Posts Tagged ‘Industrial Production’

Industrial Production Unexpectedly Declines, First Drop in a Year; Where to From Here?

Industrial Production Unexpectedly Declines, First Drop in a Year; Where to From Here?

Courtesy of Mish

In yet another sign of a weakening economy, Production in U.S. Unexpectedly Dropped in September

Output at factories, mines and utilities fell 0.2 percent, the first decline since the recession ended in June 2009, figures from the Federal Reserve showed today. Factory production also decreased 0.2 percent, reflecting declines in consumer durable goods, like appliances and furniture.

The rebuilding of stockpiles, a component of the factory rebound last year, will probably cool following eight consecutive gains in inventories, a sign assembly lines will not accelerate much more. At the same time, improving demand from overseas and a pickup in business investment on new equipment may keep benefiting American manufacturers like Alcoa Inc., helping support the

Economists forecast production would increase 0.2 percent, according to the median of 63 projections in a Bloomberg News survey. Estimates ranged from a decrease of 0.3 percent to a gain of 0.4 percent. The drop followed an unrevised 0.2 percent gain in August.

Industrial Production Release

Inquiring minds are interested in the Industrial Production Release details.

industrial production

Final products and consumer goods were both down for the second consecutive month. With the collapse in housing and the stimulus money pretty much spent, I expect further weakening of all the major market group components.

The only positives in the report this month are mining and business equipment, with the latter weakening rapidly.

Industrial Production

In percentage terms the bounce in industrial production looks impressive. In actual terms it looks pretty feeble.

Note that industrial production collapsed to 1998 lows at the bottom of the recession, taking back an unprecedented 11 years worth of gains. In spite of the huge bounce from the bottom in percentage terms, Industrial production is barely above the level in 2000.

Business Inventories

Note the impressive drop in business inventories. In percentage terms the rebound looks good, but only in percentage terms, not real terms.

Moreover, the important point is that inventory replenishment is nearly over. Looking ahead, production will be more in line with actual final demand, and that demand looks both weak and weakening.

Look for 3rd quarter GDP to surprise to the downside.

Fed is Spooked

I believe this is what has the Fed spooked. Yet, spooked or not, the Demographic Pendulum is in Motion.


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Initial Jobless Claims Jump while Philly Fed Signals Economic Contraction

Initial Jobless Claims Jump while Philly Fed Signals Economic Contraction

Courtesy of Rom Badilla, at Bondsquawk.com

Falling Businessman

The Philadelphia Federal Reserve released its manufacturing survey for August, which suggests economic contraction and may lead the Federal Reserve to promote additional stimulus measures.  The Philadelphia Federal Reserve Outlook survey or simply “Philly Fed” for August plummets to a negative reading of 7.7 versus economists’ surveys of +7.0.  This marks the third consecutive decline after the outlook survey peaked in May at 21.40.

Behind the headlines, components that represent economic growth were especially weak.  Specifically, New Orders dropped further into negative territory to -7.1 from a prior month’s reading of -4.3.  Inventories fell from +4.5 in July to -11.6 while the Number of Employees component dropped from 4.0 to an August reading of -2.7.

Inflation expectations should remain subdued and keep bond yields in check as price pressures fall, judging by some of the Philly Fed components.  Prices Paid dropped from +13.1 in July to +11.8.  In addition, the Prices Received component continues to drive deeper into negative territory.  The Prices Received component fell to -12.5 following prints of -6.5 and -8.4 in June and July, respectively.

The Philadelphia Fed numbers carry significant weight since the index is heavily correlated to the ISM manufacturing index and the index of industrial production, which both measure the health of U.S. economic activity.  ISM Manufacturing should it fall below 50 in the coming months may lead the Federal Reserve to act in providing stimulus measures via Quantitative Easing.

The number of people in the U.S. filing for employment benefits increased last week according to the Department of Labor. Initial Jobless Claims for the week ending August 14 jumped to 500k people.  The number of people who recently became unemployed and are now accessing government benefits was revised upward in the previous week by four thousand to 488k.  The increase, which the highest reading since November of 2009, highlights the beginning of deterioration of the employment landscape in the last few weeks as economists were expecting a reading of 478k.  Furthermore, the 4-week moving average, which is used to smooth out volatility to establish a better reading of trends, continues to inch higher to 482,500 people and is on the higher end of the recent range of 450-500k that has been established since last November.  With this in mind, the number is…
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THE ADS BUSINESS CONDITIONS INDEX PLUMMETS

THE ADS BUSINESS CONDITIONS INDEX PLUMMETS

Courtesy of The Pragmatic Capitalist 

The latest reading on the ADS Business Conditions Index from the Philly Fed shows a dramatic turn for the worse in recent weeks.  This is consistent with several other leading indicators.  Details on the index can be found below:

aruoba THE ADS BUSINESS CONDITIONS INDEX PLUMMETS

The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data. Both the ADS index and this web page are updated as data on the index’s underlying components are released.

