Thursday, September 19, 2019

The hopeium cheerleaders are out in full force.


As each day passes I get more and more freaked out. We are kissing manufacturing contraction. The last reading was 50.30. Anything above 50 means you are still growing. As you can see..... we are BARELY growing. The reading before that was 50.50. Previous to that 54.70. I would wager that a little GM strike is not going to help this number. They are rumored to want to close four plants.

Add to that a large collapse in European car sales - "Nissan Motor Co. and Fiat Chrysler Automobiles NV saw the biggest slowdown in August sales at 47.5% and 26.5% respectively." and that fact that this slowdown is now being reflected in steel prices - I am more confident than ever our next print will be in contraction.

Today they released the Philadelphia Fed numbers and people were beside themselves saying how good it was. But if you look at the data  - they are playing that "better than expected game".

Manufacturing Activity Moderates in September — Philly Fed.

"The Philly Fed's Manufacturing Business Outlook Survey's index of business activity declined to 12 in September from a reading of 16.8 in June. Economists polled by The Wall Street Journal expected a reading of 9.5.

The new order index ticked down to 24.8 in September from 25.8 in August. The index that gauges current shipments, however, jumped to 26.4 in September from 19 last month."

Which partially looks good until you get to this paragraph:

"The index measuring delivery times rose to 11.6 from 9.3 in August. Inventories leaped to 21.8 from 8.7 last month."

Negative interest rates have hit the mainstream media and I literally hear it get talked about every day now. When I wrote about it July (in the comments) - I was literally the only one talking about it in the US. And the only reason I spotted it was because of an offhand comment on Doomberg one evening. Even I thought it not possible. Now I'm not so sure.

I also have been hitting the global slowdown pretty hard since the beginning of May. Read - At least we don't pay attention to the rest of the world.

When last we talked there were only four large countries in manufacturing contraction.

Canada - reading 49.70

Germany - reading 44.40

Hong Kong - reading 48.00

Japan - reading 49.50

Now Canada has has two negative prints. Germany two. Hong Kong three and Japan two.

You can add Mexico to that  at 49.00.

The Eurozone as a whole is deep in contraction at 47.00.

China is still holding up, but just barely.

Now I know that housing printed an okay number the last two days, and employment is still holding up - but I believe this is only temporary. People are completely tuned out to the rest of the world. And when the President starts calling for lower interest rates - things are serious. Each time one country lowers rates there is a bit of a cascade. One country will lower and then not too long after a few other countries follow suit. If low interest rates were so good, why are so many countries in manufacturing contraction?

The ONLY thing that kept me safe through the recession was figuring out when people were lying by what happened in the interest rate department. And you don't need to prop up a strong economy through overnight lending if things are fine.

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