Arlo Ellison 11/30/12
Arlo Ellison was trained as a chemical engineer, and had a successful career in buying, shipping, and selling oil. He left that business in 2004 and in 2008 he bought a company in Waterbury, Ct. called Reliable Silver Corp. He started his talk by giving the state of, and brief history of, manufacturing in Ct. Today manufacturing in Ct. is still robust with over 5000 companies employing over 190,000 people who earn about 17% more then non-manufacturing blue collar workers. Manufacturers pay about $2 billion in taxes to the state.
Historically Ct. had a lot of advantages that made it suitable for manufacturing. These included a large protected coastline, lots of navigable rivers, extensive hardwood forests, and a large deposit of iron ore. This resulted in many businesses including mill works, tanneries, ship building, and metal working. Ct. made the best quality iron in the world and it was also the largest brass producer. Waterbury alone produced 80% of the brass used in the world. As time went on Ct. became a world leader in clock making, firearms, and in the development of mass production techniques and machine tools. The whole concept of interchangeable parts was developed in Ct. All this lasted for about 200 years, but by the end of the 1800s, most of the iron ore was gone, and the forests were depleted. By the mid 20th century, most of the rivers were polluted with dangerous toxins which led to the shutting down of major industries. The entire Naugatuck river valley still contains many contaminated sites.
Arlo then talked about Reliable Silver Corp. They fabricate silver products, mainly for industrial use including wire, electroplating anodes, chemicals, and various alloys. The company maintains its competitive advantage by utilizing low cost equipment, natural gas for fuel, and a dedicated and experienced work force. Arlo also is somewhat of an expert in managing commodity pricing which is vital to his success. Since 2009 sales are up 150%, the customer base has increased by 100, and employment has increased 50%. This year they have developed silver coated bandages and silver treated clothing, both of which are anti-bacterial because of the free electrons that kill bacteria.
During Q&A he made the following points:
1. The higher tax rates in Ct. are not a major issue. As long as his business is growing he will continue to hire.
2. He can compete with China because shipping silver is very expensive and therefore offshore companies have a disadvantage.
3. Waterbury will never come back to where it was. They lost over 25,000 workers in the brass industry alone.
4. The demand for silver is growing even though the amount used in photography has fallen 80% in just the last 10 years. Its properties as the best conductor of electricity and heat (except for gold) becomes more and more important as electronics shrink in size and the need to get the heat out of circuits increases.
5. Over 1 billion ounces of silver are produced each year. Of that,160 million ounces are held by investors. As long as investors keep buying the price should go up and it could be a good investment. But if they start to sell, the price can fall like a rock!
Thank you Brian for another interesting and enjoyable speaker!