The U.S. faces a weak economy at least into next year as the country continues to go through the normal boom/bust business cycles.
So predicts George Dagnino, chairman of Peter Dag Strategic Money Management and a former financial forecaster for Goodyear. He spoke at the recent Clemson University Tire Industry Conference in Hilton Head.
Mr. Dagnino documented nine boom/bust cycles the nation has endured since 1960, and insists the U.S. government is powerless to stop the trend and keep markets more steady. ``Their only impact is stability in the financial system and to make sure that enough money is available,'' he said.
Currently, the spread between the cost of corporate borrowing and the yield of treasury bonds is the highest since before 1955. As that spread increases, Mr. Dagnino said, ``there is slow growth in the money supply, you have a slow stock market and a weak dollar. Things will be difficult for the next two years.''
This year hasn't started well and will continue to be weak because cyclical peaks were reached in a number of markets, including automotive, Mr. Dagnino sai.
But most corporate managers don't try to take advantage of business cycles by thinking forward and doing such things as taking a hedge against future natural gas costs. ``They don't have the (guts) to do that,'' he said.
Instead, once they see sales are dropping, they stop building inventories. Then commodity prices start to drop. ``The average manager manages looking into a rear-view mirror,'' Mr. Dagnino said.