Contributors
Founder and Chair – LMFC
Vice Chair – LMFC
President and CEO – The Bank of Northern Michigan
SVP of Shared Services - LMFC
Senior Vice President, Traverse City Market Manager

Hear from the founder of Lake Michigan Financial Corporation, Rich Lievense, and his insight on what this blog encompasses.

Overall, we saw some improvement throughout 2012, but most businesses in the Grand Traverse region are cautiously optimistic for 2013. Uncertainty over the federal budget and taxes has a lot of business owners in a “wait and see” mood. However, the manufacturing sector saw strong and increasing demand, which resulted in many companies having some of the best years since the economic slowdown in 2008.
 
Northern Michigan also experienced a much-improved commercial real estate market on most fronts. By the end of 2012, most of the excess industrial space for sale had been absorbed; bringing inventories more in line with ongoing demand. On the other hand, the commercial leasing market for office and retail space continues to be soft, with a fair number of vacancies and continued downward price pressure on rental rates for most of these properties.
 
Businesses that are planning expansions are taking advantage of low real estate prices, and will possibly begin utilizing that space with additional capital outlays for equipment and employees in the next 12 to 18 months. However, these companies have deferred incurring additional expenses to the point where they could no longer wait. Companies are operating much leaner than they have historically, which will help them deal with expansion expenditures and, actually fuel the economy.
 
There has been continued investment in the energy sector, both in more traditional forms, such as oil and gas, as well as alternative energy. Low natural gas prices continue to put a damper on what has historically been Northern Michigan’s primary energy industry driver, which has refocused regional companies on other types of energy.
 
Banks saw a strong demand in the last quarter of 2012, as companies took advantage of current tax structure to complete some capital expansions and/or the sale of businesses or assets. This appears to be carrying into 2013 with the caveat of waiting to see what comes out of Washington. Interest rates are effectively as low as they can be, and the Federal Reserve Bank has indicated that they see no change to this until 2015.
 
Although banks have funds that they want to deploy in the community, they will continue to hold to conservative credit standards, which creates challenges for startup companies that are typically undercapitalized, and for companies that have had their balance sheets eroded during the past several years. The government’s continued support for, and banks utilization of the Small Business Administration’s various loan programs and the USDA’s Rural Development loan program will help keep access to money open to these companies.
 
As we head into 2013, Northern Michigan continues to be a destination for companies that are concerned about the quality of life for their employees. And overall, I think we will continue to see strong performance for tourism-related businesses as people seek vacation destinations closer to home.
 
In 2013, Michigan needs to continue to leverage its strengths to build on the growth we have seen over the past months. Northern Michigan’s geography and population base have allowed many diversified types of businesses, ranging from those related to the slow/local food movement to technology-driven companies, to finding a nurturing environment. As a result, there has been all kinds of start-up small businesses around these types of industries both in direct production and support services. West Michigan continues to diversify the industries it serves, and the southeast part of the state utilizes the manufacturing technology and expertise we have from our automotive driven past. We have a great university system throughout the state that will help drive research and innovation and bring new industries to the state. We also have an agricultural economy that is finally getting some of the attention that it deserves. As the US becomes the supermarket to the world, Michigan— especially Northern Michigan—can play a significant role.

We have just watched our elected officials temporarily avoid the financial cliff by increasing taxes and not dealing with imbedded government spending.  We have kicked the can down the road again and insured that the drama experienced over the last couple of months will continue well into 2013.  The fundamental problem continues to be that we want more government than we are willing to pay for with taxes of one kind or another.  This problem is not unique to our national budget but is being experienced at the state and local level throughout the country as well as Japan, Europe, and other countries around the world. 

It is easy to complain about our elected officials but what would you do to address our $1 trillion + annual deficits if someone made you king/queen for the day?  Attached to this post is a interactive calculator from the Wall Street Journal.  See how your ideas work in addressing this ongoing problem.  This process will probably underscore the difficulty of the task given politician’s desire to get re-elected and the citizen’s desire to continue government programs that benefit them.  Remember, one person’s pork is another  person’s benefit or right.

Read the article.

Ken Rogoff and Carmen Reinhart have written a book titled ‘This Time is Different – Eight Centuries of Financial Folly’ about financial crises and debt bubbles that will considered a classic. It will be required reading in financial circles for years to come. The only problem is that it is 292 pages of deep analytical work and takes a commitment to get through. If you are so inclined to read it, you will not be disappointed. If not, take a moment to read the following interview. It will provide you the high level review of their thoughts and will certainly give you a perspective on our slow recovery from our most recent crisis. 

Read the Article
Frequent readers of this blog know I have a special interest in the economic and political development of China especially as it relates to the United States.  China has well over a billion people, is rapidly modernizing their economy, and developing into a world power.  We have all watched an erosion of manufacturing in this country as jobs and manufacturing capacity moved to the far East and especially China.   Since China is  major emerging market for our exports as well as a formidable competitor, I believe it is in our interest to understand the implications of their development.  I have recently found a couple of articles that present a new view of our place in a world-wide manufacturing market. 
 
After years of outsourcing manufacturing and production, many large companies are moving manufacturing operations back to the United States.  They are starting to fully understand the risks of long distance supply chains.  Some developing countries are rapidly losing their competitive advantage on labor prices.  There are intellectual  property issues associated with state of the art technology transfers to developing countries.  The work place environment and work rules in the United States are rapidly becoming some of the most competitive in the world.  The United states is on track to be the largest producer of oil and natural gas in the  world.  The result of these transformational changes are making the United States a much more attractive place to make things. 
 
The Insourcing Boom describes the experience of General Electric as they move their appliance manufacturing business from China to Louisville.  It is a real story of hope for our country and for Michigan’s manufacturing base.  Mr. China Comes to America describes how the compressed development time from idea to prototype to finished good is best completed in the United States.  This is particularly important trend in the rapidly changing technological product business. 
 
Take the time to read these articles.  I think they might help you look beyond the current political rhetoric and recognize some new opportunities closer to home.  We might be on the verge of a transformational time in our economic development.

Click here to read Mr. China Comes to America.
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