The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions significantly worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0.

The vertical lines on the figure provide information as to which indicators are available for which dates. For dates to the left of the left line, the ADS index is based on observed data for all six underlying indicators. For dates between the left and right lines, the ADS index is based on at least two monthly indicators (typically employment and industrial production) and initial jobless claims. For dates to the right of the right line, the ADS index is based on initial jobless claims and possibly one monthly indicator. 


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IS IT A V-SHAPED RECOVERY?

IS IT A V-SHAPED RECOVERY?

Courtesy of The Pragmatic Capitalist

Monday’s very strong reading in the ISM manufacturing data has many market pundits beating their chests over the v-shaped recovery in the U.S. economy.  Many of these pundits (most of whom completely missed the collapse) remain delusional.  By almost any metric of the real economy this is anything but a v-shaped recovery.  Not only is the stock market still 28% below its all-time high (no v there), but the data from the real economy still shows that the majority of Americans confront a very tough environment.  The following four charts from the St. Louis Fed succinctly tell the story:

Industrial Production – No V here:

v1 IS IT A V SHAPED RECOVERY?

Real income – No V here:

v2 IS IT A V SHAPED RECOVERY?

Employment - No V here:

v3 IS IT A V SHAPED RECOVERY?

Real retail sales – No V here:

v4 IS IT A V SHAPED RECOVERY?

So, is this a v-shaped recovery?   Only if you’re a banker:

DB1 IS IT A V SHAPED RECOVERY?

Source: DB, St. Louis Fed

 


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Key Theme In Interview With ShadowStats’ John Williams (You Guessed It) – Hyperinflation And The Death Of The US Economy

Key Theme In Interview With ShadowStats’ John Williams – (You Guessed It) Hyperinflation And The Death Of The US Economy

Courtesy of Tyler Durden

Money is worthless in

If you thought John Williams, who a month ago prophesied that the US could be facing hyperinflation as soon as 2010, has changed his tune, think again. In an interview conducted by Phil Maymin of the Fairfiled Weekly, the man who has made a business out of debunking the government’s data fabrication machine, dishes out some very hard to swallow truths about the US economy and where the fiat world is headed. As always, Williams’ perspectives are debate-worthy by all, whether inflationist or deflationist: in a field of media sycophants, JW is not afraid to speak what we all know, yet rarely wish to acknowledge.

*****

Maymin: So we are technically bankrupt?

Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless.

 

Obama says America will go bankrupt if Congress doesn’t pass the health care bill.

Well, it’s going to go bankrupt if they do pass the health care bill, too, but at least he’s thinking about it. He talks about it publicly, which is one thing prior administrations refused to do. Give him credit for that. But what he’s setting up with this health care system will just accelerate the process.

 

Where are we right now?

In terms of the GDP, we are about halfway to depression level. If you look at retail sales, industrial production, we are already well into depressionary [territory]. If you look at things such as the housing industry, the new orders for durable goods we are in Great Depression territory. If we have hyperinflation, which I see coming not too far down the road, that would be so disruptive to our system that it would result in the cessation of many levels of normal economic commerce, and that would throw us into a great depression, and one worse than was seen in the 1930s.

 

What kind of hyperinflation are we talking about?

