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ISM Misses: Prints 54.4, On Expectations Of 54.5, Previous 56.3, Huge Jump in Prices Paid As Inflation Collapses Margins
ISM comes at the lowest print of the year, as it prepares to breach 50 next month:
And for all those not seeing inflation anywhere, better ask all these companies (that have been hoarding cash for a reason): the Price Paid component has surged, even as the broader economy is deleveraging, as company margins are forced to eat the increase in input costs. This is very scary indicator for Q3 EPS.
And the scariest reading: Inventories come at record highs!
From the survey respondents: 4 out of 5 is sufficient to give an idea of how things are going.
- "Business results (top and bottom line) continue to meet or exceed
our operating plan and exceed prior year performance by double digits."
(Chemical Products) - "Business continues flat relative to prior month and is expected to
remain flat. Commodities continue to be the main concern heading into
2011." (Food, Beverage & Tobacco Products) - "Our business is softening due to seasonal considerations. Overall, our situation is much better than 2009." (Machinery)
- "Customers seem to be pulling back on orders. I suspect that they
are trying to reduce their inventory for the approaching year-end."
(Transportation Equipment) - "Strategic customers reducing order quantities." (Computer & Electronic Products)
For the bloodbath among the various indices, especially the all imporant New Ordes, Production, Employment, and Supplier Deliveries see table below, which we fail to see how can be described as "growing" by the ISM when all of these are plunging. The one thing that IS growing: inventories, as fake growth continues, and, of course, prices, thank you inflation.
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rally, bitchez?
Lowest of year? Rally on.
Isn't this good for stocks?
Nominally, yes. Actually, not so much.
KNOW THE DIFFERENCE.
Isn't this good for stocks? Not so much
For Underwater Home Mortgages...... Perfect, the plan all along.
This seems to be the 'worst' possible over-50 composition. Inventories and Prices paid up. Backlog down. New Orders down.
By the way, the Irish PMI was sub-50 and the German retail numbers missed.
Rally on people.
I think at this point one sould note that there is nothing that is BAD for stocks (short term).
Shitty numbers = $2.0T of QE
Less shitty numbers = $1.5T of QE
The battle is being won by Ben Shalom, the war will not.
Great assessment lizzy, as always
You're asking a fundamental question in a Fed induced QE world. The question should be "Is this good for more Fed pumping"?
What ISN'T good for stocks?? Im letting the nuts have their hand grenade juggling party all to themselves.
Inflation, bitchez...
Sounds very bad for the FED.
Fuck.... Where are the good ole days of 2009?
I thought inflation was tame, god dam it they lied to me again.
I chuckled.
That's an extremely bad indication for inflation, and goes well with the PM rally.
Time to hunker down and hope we don't go full Argentina.
I'm guessing more Soviet Union then Argentina. Either the Soviet police state or the fracture, God do I hope for the fracture! The problem we have is the amount of foreign held dollars, or dollar based financial assets. When that dam breaks and all those dollars run screaming back home to try to buy goods/services before they lose more value it will be quite interesting. Even without Zimbabwe Ben printing more, if those foreign held dollars rush back it's lights out.
But if it's Argentina here is a good blog to look at http://ferfal.blogspot.com/
I do not know how this stuff is scored, but that seems like a meaningful jump in inflation.
How seriously should one understand inflation component?
obama business channel - nothing but "growth" and "recovery"
time for another "recovery" story - getting surreal
ask and he shall recieve:
http://blogs.wsj.com/economics/2010/09/30/geithner-on-the-economy-politics-and-more/
He said the country is in the third stage of its response to the financial crisis. “The first stage to brek athe back of the panic, get growth restarted.” The second stage was “transformative reforms for education, health care, and a financial system. These are things that businesses depend on.” The third stage is getting programs in place to keep growth moving and to “convey more political will to bring down our long-term deficits.”
You can't make up crap like this... Oh wait, they did.
Good to see you lizzy.
One of the key public keepers of the economic myth says all is well. Who are you to say otherwise?
Also, Time Magazine says the stimulus was well-run.
I'm voting Dem this Fall, f'uh shizzle. Join me!!!! Life is good!
http://news.yahoo.com/s/time/08599202278100
"So far, while the American Recovery and Reinvestment Act is clearly not a political success, it is just as clearly a managerial success - on schedule, under budget, and according to independent investigators, remarkably free of fraud."
Digging holes, then filling them up again -- what could be fraudulent about that?
transformative reforms for education, health care, and a financial system. "
and there's the rub. like everything else these days, transformation exists only on the surface as a virtual appearance. the question is as always, what lies underneath?
a tower of babel, even one covered with reflective glass to mirror the clouds, can only reach so high before shards start hitting the pavement below.
or so says chicken little.
tip e. you could not be more right about that.
