by ilene - September 1st, 2015 12:42 pm
Courtesy of Mish.
Those expecting a boost from the ISM report for August were disappointed today.
The Bloomberg Consensus estimate for ISM was 52.8, with a range of 51.5 to 54.0. The report was below any economist’s expectation at 51.1.
The ISM index, at a lower-than-expected 51.1, is signaling the slowest rate of growth for the factory sector since May 2013. And the key details are uniformly weak.
New orders, at 51.7, are at one of the slowest rates of monthly growth of the recovery, since April 2013. Backlog orders, at 46.5, are in a third month of contraction. New export orders, at 46.5, are also in their third straight month of contraction and are at the lowest rate since July 2012.
ISM’s sample wasn’t hiring much in August, at 51.2 for a 1.5 point decline from July and the weakest reading since April. Production slowed and prices paid, at only a 39.0 level last since in March, points to deflationary pressures.
The good news for the economy is that this report failed to pick up the auto-led surge that lifted the factory sector noticeably in June and July. Still, the ISM is followed closely and will raise doubts, justifiably or not, over a September 17 rate hike.
Let’s investigate all the details of today’s report straight from the Institute for Supply Management Manufacturing ISM® Report On Business® released this morning.
|Index||Aug||Jul||PP Change||Direction||Rate of Change||Trend in Months|
|Supplier Deliveries||50.7||48.9||+1.8||Slowing||From Faster||1|
|Customers’ Inventories||53.0||44.0||+9.0||Too High||From Too Low||1|
|Backlog of Orders||46.5||42.5||+4.0||Contracting||Slower||3|
- Backlog of orders are in contraction
- Growth in new orders plunged but still positive
- Customer inventories surged (not a good sign for future orders)
- Exports contracting faster for the third month
- Prices have plunged
There’s nothing in the ISM report to make the Fed want to hike, but the Fed will do what they want.
Mike “Mish” Shedlock
by Market Shadows - September 1st, 2015 12:05 pm
Financial Markets and Economy
Global markets are melting down (Business Insider)
Global markets are getting smoked again.
Dow futures are down 323 points, S&P 500 futures are down 40 points, and Nasdaq futures are down 93 points.
U.K. stocks declined as investors considered further indications that the Chinese economy is slowing down.
Bwin.party Digital Entertainment Plc dropped 1.5 percent after its takeover battle took another twist with a revised proposal from 888 Holdings Plc. BP Plc slid 1 percent as oil’s biggest three-day rally in 25 years stalled before U.S. government data forecast to show crude stockpiles expanded.
The dollar slumped against the yen on Tuesday, as a fresh bout of weakness in global stock markets following weak Chinese data sent investors scurrying to the perceived safety of the Japanese currency.
The greenback USDJPY, -1.04% fetched ¥119.59, down from ¥121.22 late Monday in New York.
A major warning from the most reliable bellwether of the world economy (Business Insider)
South Korean exports plunged 14.7% in August from a year ago. This was much worse than the 5.9% decline expected by economist. And it was the biggest drop since August 2009
This is a troubling sign as Korea's exports represent the world's imports. Because it is the first monthly set of hard economic numbers from a major economy, economists across Wall Street dub South Korean exports as the global economic "canary in the coal mine."
China’s securities regulator asked brokerages to step up their support for share prices by contributing 100 billion yuan ($15.7 billion) to the nation’s market rescue fund and increasing stock buybacks, according to people familiar with the matter.
The China Securities Regulatory Commission gave the order on rescue-fund contributions at a meeting with representatives
by ilene - September 1st, 2015 5:39 am
Courtesy of Mish.
China manufacturing and services are both in contraction at the fastest rate since early 2009.
The Caixin China General Manufacturing PMI shows operating conditions deteriorate at fastest rate since March 2009.
Chinese manufacturers saw the quickest deterioration in operating conditions for over six years in August, according to latest business survey data. Total new orders and new export business both declined at sharper rates than in July, and contributed to the most marked contraction of output since November 2011. Lower production requirements prompted companies to reduce their purchasing activity at the fastest rate since March 2009, while weaker client demand led to the first rise in stocks of finished goods in six months. Meanwhile, softer demand conditions contributed to marked falls in both input costs and output charges in August.
- Output contracts at quickest rate in 45 months as new business falls solidly
- Purchasing activity declines at sharpest rate since March 2009
- Input costs and output charges both fall at marked rates
China Manufacturing PMI
Composite Contract Most Since February 2009
The bad news in China does not stop with manufacturing. Markit reports the Caixin China General Services PMI has the fastest contraction of output seen since February 2009.
- Composite output and new orders both contract for the first time in 16 months
- Job shedding intensifies at manufacturers, while employment rises only fractionally at service providers
- Composite input costs and output charges continue to fall
By now it should be perfectly clear to everyone that the entire global economy is cooling and the US will not decouple from that slowdown. Nonetheless, most economists, including those at the Fed, still do not see the obvious.
