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Rosenberg Explains Why Yesterday's ISM Was Likely Wrong, To Be Revised

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Thu, 09/02/2010 - 10:57 | 559588 Bartanist
Bartanist's picture

Actually, it seems more logical that the ISM number was a "cover" for boosting stock price and not the reason stock prices increased.

Thu, 09/02/2010 - 11:00 | 559595 SheepDog-One
SheepDog-One's picture

Bartanist, exactly.

Thu, 09/02/2010 - 11:53 | 559720 topshelfstuff
topshelfstuff's picture

YES, I'll second that. Bartanist got it Exactly right on the very first post.
Perhaps/Likely most here see these things, expect them, more easily.
I had posted something similar yesterday. In fact I had use, just as an example, a rise in the DOW  of about 250 points, as the pre-ordained move given out to "The Gang" in advance. Needing a Hook to hang your Hat on, the ISM Number served as the Hook.

[ Incidentally, I noticed this begin in force on March 10, 2009, C's Pandit unusual comment about the results of the first 2 months of the QTR being Positive. The DOW's 200-300 point gain attributed to that. It worked so well, and 2 days later BAC's Lewis repeated the exact same script, just replaced Bank of America for Citi, and another couple hundred DOW points had the "Cover" needed. You know O slipped up, and accidentally leaked this move was afoot. The Media hasn't brought it up since, of course, but if you don't remember it just google [ Obama March 3 Buy stocks ], and how the Headlines and articles were a bit shocked and mentioned that this was the first time they had heard a Pres act as a stock analyst ]
I could go on and on, but what's the point. We have moved far beyond the Blatant, "in your face", rip-off and rake-in moves. The free-for-all, no holds barred, outright thefts that had escalated as we moved towards the election day of 2008, and end of the 8-year term of office of an administration, did not end, as some had thought. The only thing that has changed is the loading up of massive $Capital injections to the "5-Families" in The Godfather speak. The oddity for me is in knowing that the rest of the world is more aware of this than our own People.
This may be kind of funny, and true, maybe some of you experienced the same. Several years ago when it became obvious that Fundamentals became totally of no use, even TA couldn't be trusted as it had been, a small group of fellow investors I have communicated with for years, began to make our trades in what we dubbed "Follow The Crooks" type of tradng.
This may be unrelated, but I'll stick it in. I've noticed that slamming, smearing, anything negative, about China based stocks, have apparently received the OK, the Seal of Approval. This is a topic I should write about in more detail.

Thu, 09/02/2010 - 11:24 | 559643 Rasna
Rasna's picture

Agree Bart,

The line in the sand until the midterms is 1050/10000 for the S&P/Dow... We'ver seen the Fed/Treasury step in countless times during the past year to create phantom rallies. 

The government once again outdid itself in boosting numbers with the hope of surging stocks. It succeeded. Now the question is whether the imminent ISM downward revision have a comparable adverse market effect.

The market has "flash memory"... When the numbers are revised there will be marginal change because the "next" better numbers will have captured its interest.

Thu, 09/02/2010 - 12:08 | 559749 Ripped Chunk
Ripped Chunk's picture

Agreed, prop it up until November.

Vote all the assholes out anyway. All of them at every level. Then do it again next general election and the next after that and so on.  And letter writing campaigns that scare the shit out of the newbies.

Thu, 09/02/2010 - 12:31 | 559814 LeBalance
LeBalance's picture

Please define how to elect a non-asshole, when the choices (all of them) are assholes?

Thu, 09/02/2010 - 14:44 | 560179 Attitude_Check
Attitude_Check's picture

Realistically you can't.  But you can cause enough rotation in composition,that it limits the amount of fraud possible since it takes time to build your "crew" for the SS Graft.  The second thing this can do is to "scare" them enough to at least try to hide the graft (thus making it smaller in general) since most all politicians are power-hungry sycophants.  Finally on a longer term it may over time punish bad behavior enough that a collective shift in political culture occurs (although that is probably a generational timeline).

Of course we all "just give up"  that will turn out SOOOO much better.

Thu, 09/02/2010 - 12:20 | 559788 rosiescenario
rosiescenario's picture

...and it was just a coincidence that the party in Jackson Hole had ended...

Thu, 09/02/2010 - 10:58 | 559589 clagr
clagr's picture

in summary, rise doesn't pass the smell test. Put the shorts back on.

Thu, 09/02/2010 - 11:35 | 559665 Ned Zeppelin
Ned Zeppelin's picture

Good luck with those shorts in this environment. When fundamentals don't matter, and behind the scenes interventions are the market-makers, I don't know how you can trade - gamble yes, trade, not so much.