I am talking something like you saw with the Weimar Republic of the 1930s. There the currency became worthless enough that people used it…
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THOUGHTS ON THIS MORNING’S DATA

THOUGHTS ON THIS MORNING’S DATA

Courtesy of The Pragmatic Capitalist

goldilocks economy, sorry bearsCPI came in in-line with expectations.  The headline figure was 0.4% while the CPI less food and energy came in at 0.1%.  These are relatively benign figures.  There are no serious signs of deflation and inflation isn’t running wild.  Not too hot and not too cold.  A Goldilocks figure in case you’re a Kudlow fan.   Unfortunately for those of us who are growing increasingly concerned about the perpetual boom bust cycle created by easy money, this only throws fuel on the fire.  Bernanke is now in the exact position he wants to be – wait and see mode.  That means the fire can rage while the Fed chief twiddles his thumbs.  Much like he did when he kept rates too high in 2007 and much like Greenspan did in 2003 when he kept rates too low.  If the global economy begins to take off as it did in 2003 we are almost certain to see a repeat of the boom portion of the cycle in the coming years.  Of course, the likelihood of a following bust is high….Econoday has some thoughts on the data:

Several factors kept the core rate soft. The cash-for-clunkers tax credits helped push prices for new vehicles down by 1.3 percent. Apparel slipped 0.1 percent. Shelter costs were sluggish, including owners’ equivalent rent rising only 0.1 percent. The recession has kept rents soft which also impact owners’ equivalent rent which is based on actual rent for owner-type houses. On the upside, prescription drugs increased 0.6 percent and airline fares jumped 1.7 percent.

Year-on-year, headline inflation rose to minus 1.4 (seasonally adjusted) from down 1.9 percent in July. The core rate eased to up 1.5 percent in July from up 1.6 percent the previous month. On an unadjusted year-ago basis, the headline number was down 1.5 percent in August while the core was up 1.4 percent.

Outside of energy, consumer price inflation is subdued, leaving the Fed flexibility for when to start unwinding its balance sheet expansion. Given that the August numbers matched expectations, there should be little market reaction today. But the higher energy costs serve as a reminder that when recovery strengthens, oil prices and headline inflation are likely headed up. Bond traders should take note.

In other news. industrial production came in better than expected at 69.6%.  This…
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Monday Markets – Mr. Obama Goes to Wall Street

Today should be very interesting!

One year to the day after Lehman Brothers collapsed and precipitated a financial crisis that reverberated across the globe, President Obama will deliver a major speech on the financial crisis at Federal Hall in New York City at midday on Monday.  According to the White House: "He will discuss the aggressive steps the Administration has taken to bring the economy back from the brink, the commitment to winding down the government's role in the financial sector and the actions the United States and the global community must take to prevent a crisis like this from ever happening again."

As I had mentioned in our Year One Review of the Stock Market Crash, Obama and Wall Street did not get off to a great start but, even after the March crash, we are still up 20% since he was sworn in in January as the President has been EXTREMELY accommodative to Wall Street's needs (ie. free money) so far.  That has been the carrot - perhaps now it is time for the stick…

The Treasury just released a document entitled: "The Next Phase of Government Financial Stabilization and Rehabilitation Policies" which, at 51 pages, is a pretty neat review of the crash as well but I still prefer mine as it saves you an hour and has much better pictures.  There are many charts in the government's documents and they are not all that encouraging.  As the report concludes: 

We must address the structural weaknesses in our financial system that this crisis revealed. The Administration is working to gain approval of a detailed set of proposals to reform our regulatory system to address these weaknesses and keep our financial markets and economy on track to a sustainable recovery.

In addition to Obama speaking at noon, we have 3 Fed Governors making speeches today.  Duke speaks on Regulatory Reform at 8:30, Lacker talks about Financial Regulation at 12:30 (right after Obama) and Yellen gives an Economic Outlook at 3:50, just in time for a stick-save into the bell so we could have a wild ride this morning! 

Speaking of the Fed, I just read a great book called "The Creature from Jekyll Island," which our man Ron Paul calls: "What every American needs to know
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Will We Hold It Wednesday? Industrial Production Edition

Whee, this is great!

Any excuse to take the markets higher and INTC was a good one last night.  We're thrilled because my 2:43 Trade Idea for members was "INTC Jan $17.50s for $1.28, speculative naked call with earnings tonight."  We don't do those very often but we looked primed for a pop and not much was expected from Intel, who were still expected to earn just 8 cents this quarter by the 44 analysts who are paid to follow them, despite the fact that they earned .11 last quarter (an 8-cent upside surprise) and had earned .28 last year in Q2.   That made the long call an excellent play since we were also willing to stick with them and add to the position if INTC had missed.   As it is, that should give us a nice 50%+ pop this morning! 

