ISRI Annual Convention: Optimism Abounds

When three economic analysts are in a panel discussion one can probably expect a mix of bulls and bears, and perhaps an audience that is split evenly over near-term business conditions.

But in an ISRI Annual Convention session hosted by Jim Axelrod of CBS News, the audience came forward with some fairly uniform sentiments, often closely matching the bullishness of panelist Dennis Gartman, publisher of The Gartman Letter, Suffolk, Va.

Although Gartman told attendees of the breakfast session that he had been “selling short aggressively” in late March and early April, he does not see a correlation between the market and general business activity.

Basing his observation in part on increased sales tax collections, Gartman sees the U.S. economy (driven two-thirds by household spending) as remaining healthy so far in 2005.

Even though higher oil costs and a weak dollar are cited as sources of concern for some observers, Gartman credits skilled American business managers with being able to adjust to operating with higher oil costs, and he believes the weak dollar is already starting to get stronger.

Gartman told attendees that the trade deficit has no genuine correlation to currency valuation. “Our ability to attract capital is the key. Capital comes here, and it still is.”

Even though the euro has fared well against the dollar the past two years, Gartman noted that if the European constitution is not ratified by all nations, “You’re about to have a currency that doesn’t have a country.”

Panelist Louis Navellier of Navellier & Assoc., Reno, Nev., noted that the weak dollar helped portions of the U.S. economy, especially agriculture, which was good for “red states” voters heading into the 2004 election.

He agreed that the trade deficit was not a problem “as long as you have capital coming in.” Additionally, it will not be in the best interest of Asian-based U.S. treasuries holders to disrupt the U.S. economy by selling their notes all at once. “If they pull out, it’s not in their best interest because we’ll stop buying their stuff.”

Regarding the federal budget deficit, panelist Jason Schenker of Wachovia Bank, Charlotte, N.C., said a long string of red ink years “is problematic.” He voiced particular concern about the growth of the Medicare and Medicaid programs, which on their current paths would grow to represent 25 percent of the United States economy by 2080.

Schenker also remarked that before India can join China as the next surging economy, it will have to reduce its reliance on sufficient monsoon season rainfall to dictate its economic expansion. Currently, 40 percent of India’s economy is assigned to the agricultural sector.

Audience members at the session—predominantly scrap recyclers and their suppliers—could vote (as a table) to answer poll questions.

Among the poll results: 81 percent of respondents thought scrap pricing would trend “slightly weaker” in 2005; 67 percent though higher energy costs have “some impact” on business conditions; and 71 percent thought the U.S. economy was “just right” (rather than too hot or too cold) in early 2005.

The ISRI (Institute of Scrap Recycling Industries Inc.) Annual Convention was held in mid-April in New Orleans.