the meltup. me commented on May 4 “but GS stays (and will always stay) in Manhattan because NYC-based GS employees are the high productivity-high revenue generating employees that want to be in NYC….and the executive staff want to be in NYC because of quality of life, proximity to Westchester/CT, airports, proximity to financial community/decision makers” As everything moves offshore they will need synergy with global markets to be competitive so they will have to move to London, Hong Kong, Singapore or Shanghai to stay in touch with the decision makers. Once there are no lowly back office workers here we certainly won’t need any bosses. John Thompson commented on May 4 If what Winston says is true, CAPEX are happening by multinationals overseas, where are these numbers? Secret, yeah. So, our rich fund booms around the world. Our cheap dollar makes stocks attractive buys for our foreign friends. And they need to get rid of their excess dollars. Our friends fund the multinationals which fund themselves – all indirectly in a loop. But is this loop, with the WSJ reported 4.9 trillion in leveraged money going to be a bet that lasts, if the risk keeps going up and the bets have doubled in five years???? Seems pretty F*&^ing scary. Tell me I’m wrong, please. (Oh yeah, I’m west coast and always have the last word. Damn.) me commented on May 5 Here are the numbers John http://www.businessweek.com/magazine/content/07_17/b4031048.htm Read this next.August 9, 2006 Trannies Begin New Leg DownAugust 15, 2007 SPX: Flat negative for the YearAugust 17, 2005 What price changes behavior? 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