Other trades ideas from yesterday's Member chat were a GS put spread, AIG puts (and we can't wait for "earnings" on them!), DIA puts and calls as momentum plays, a YUM ratio backspread for the $5,000 Virtual Portfolio and a JPM bear put spread.  So we weren't overly enthusiastic in the run-up, mainly because we loaded up the truck in last week's dip with 18 bullish plays that I reviewed in the weekend wrap-up.  So we are looking for short plays to defend ourselves until we are sure what we have here is more than the proverbial "dead cat bounce" off our 33% retrace (which I discussed in Monday's post).  As I mentioned in yesterday's post, our upper targets to break the dreaded head and shoulders pattern are:  Dow 8,500, S&P 930, Nasdaq 1,825, NYSE 6,000 and Russell 510.  We're making good progress but nothing would be worse than failing this breakout and confirming the downward pattern so it will still be a tough week to get through, especially with todays manufacturing data, which we are concerned about.

David Fry INTC ChartI think David Fry summed it up for the skeptic's camp yesterday saying:

The AP headline today read: “Goldman Sachs’ $2.7B profit shows the firm’s prowess.” Good Grief! You have to hand it to Da Boyz, they know how to bedazzle Main Street. Anyone with a HAL 9000, their bad debts taken off their books, billions in public money to trade and most of their competitors (Bear Stearns and Lehman Bros.) eliminated


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Kimble Charting Solutions

Wilshire 5000 Creating A Triple Top? An Important Breakout Test Is In Play!

Courtesy of Chris Kimble.

The stock market has been on fire of late, rallying up to the edge of price resistance on several indexes. Today, we look at one of those stock market indexes: the Wilshire 5000.

The Wilshire 5000 tracks all of the stocks in the US market, so it is a broad-based index that carries significant importance when gauging the health of the overall US stock market.

Looking at the long-term “weekly” chart above, it is pretty clear that the index is at an important price juncture.

The Wilshire 5000 spent the last 25 years trading within a rising price channel (1)...



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Phil's Favorites

Will it hold?

 

Will it hold?

Courtesy of 

My Chart o’ the Day this weekend comes to us from Jonathan Krinsky at Baycrest Partners, who’s out with some significant insights about the week that was.

He looks at the possibility that both the dollar and bond prices have hit a high and are now about to roll over. A drop in USD below support, which appears to be imminent, would have all sorts of implications for the recent breakout in gold extending and for the potential of emerging markets stocks outperforming US stocks. A drop in bond prices (rates going up) could mean a reversion in the bond proxy rally (REITs and Utes) and a boost for the banks and brok...



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Zero Hedge

Draghi 'Out'ed By ECB Insiders As Liar And Schemer

Courtesy of ZeroHedge. View original post here.

Authored by Wolf Richter via WolfStreet.com,

Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of ...



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Chart School

Formula for when the Great Stock Market Rally ends

Courtesy of Read the Ticker.

When valuations for the boring water company or the boring electric company is trading like your Facebook, Apple, Amazon or Netflix or Google (ie FANG) you know something is wrong.

This is when a seriously over valued market is screaming at you.

Of course the reader must understand in a world where money printing goes super nuts (Zimbabwe style) the stock market may go hyper inflationary and picking a time frame for a top is never a good idea, but we are not there yet. There is no Ben Bernanke helicopter money to the masses yet (ie MMT). 

To see when water company's (and such like) are nearing the crazy FANG like valuations a review of the Dow Jones Utility Index channel shows us how history can repeat. The c...

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ValueWalk

The "Tesla Killer" Car Is Nowhere In Sight

 

The “Tesla Killer” Car Is Nowhere In Sight

By Jacob Wolinsky, ValueWalk

Here’s some catnip for the Tesla bulls on this email list: my analyst, Kevin DeCamp, a longtime TSLA shareholder and car owner, took a test drive of the Jaguar I-PACE and, while it “looks great and is fun to drive… it is lacking in a few areas where Tesla really shines.” He concludes that “Tesla may end up killing itself, but the “Tesla killer” car is nowhere in sight.”

The Tesla Killer Hasn’t Arrived Yet: My Test Drive of the Jaguar I-PACE

By Kevin DeCamp

As a long-time, devoted Tesla...



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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Insider Scoop

What To Expect From The S&P 500 Over The Next 20 Years

Courtesy of Benzinga.

The volatility of the SPDR S&P 500 ETF Trust (NYSE:SPY) so far in 2019 is enough to highlight just how unpredictable the S&P 500 can be.

It may seem impossible to predict what’s coming for the market over the next 20 years, but DataTrek Research co-founder Nicholas Colas recently ma...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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