Mike “Mish” Shedlock
by ilene - September 1st, 2015 12:47 am
Courtesy of Mish.
It's no wonder Greek prime minister Alexis Tsipras wanted elections now rather than later. He does not want the grim news of job losses and austerity to hit when he is more vulnerable.
Tsipras' problem may well be that he is too late.
Via translation from Libre Mercado, The Greek Economy Lost 17,000 Jobs in July, the Worst Result Since 2001.
Industrial production recorded a record drop in July, according to estimates by Markit.
In addition, capital controls, have resulted in record job losses according to data published on Monday the National Confederation of Commerce and Companies (ESEE ).
Consequently, economic sentiment has suffered an unprecedented collapse, returning to its lowest level since the start of the crisis.
According to the local press, Greece destroyed about 17,000 jobs in July, the worst result since 2001. In addition, another 40,000 people went to work part time from full time, with a consequent reduction in salary.
What a disaster.
Mike "Mish" Shedlock
by ilene - August 31st, 2015 10:40 pm
Courtesy of The Banker
“Let’s start at the very beginning, a very good place to start,” sings my children’s favorite nanny-from-the-movies, Maria.
School started for my girls this week, so I’m in the mood for new beginnings. New school uniforms, freshly sharpened #2 pencils, and lined notebooks still unblemished with unicorn stickers.
Besides inheritance (obviously the very best way, because remember your first $5.43 Million arrives tax free!) the next two best ways for a person to get wealthy are investing throughout your lifetime, and starting a business.
Neither of these two methods – slow-and-steady investing beginning at a young age or entrepreneurship – require extraordinary talent or prior knowledge. In fact, the biggest common barrier to both methods is simply getting started.
But how does one even do that? Let’s not under-estimate the difficulty of the “getting started” part!
I have a reader who regularly emails me to the effect (I’m paraphrasing a bunch of his emails) “You need to tell everybody – especially young people – how to call up a brokerage company and how to buy their first stock or mutual fund. They don’t need special knowledge, they just need to get started now, contribute regularly, and never sell. And they’ll end up rich.”
Of course he’s right. You should all totally do this.
Even so, many will resist the advice.
A managerie of discount brokers. Sadly, none of them pay me to list their brands
My question back to my reader: How do we get people to start at the very beginning?
I really don’t know how to fulfill my reader’s wish of inducing people to call up a brokerage firm, open up an account, and buy their first stock or mutual fund. I wish I had the words to express the importance of beginning, like, right now.
Goethe didn’t really say this, but…
by ilene - August 31st, 2015 9:54 pm
Michael Batnick studies the "death cross" and finds that the 50-day moving average crossing below the 200-day moving average is a short-term bad sign but post-death cross life is not as bad as the name suggests.
Courtesy of Joshua Brown
Michael Batnick, our firm’s director of research, goes toe to toe with the Death Cross fixation among traders and the financial media:
On Friday the S&P 500 experienced what is known as a “death cross.” This is when the 50-day moving average crosses below the 200-day moving average and as you can guess by the name, is allegedly a negative signal for stocks moving forward.
A lot of work has been done to debunk the myth of the death cross and yet we continue to hear about it whether it’s in an index, a sector or a specific stock. Here are two reasons why it refuses to go away: 1) It sounds ominous, people love that and 2) over the last fifty years, a death cross occurred before each of the ten worst years. Not only did they appear but in eight of those ten years the indicator was quite timely, saving those who listened from further downside.
So if it identified the very worst years, wouldn’t it be foolish to dismiss this as a valid indicator?
Picture via Pixabay.
by Market Shadows - August 31st, 2015 8:42 pm
Financial Markets and Economy
In 1863, the Dowlais Iron Company had recovered from a business slump, but had no cash to invest for a new blast furnace, despite having made a profit. To explain why there were no funds to invest, the manager made a new financial statement that was called a comparison balance sheet, which showed that the company was holding too much inventory. This new financial statement was the genesis of [the] cash flow statement that is used today. In the United States in 1973, the Financial Accounting Standards Board (FASB) defined rules that made it mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources and uses of funds, but the definition of "funds" was not clear. Net working capital might be cash or might be the difference between current assets and current liabilities. — The Cash Flow Statement, Wikipedia.
As if those events weren't enough, a technology glitch is adding to the confusion.
Dow posts worst August decline in 17 years (Market Watch)
The month of August can be pretty rough for stock investors. But this August has earned its place in the record books, as stocks were unsettled by uncertainty over the state of affairs in the world’s second largest economy, China.
As far as Augusts go, this has been the worst in nearly two decades for the Dow Jones Industrial Average DJIA, -0.69%
by ilene - August 31st, 2015 7:13 pm
Courtesy of James Howard Kunstler
The tremors rattling markets are not exactly what they seem to be. A meme prevails that these movements represent a kind of financial peristalsis — regular wavelike workings of eternal progress toward an epic more of everything, especially profits! You can forget the supposedly “normal” cycles of the techno-industrial arrangement, which means, in particular, the business cycle of the standard economics textbooks. Those cycle are dying.
