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Musings About 2009

Dec. 1, 2008
No one could have expected 2008 to turn out quite like it did. Next year could be even more interesting for the electrical market.

I never thought we would see copper prices swing from $4 per pound to less than $1.50 per pound, credit markets freeze up, and gas prices hit record highs before plummeting to well under $2 a gallon in the same year. We may be in for another year of surprises, but I am still willing to offer a few ideas on what may happen in 2009.

The electrical market won't slide downhill as fast as feared in 2009, but it will be a slow climb to better times. I base my relative optimism on the fact that before the credit crunch hit, the commercial and industrial segments of the electrical construction market, which account for more than 50 percent of sales through electrical distributors, were stable and healthy, even if they were anticipating a cyclical downturn. They were operating closer to “real demand” than the residential market, because they weren't overheated from speculative construction or crazy financing schemes, and won't have as far to recover when demand cranks up again.

Lighting reps emerge as a key channel for green lighting products. Independent reps that focus on lighting products would seem to be perfectly positioned to make a run at the green market. Technically competent reps with A-list contacts at architectural and engineering firms have always been first in line for many high-end lighting jobs, and there would appear to be no reason for that to change. Since lighting reps do most of the legwork on these jobs, they usually take them direct, leaving electrical distributors out in the cold.

Battered electrical stocks see a surge of new investors after the market bottoms out. No one knows exactly when investors will regain their confidence and jump back into the stock market. But when they do, don't be surprised if some blue-chip electrical stocks are some of the first places they invest fistfuls of cash. Investors will look first at rock-solid companies with stellar balance sheets, attractive dividends — and stock prices at or near 52-week lows. Household names in the electrical market like GE, Hubbell Inc., Eaton Corp., Rockwell Automation, Thomas & Betts Corp., Cooper and WESCO are some of the companies that come to mind. Don't think Wall Street isn't watching our market. CEOs from two companies from our neck of the woods have been guests on Jim Cramer's “Mad Money” over the past year: Eaton Corp.'s CEO, Sandy Cutler and John Colson, CEO, Quanta Electrical Services, Houston.