Thu, 09/02/2010 - 11:49 | 559697 Rasna
Rasna's picture


The thing that we have to remember is the Fed/Treasury control or influence a lot of these numbers and also control the markets with their interventions, so until something comes along to change that control it's business as usual...

The short side is the best bet, but it can be a frustrating and, at times, unprofitable... To be short the trader HAS to take the Long View.

Thu, 09/02/2010 - 11:01 | 559594 Bearster
Bearster's picture

The people who bring us these lies masquerading as data are the same people who some are calling to use force to regulate HFT and other "undesirable" market participants.

Thu, 09/02/2010 - 11:02 | 559596 Robslob
Robslob's picture

Mutual Fund Wednesday?

Thu, 09/02/2010 - 11:04 | 559599 Iam Rich
Iam Rich's picture

Rise did not follow the ISM but preceded the ISM and was over by the ISM

Thu, 09/02/2010 - 12:22 | 559794 rosiescenario
rosiescenario's picture

...you mean someone at the PPT didn't get the email?

Thu, 09/02/2010 - 11:04 | 559600 Jason T
Jason T's picture

the stock markets are so rigged its gotton beyond ridiculous.  I forecast retail withdrawals for the next 52 weeks in a row.  Who wants to be involved in this parasitic market run by 6 large banks that collectively own the Fed which gets to print money for free?

Thu, 09/02/2010 - 11:07 | 559606 Cognitive Dissonance
Cognitive Dissonance's picture

Suffice it to say that in the past 30 years, with eleven observations, ISM dropped to 47x in the three months after such a decline in the orders/inventory ratio to such a low level as is the case today. That is the average, the median, and the mode. The highest ISM reading three months hence was 51.9, so if past is prescient, today's data was likely a huge headfake.

That's pretty much all everything in the markets are these days. Head fakes. And pumps and squeezes and wishful thinking and bandwagon jumping and so on. And yet the market remains elevated despite the "obvious" worsening data. So the "obvious" question is why?

If we're to assume that the markets were more "pure" 20 or 30 years ago, meaning there was less overt manipulation, at least of the governmental variety, and out of that era came the well accepted pearl of wisdom "Market's don't move, they're moved" then what do we say about today's markets?

Can you say "National Security Directives"?

Thu, 09/02/2010 - 11:18 | 559630 SheepDog-One
SheepDog-One's picture

C.D. exactly, economic martial law, and most people have no clue about it!

Thu, 09/02/2010 - 12:01 | 559739 Ripped Chunk
Ripped Chunk's picture

economic martial law

Excellent terminology. I will run with that.

Thu, 09/02/2010 - 12:30 | 559811 Astute Investor
Astute Investor's picture

Makes you wonder why the so-called capitalists are so afraid of true capitalism.....

Thu, 09/02/2010 - 12:32 | 559817 LeBalance
LeBalance's picture

because they have to work and are uncertain of the outcome.


Thu, 09/02/2010 - 11:19 | 559633 American Dreams
American Dreams's picture

Defense of the dollar and defense of the stock market would seem to go hand in hand within this thrid world war.  Crashes are neutralized, currencies are manipulated and we should all just buy into the fact that we have the most powerful entities in this conflict, The Federal Reserve and the IMF.  So all is well, go USA and BUY BUY BUY



Thu, 09/02/2010 - 13:19 | 559944 Commander Cody
Commander Cody's picture

And why wouldn't we all follow the criminals to wealth and prosperity?  Can we fight the Fed?  The TBTF banks?  The Treasury?  The US military-industrial complex?  Large multi-national corporations?  So many questions, so little time.  Party on!

Thu, 09/02/2010 - 11:08 | 559608 American Dreams
American Dreams's picture

Thank you Dave!  Your data mining is always appreciated, as I stated yesterday right after the number was announced that we should have been seeing a number in the low 50's but your ability to put color to canvas is much ahead of and a great improvement on my frustrated rants. 


know your enemy

Thu, 09/02/2010 - 11:24 | 559642 traderjoe
traderjoe's picture

And of course, the enemy has unlimited money behind them and every reason to try to keep the illusion(s) going for as long as possible. 

On a SA basis the China PMI was in-line. The EU periphery PMI's showed great economic distress. Harrisburg, PA defaulted on a bond (expected, but that the first muni default to break the dam going forward). Anyone buying stocks now is whistling past the graveyard of the bank failures, sovereign defaults, and financial destruction to come. 