They’re dying because there really are Limits to Growth and we are now solidly in grips of those limits. Only we can’t recognize the way it is expressing itself, especially in political terms. What’s afoot is a not “recession” but a permanent contraction of what has been normal for a little over two hundred years. There is not going to be more of everything, especially profits, and the stock buyback orgy that has animated the corporate executive suites will be recognized shortly for what it is: an asset-stripping operation.
What’s happening now is a permanent contraction. Well, of course, nothing lasts forever, and the contraction is one phase of a greater transition. The cornucopians and techno-narcissists would like to think that we are transitioning into an even more lavish era of techno-wonderama — life in a padded recliner tapping on a tablet for everything! I don’t think so. Rather, we’re going medieval, and we’re doing it the hard way because there’s just not enough to go around and the swollen populations of the world are going to be fighting over what’s left.
Actually, we’ll be lucky if we can go medieval, because there’s no guarantee that the contraction has to stop there, especially if we behave really badly about it — and based on the way we’re acting now, it’s hard to be optimistic about our behavior improving. Going medieval would imply living within the solar energy income of the planet, and by that I don’t mean photo-voltaic panels, but rather what the planet might provide in the way of plant and animal “income” for a substantially smaller population of humans. That plus a long-term resource salvage operation.
by ilene - August 31st, 2015 5:00 pm
Courtesy of Mish.
Witch Hunt Review
As I noted earlier today China Starts Witch Hunt for Those Obstructing Government Efforts to Prop Up Stocks.
It took less than a day for a victim of the witch hunt to be rounded up for public display. The Financial Times reports China Reporter Confesses to Stoking Market ‘Panic and Disorder’.
A leading journalist at one of China’s top financial publications has admitted to causing “panic and disorder” in the stock market, in a public confession carried on state television.
The detention of Wang Xiaolu, a reporter for Caijing magazine, comes amid a broad crackdown on the role of the media in the slump in China’s stock market, which is down about 40 per cent from its June 12 peak. Nearly 200 people have been punished for online rumour-mongering, state news agency Xinhua reported at the weekend.
“I shouldn’t have released a report with a major negative impact on the market at such a sensitive time. I shouldn’t do that just to catch attention which has caused the country and its investors such a big loss. I regret . . . [it and am] willing to confess my crime,” [said Xiaolu]
When the market turmoil began in June, Beijing imposed restrictions on media reporting of the stock market. The independent China Digital Times, which monitors internet censorship in the country, said in June media were told to avoid stoking panic.
“Do not conduct in-depth analysis, and do not speculate on or assess the direction of the market,” it reported an official directive as saying. “Do not exaggerate panic or sadness. Do not use emotionally charged words such as ‘slump’, ‘spike’ or ‘collapse’.”
Word Police US Style
With thanks to reader Mark for the link, Campus Reform reports that Professors Threaten Bad Grades for Saying Oppressive Words.
Multiple professors at Washington State University have explicitly told students their grades will suffer if they use terms such as “illegal alien,” “male,” and “female,” or if they fail to “defer” to non-white students.
According to the syllabus for Selena Lester Breikss’ “Women & Popular Culture” class, students risk a failing grade if they use any common descriptors that Breikss considers “oppressive and hateful language.”
by ilene - August 31st, 2015 4:41 pm
Courtesy of The Automatic Earth.
Dorothea Lange Hoe culture in the South. Poor white, North Carolina July 1936
Nicole Foss recently participated in a live Google Hangouts (not Skype. I’m told) ‘forum’ discussion at the Doomstead Diner site that also included among others, Gail Tverberg, Steve Ludlum, Norman Pagett and Ugo Bardi. Apologies for the fact that I haven’t watched the videos yet and I’m getting the details as I go, so my info will be a bit sketchy.
I’ll run this in episodes. Today’s post contains episode 4. Previously, I posted episode 2 and 1,
Episode 3 has apparently not even been recorded yet, but we’ll post it as soon as it is available,
Part IV- Futurology
The Doomstead Diner site blurb:
One of the biggest hopes as the fossil fuels run thin or become too expensive to dig up is a switch to renewable forms of energy. How can such forms of energy be utilized, and how much of our current technological society can be maintained with the renewables?
As the larger structures of society begin to break down, a more localized organizational structure will become necessary, both on the food production and distribution level as well as new political organizations. How can communities come together and create the kind of structures necessary for a low per capita energy society of the future?
Psychology of Collapse
Collapse is creating many psychological issues and problems as it progresses and accelerates. More people are under more stress all the time, losing jobs, losing their homes to foreclosure, becoming homeless, waiting on long bread lines for food aid etc. We read daily about increasing suicide rates and the number of mass shootings is also on the increase, recently there were 142 mass shootings catalogued in 142 days, 1 every day. How can we handle these psychological problems that are cropping up, and likely will worsen as the overall economy worsens?