Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: energyplay who wrote (62201)	4/18/2005 9:06:42 AM
From: Slagle	of 74559

Energyplay, I did not know that economists were even aware there was a N.Georgia carpet industry. A little history: 100 years ago country women there began to make hand tufted bedspreads. A paved highway "The Dixie Highway" was completed about 1920 and was the main automobile route from Chicago or Detroit to Florida and local folks would hang these tufted bedspreads on clotheslines beside the road and sell them to "yankee tourists". By 1930 a pretty big cottage industry had maybe thousands of Georgia hill country folk stitching these bedspreads by hand. Around this time some smart local guy around Dalton (name unknown) figured out a way to adapt a sewing machine to this tufting duty and soon lots of guys like one of my uncles were riding the train to New York to buy up second hand Singer industrial sewing machines to convert to tufters. Another smart local guy (also name unknown) decided to put TWO needles on a single machine. If you could have two needles you could have four, or a thousand for that matter and that is what happened. Soon you had large "broadloom" machines being built, with the frame cast nearby at Chattanooga Tenn. Around 1940 the first tufted rug was made and in the 1950's another local guy, Gene Barwick who had been a Sears Roebuck purchasing agent convinced Sears to market Georgia "wall to wall" tufted carpet and thus was born Georgia's largest manufacturing industry. The natural gas hedges are for the gas used in the finishing ovens and they also use a good bit of heavy oil and even some coal for boiler fuel, mainly in the dyeing operations. But all of this is a fairly tiny percentage of their cost; the main thing is the nylon and polypropelene that is what the carpet is made of and is maybe over 75% of the cost of the carpet. MHK doesn't make these basic plastics, they buy this stuff from Dupont, Monsanto and others. And maybe Dupont and other fiber producers hedge their oil that they use to make the fiber. They probably do because as I remember yarn price increases seem to go on for years and years after the price of oil first rises. I don't have any idea how much of their business is tile but it is bound to be a fairly small percentage. From the S&P Stock Report Dal-Tile was acquired in 2002 using 12.9M MHK shares (of 66.8M outstanding). They are big on that, they bought out a friend's operation, paying a fortune. Probably what I need to do is to try to find out what is going on with yarn and backing prices. Slagle

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