I can speak to the education end of this. I teach at a public university and we are bursting at the seams to handle the new enrollments. I am teaching a rather large class this semester. I just gave them their first test. Brace yourself. 4 As, 9 Bs, 12 Cs, 43 Ds, and 20 Fs. While it is not the exact same test, it is very similar because the first unit is not going to change that much from year to year (covers basics that don't change much). Going back over my records of having taught the course a good number of years, I always have a normal curve for test 1. Always.
When I told a senior colleague my results, he told me he has 83% of his students with Ds and Fs and that it is happening all across the campus.
What do I think is happening? I think many of the folks in my class are there not for "retraining" but because they are hiding from the "recession." Student Loans, Pell Grants, etc. It is a way to supplement unemployment or maybe the only money they have coming in for all I know. I do not know how else to explain these radically bad results. The only other thing different is the large class size. Thing of that is I still get lots of student participation anyway, so it should not be this bad.
And God, they don't know to read a syllabus, they are always asking me questions they should know from the syllabus. They are entitled as all get out. I gave them practice tests and some of them are spitting mad I won't let them have the answers. I do have students approaching me on the side letting me know that they are grateful for the practice tests and that they find the other students outlandish. Others are pissed at those students because they are kind of slow.
We are under pressure from administration not to fail too many of them, you actually go on a "problem" list if you do this, and you have to go in for "counseling" regarding your grading practices (I shit you not).
There are a number of us who are horrified but with money being the short term survival incentive, there is nothing we can do. I could go on with a whole lot more. It is indeed a transformation that exists only on the surface. What lies underneath is a path straight to hell. Many of them are not there to learn, and we are not permitted to grade them honestly.
Welcome to the University of Moral Hazard.
I don't think the administration thing about grades is unique. I know in undergrad one of my profs "got benched" for it. He was a hard nosed old man that ended up giving D's and F's to most of a high level accounting class. I was in that class and I got a hard fought C (the final was a nightmare), but the class was meant to be hard he even warned us, and everyone knew he was the hardest accounting prof on campus. Talked to him the next semester and while he had office hours he was not teaching, and he didn't want to talk about it with me. Still paid him, I guess because of tenure and was waiting to retire. I personally loved the guy, a treasure trove of knowledge and cool stories, but he was hated by most students for being to hard. Had a reputation for grading in a rough manner and was unwilling to change.
I personally know a few people that fled back to school to hide out the recession, both normal university and law school. I'm just glad I was able to get back into the workforce while finishing up school, it's only going to get tighter over the next few years. The student loans are crazy too, and can't get rid of them like credit card debt.
Student loans = instant debt slavery. One of the great benefits of reading ZH is that I will never allow my kids to take out student loans when they go to college. Can't afford that private school you want? Find a comparable public school.
Sounds familiar -- great post.
thanks for sharing the anecdotes ms.c. ride the curve baby, no matter who's trying to jostle you from your board.
University of Moral Hazard - love it! what could the name of their sports teams?
let's see:
the MeMeMe's
the Shylocks
the Sloths
the Hungry Ghosts
???
Wow, other than the typical professional students, I had never even considered the hiding out for cash-flow strategy. The ones who took out loans are going to be completely screwed, living out their days in Uncle Scam's 21st Century debtor's prison.
Meanwhile, my college town will reap the short term benefits.
ms.
Always good to see you.
From the high-school math department, the problem, and it's results, are similar if not more tragic. We can't fail them. No student left behind means all students left behind. The lowest common denominator is in charge of the education system, all in the pursuit of "high self esteem."
And, of course, federal/state dollars. Which is amazing to me. I can teach just as well in a grass hut as I can in a state-of-the-art classroom with overheads and wi-fi. Who convinced us that we needed all this shit? Whan did drawing in the dirt become passe?
I assume in universities the name of the game is reputation. If a certain percentage of the class fails, what does that say about the quality of education they are receiving, eh? Gotta keep the dollars a-pourin' in. Counseling. My ass.
I've always said that government is man's way of attemting to control nature. Specifically human nature. And you can't steer nature. It does what it does, and God help the ones who try to change it. We're finding out how it all ends, right here, right now. It could have been easy. It's going to be hard.
Peace out. Oh, and welome back, Lizzy.
"I've always said that government is man's way of attempting to control nature."
that statement & paragraph is pure gold my friend.
By the way, happy Zero Hedge Birthday tomorrow!
hey thanks...just noticed that...been slumming around these parts since the blogspot days though...only went legit when they made me settle on 1 identity in order to post anymore.
