Reverse Industrial Collapse or Face a Great Calamity

This well-known stock suggests we have reached a defining moment.

All the rivers run into the sea, Yet the sea is not full;
—Ecclesiastes

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Weekday mornings I get delivered to my inbox Wall Street Breakfast: Must-Know News published by Seeking Alpha. This morning's edition contained the following brief. The news got my wheels turning...

"Industrial production fell 1.4% in February, according to the Federal Reserve, making it four consecutive months of contraction and 10 out of 12. Industrial production is now at its lowest level since 2002. Capacity utilization fell to 70.9% - matching an all time low set in 1982."

The first question that came to mind was, "How much capacity has been outright dismantled at the altar of globalization since 1982?" And yet, despite our nation's markedly reduced industrial capacity, present utilization stands at a dismal 70% of what remains. My friend, we are in deep trouble. What's more, I am not the only investor who realizes this.




Is not Alcoa the dominant producer of aluminum in the Western Hemisphere? Investors apparently believe significant aluminum demand will not soon be materializing — hundreds of billions of dollars appropriated toward infrastructure notwithstanding. Likewise, to my knowledge there is no Finance Division burdening Alcoa's balance sheet (unlike General Electric). So, the performance of Alcoa's stock might represent something of a canary in a coal mine, so to speak. No doubt, a move back up to the $10-15 range could be in order, near-term. But then what?

Industrial stocks like Alcoa will not find legs unless one of two things happen. Either structured finance is resurrected and the grotesquely leveraged American economy is stretched further (a probability whose odds are as near zero as can possibly be), or a massive build-out of a physical economy worthy of the 21st century, employing trillions of dollars of credit created out of thin air directed toward productivity enhancing investment, is made a national priority.

Stocks like Alcoa rose for thirty years largely because a [now deceased] finance-dominated environment made for more than enough money to chase stocks doomed to be laggards. Those days clearly are over. Unless some significant, fundamental redirection of focus originating with our nation's institutions of government is effected, the means of sustaining the industrial economy surely will evaporate, and therefore, too, will the nation in all probability face a Great Calamity. I have no desire to sound alarmist. Rather, I am simply stating what appears a matter of fact. The collapse in industrial stocks like Alcoa has happened for a reason. It announces we have reached a defining moment in history.

—Tom Chechatka