ISM Data Very Bad - Manufacturing in Recession

Autoworkers strike is shutting down plants and thats a few 100,000 people so yes it is a dip. Other sectors are fine. our company running flat out looking at a record sales year AGAIN!! We have about 60,000 production workers in the US.

a reply to: mikell

a 2 week strike won't bring down the entire manufacturing sector, it's month over month; bad analysis

a reply to: wantsome

This is also bad analysis, anecdotal data is not superior to actual data

my GLD calls are up 3-400% already in pre market and the bad inventory data didn't even come out yet

a reply to: toysforadults

I can always understand a well-written market and charts analysis, I just wish I had the knowledge to interpret them myself. Guess I should really do more reading!

You're clearly well-versed in the indicators and fundamentals, so I'm guessing there's a logical answer to this, but I'm missing something here.

Why buy PMs? Does this indicate a coming weakening of the dollar? Is a manufacturing contraction itself indicative of movement from USD to precious metals. Or is it something else in all of this that would indicate such?

Trying to wrap my mind around strong & trending upward dollar, coupled with expecting strength in PMs. Or are you expecting USD to turn around and decline?

I think I understand why the volatility indices, but if you could shed some light on why this looks like a time to buy PMs, I'd really appreciate it!

a reply to: dogstar23

Why buy PMs? Does this indicate a coming weakening of the dollar? Is a manufacturing contraction itself indicative of movement from USD to precious metals. Or is it something else in all of this that would indicate such?

everyone was running to the dollar (around the world) because the Fed only dropped rates .25 instead of .50+. So the dollar has been crazy amounts of strength which devalues PMs.

Well, that brought about a market correction (this week) and a strong dollar is bad for business for manufacturing so... now a rate drop is being priced into the market for Oct (the Fed said they wouldn't drop rates this month) so now everyone is running from the dollar as fast as possible causing PMs and bonds to go up

a reply to: toysforadults

Thanks for the information.

This is really about monetary policy and uncertainty. Standard 'Chicago School' isn't working.

Ellen Brown wrote a recent post:

The Disaster of Negative of Interest Rates

ellenbrown.com...

... that analyzes this trend, explains how the US situation is different then the EU's and could perhaps follow Japan's lead.

Her conclusion:

The Bank of Japan now holds nearly half of Japan’s federal debt, a radical move that has not triggered hyperinflation as monetarist economists direly predicted.

In fact, the Bank of Japan can’t get the country’s inflation rate even to its modest 2 percent target.

As of August, the rate was an extremely low 0.3%.

If the Fed were to follow suit and buy 50% of the U.S. government’s debt, the Treasury could swell its coffers by $11 trillion in interest-free money.

And if the Fed kept rolling over the debt, Congress and the president could get this $11 trillion not only interest-free but debt-free. President Trump can’t get a better deal than that.

Another local company announced today a $30,000,000 expansion and returning production from China. Our company has $35,000,000 left in our building and upgrade work for the next 18 months. County leaders were bragging last week over $300,000,000 in corporation upgrades in the last year for a county with only 65,000 people.

a reply to: mikell

That's the problem with using the PMI. You have two companies expanding, with $60,000,000 in purchasing between them. You might have 18 companies who have already expanded and will not have very many expansion purchases, say they each only spend $10,000,000 towards expansion compared to $20,000,000 last quarter. The way the PMI is calculated, that's 18 companies with less expansion purchases and two with increased expansion purchases. (2*100)+(18*0)=200. Divide that by 20 companies and you get a PMI of 10%... which looks pitiful!

The reality is that there is still $240,000,000 being spent in expansion and two new employers providing jobs. The sector is expanding, jobs are expanding, and production is expanding, despite total expansion purchases being down from $360,000,000. If one looked only at total expenditures, one would see a 33% drop... still bad, but it looks better than a 10% PMI. If one looked at value of goods produced, one would see an increase. If one looked at total jobs produced, one wold see an increase. If one looked at value of the companies, one would likely see an increase.

That is what I was pointing out earlier in the thread: the PMI is a measure of how widespread an expansion is across companies, but has no information about the the depth or overall effect of the expansion. It is a poor metric to rely on.

TheRedneck

a reply to: FyreByrd

the markets pricing in a big rate cut look at DXY/GLD today, it's making me a ton of money right now

a reply to: TheRedneck

you guys can pretend that the manufacturing data is lying or telling a different story but it's not