I went to curriculum night last night at Inglemoor H.S., which has the reputation as being the "brainy school" in the area. The honors math teacher spent the entire 15 minutes he had with us demonstrating the ActiveBoard in the classroom. He made lines and circles and the parents in the room "oohed" and "aahed". All I could think was "What does this have to do with math???"
Every classroom in our county has an ActiveBoard. I haven't yet met ONE teacher who knows, or cares, how to use it.
I've never even turned one on. Makes a good whiteboard, though...
And some people wonder why we're homeschooling.
Reminds me of this:
http://www.nationalreview.com/corner/247998/re-liberalism-s-greatest-fai...
good ol' Bradford PA, home of the Paper Street Soap Co.
Ms - thanks for the story. Not to take it too far, but I think one of the most dastardly aspects of all of the bailouts (homeowner and bank, C4C, homebuyers tax credit, etc.) is the raising of moral hazard. We are no longer responsible for our own mistakes, and can simply wait for the inevitable handout. It <could> have a been a seminal cleansing of our society, but we turned away from the immediate pain for more bread and circus, and more Idol and iPads.
heard a commercial on 1010 WINS last night. don't remember the exact wording, but here's the gist, kid you not:
"Got over $10k in credit card debt? Our experienced attorneys negotiate a settlement on our debt for pennies on the dollar! Call us now and get your piece of our current bailout nation! It's not just for the fat cats!"
Those kinds of ads are all over AM radio. I guess they figure everyone listening to talk radio must be unemployed. Maybe they're right.
No matter how well-stocked your spice rack is, you CANNOT make chicken soup out of chicken sh1t!
Were at the point now where the 'QE1' price Inflation is being felt through the system.. just as the Economy weakens. Not a good situation. Stagflation anyone.
Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries.
Yes, I would agree, but this is the tip of the QE1 inflation iceberg IMO.
dollar getting polaxed
if 78 cant hold, waterfall to 74s
dollar complete toilet paper - soaring paper assets - worthless
but the memories are priceless
dollar getting ready to ramp off the 75% retrace of the entire move starting in Nov. 09 better strap in.
More like greecelaxed based on how Poland is doing compared to Greece..
What does the prices paid component to do for expectations of a shock and awe QE?
Gold seems to think like me (1320 right now): the hyperinflation will happen much, much sooner than expected
RSI charging to 81; out of the BBs
Input costs are insane.
We need a lower dollar why?
Excellent point.
To help jack risk assets in America. Nothing is wrong as long as the stock market is up. Ben said so.
So did Greenspan...the stock market is the Fed's Fifth Column.
Gold reaching for the sky again. $1319
Gold is shaking hands with polar bears, while the dollar is looking for penguins!
Market Watch headline.
"ISM manufacturing index slips slightly less than forecast in September."
Nothing is outright bad, just less than expected or lower than hoped or rebounding slowly.
Propaganda isn't just produced by governments. In fact, in today's stealth fascism, it's almost always delivered by the MSM, who is of course "free" of any governmental, corporate owner or advertiser influence.
The owners of the free press are more then happy to play the game so long as the facist cabal keep the corrupted SEC of their back while they front run all their news stories.
Maybe if I REALLY wish/hope real hard, the Economy will go up and unemployment will go down! </sarcasm>
Prices up 9% ? Whoa
Whatever, pick the winner Gold and just sit back and hold.
Sentiment is reaching extremes on many fronts now...Euro optimism, equity optimism, junk bond optimism, etc. which should make anyone begin to question the current state of affairs from a trade perspective.
So the wonderful jump in incomes just before can't even cover the increased costs from the falling dollar.
Buy wheelbarrows now, you'll need them to carry our dollars.
Darn it! I just gave my wheelbarrow away to a local charity. Good thing I got Silver talismans to ward off these evil spirits!
inflation in non-durable consumer goods, yet no inflation in wages nor employment. government policy is to screw the middle class and below and they are doing a fine job. small business in this country is getting destroyed and have been for the last decade. my business is still profitable but it is as lean as i can make it.
i feel like shutting it down and going off the grid.
Did you ever think that was part of the plan? Scare the rich old white guys (not that you personally fit this category) off into the woods with their guns and gold so that other people have a chance?
These "other" people, educated (more like socialized!) in US Public education system to be good little worker bees? Notice that NO ONE graduating from such a system can even spell Entrepreneur, much less know what it means?
Of course, the lubricant in short supply is KY Jelly.
F - U - C
K - E - D
A - G - A - I - N
Less refining. Less lubricants.
So inflation, no employment growth, and no increase in interest rates.
Welcome back stagflation. The keynesians have kept your seat warm with their credibility.
Exactly this.
I wonder how are they going to justify stagflation now. If the keynesian vodoo masters try to blame it on petrol again its going to be very obvious. I am really curious about the excuse they will choose this time.
Straw! Ya need straw to make bricks, just ask the Hebrews. :>D
Man oh man, I-bonds are limited to $5000 per year per person right?
I shutter to think what this inflation will do to familys barely getting by on food stamps and having their food stamps cut.
red is a comin
for all of 2 minutes on the /es. this market is the zombie from hell
Uh oh!
Tonight, in Prime Time on LMN:
"Lies My Government Told Me" :-)))))))))))) starring Benjie and Da Boyz!
In the 70's Wages were rising for the most part, you can see the effects in consumer spending in freefall via Consumer Metrics Inst. Qtr 4 and Q1 are going to be nasty for the mkts. CMI looks to lead by about 3-4 months.
Some good info on how the S&P lags the CMI here:
http://theautomaticearth.blogspot.com/2010/09/september-28-2010-graphic-...
Agree with you on Q4 and Q1
The average is 50, so we are overvalued as it is on the ISM. It has been obvious that all production increases were to increase inventories to brace for the recovery....well that never came. I am going to have my own Christmas after New Years when everything will go on fire sale to clear. In other news, I see the Feds are defending 1040 with all their might. Brian Sack must be having quite a busy day today.
OT, but saw Wall Street 2 last night. Yeah that movie is really bad and pisses on Oliver Stones credibility.
Quote from MarketWatch:
"U.S. stocks trim gains after a gauge of manufacturing activity dips and an index of consumer sentiment in September is revised higher, while construction spending falls. Factory strength in China bucks up bulls."
So see, no matter what happens here, as long as a communist country that would never lie, cheat or steal, reports a good number, that's good enough for the bulls.
*headdesk*
Even when no one believes the numbers, as long as we can pretend, both collectively and individually, that the numbers are good, all is well. Who said we're in denial? If most everyone believes the same thing, that makes it a fact because facts are determined by the majority, not by silly things such as numbers or fraud or spin.
When the only thing that supports a fact is faith and belief, you're no longer talking about economics. You're talking about a religion.
The almighty Dollar is my higher power and I whoreship...ops.....worship every day (well, 5 days a week) on Wall Street.
Let's see... my feet are wet, there's some crocodiles on the bank and some pyramids next to a Sphinx...yup, I'm in de-nile! :>D
NO ONE wants the music to stop, because some mindless Govt Bureaucrat is holding onto their leg, which is gonna make it REAL difficult to run to a vacant chair. This ain't gonna end well.
Just to give some perspective on the upcoming auto sales numbers, I like to track none other than the Maryland MVA, because they put not just the total sold, but the total value sold. Year to date through August, we're up about 18% from last year ($7.3 billion vs. $5.99 billion). This seems incredibly bullish, until you realize that the 2005 number YTD was $11.4 billion. For perspective, we were at Dow 10.3K around October of 2005. Now, tell me with a straight face that Maryland's auto dealers think the Dow at 10.8K in October of 2010 reflects the economic fundamentals of the Dow at 10.3K in October 2005. Their "real economy" suggests the Dow is rich about 35%, and this doesn't even take into account dollar valuation.
http://www.mva.maryland.gov/About-MVA/statistics/default.htm
Deflation in the things I want but don't need...and incipient inflation in everything I need like groceries, fuel, and medicine. Deflation and inflation...twin bitches of the same bad policies and bank fraud foisted upon consumers over the last quarter century. Time to dust off my Gerry Ford "WIN" button and await the Volkerian aftermath.
Food stamps get cut and food prices going up...........excuse me, this is a Democrat in the Oval office?
The modern day equivalent of the soup line running out soup with a long line of unfed. This is horrible news.
More inflation inducing QE now? Now?
The Fed seriously have no clue. It's like the Wizard of Oz where the wizard in a bellowing voice goes, "We have options!!!", "We won't hesitate to act if economic conditions deteriorate!!!" When really behind the curtain is a bunch of clowns playing monopoly. They're a friggin privately owned bank. The ONLY option they have is to offer credit. Although the their minions (the banking system) is only too happy to take what they have to offer and bid up commodity prices, the fact that credit in the private sector is deleveraging means that our society is going to be squeezed between high prices and no pricing power. Yeah, $140 oil is exactly what the economy needs right now.
The money lenders have lived off the productive labour of everybody else for long enough. Time to get a real job Bernanke.
Luckily commodity price inflation will not affect most businesses, as they are not having to restock, but instead are winding down operations, while using their cash piles to play in the financial world.
Nothing, like consuming your capital and paying Wall St. for the privilege of doing so.
Game On!
Only prices and inventories are up.
New orders, production, employment, and backlog of orders are all down.
Yet somehow this was still a "positive" report. Go figure.
Yup! The Devil is in those details (and he's laughing his ass off!)