Thu, 09/02/2010 - 11:13 | 559618 Pumpanddump
Pumpanddump's picture

Who cares about revisions?  Buy Buy Buy

Thu, 09/02/2010 - 11:16 | 559626 ghostfaceinvestah
ghostfaceinvestah's picture

I don't think the govt publishes the ISM number.

Nonetheless, it was so far out of whack that it lost a lot of credibility yesterday, so it might as well be published by the Ministry of Truth aka US Govt.

Thu, 09/02/2010 - 11:17 | 559628 Gimp
Gimp's picture

Lies, lies and more damn lies.

Who cares anymore about the truth, at least we got to pump it up, pump it up. Just play their rigged game and enjoy.

Thu, 09/02/2010 - 12:14 | 559766 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

"Lies, damn lies and then there are statistics." -Mark Twain

No need to guess where this number resides.

Thu, 09/02/2010 - 11:17 | 559629 Turd Ferguson
Turd Ferguson's picture

I know I'm getting way out into the conspiracy "weeds"...but I've been waiting for the Fed/Treas/BLS to begin to really manipulate the data. Of course, John Williams has done fine work for years in printing actual, non-adjusted government statistics. What I'm talking about is outright manipulation.

I'm now so confident that the Fed and the Treas manipulate our "markets" on a daily basis so as to create the necessary illusion of wealth and prosperity, why should I not expect that agency bureaucrats, under extreme pressure, can not be coerced to fudge their reports?

Thu, 09/02/2010 - 11:19 | 559631 plocequ1
plocequ1's picture


Thu, 09/02/2010 - 11:20 | 559634 Ben Graham Redux
Ben Graham Redux's picture

I agree with the folks who believe yesterday was a "gamed" market day.  The ISM number made no sense and the volume was very weak for a 3% day.  In fact, I'd argue that yesterday was set up by the Fed in conjunction with the BOJ and the ECB as the yen got crushed after it was running higher the night before - opposite but same situation with the euro.

The problem here is that whoever is gaming these moves keeps going back to the same well.  People have figured it out which is why short interest is falling and put/call ratios are steady.  With the amount of firepower expended yesterday, 3% was the best they could do?

With money leaving every week and short sellers unwilling to put their necks out, this becomes a waiting game - a siege, if you will.  Each week the defenders use up a little more ammunition and supplies while desertion (mutual fund redemptions) remains high.  It's just a matter of time...

Thu, 09/02/2010 - 12:28 | 559805 rosiescenario
rosiescenario's picture

...very nicely put...and keep in mind that the New Era currency shall be ammo, "calibrated" in a variety of denominations...

Thu, 09/02/2010 - 11:21 | 559636 tom
tom's picture

Rosie's dissection is right on.

But Tyler: "Government ... boosting numbers"? This is the ISM you're talking about. It's a simple survey, subject to misreporting and sampling error. I really have a hard time understanding why you get your shorts so twisted over it. A market-misleading report is a gift horse, add to your positions and be happy.

Thu, 09/02/2010 - 11:43 | 559679 traderjoe
traderjoe's picture

As a general comment attached tangentially to yours, I wonder how much GM not shutting down for the summer impacted this ISM (to boost it on a seasonal basis). As I roughly understand it, the point of conspiracies is to involve as few people as possible. Therefore, outright manipulating a non-Gov number would be too risky. It would be far easier to massage the inputs - like having all the parts and auto supply chain happy on a seasonally adjusted basis. Who knows. 

And of course, with the Gov numbers, you can just manipulate the calculations - like the B/D model, geometric weightings of the CPI, etc. 

If you read up on the Birth/Death model, it will show the mockery of the BLS NFP numbers. Part one is they ignore all of the job losses that might have resulted from businesses closing, i.e. when they contact a business and there is no response they ignore the impact that would have resulted from the business shutting down. This "number" is never published or revealed. Only the annual benchmark revision (last one was an extra 800k losses for the year) corrects for the B/D model. 

The second part of the B/D model is the more familiar adjustment to jobs published on their website. Of course, these numbers are non-seasonal, making it impossible to subtract them directly from the headline number. Another way to muddy the waters. Of course, they ramped up the 2010 effects of part 2 (monthly adjustments are running higher than 2009), even after the model was discredited in 2009. BTW, this coming month is a favorable one for the B/D model (a higher adjustment then the previous month) - might mean that the NFP doesn't dramatically disappoint. Just sayin'.

Thu, 09/02/2010 - 11:28 | 559647 dukeland
dukeland's picture

"Norbert Ore, who presides over the ISM survey, had this to say about inventories: “If the inventory build isn't voluntary then we have a huge issue on our hands.”"

Did'nt the INTC preannouncement and CSCO results last month almost confirmed that that channel stuffing is prevalent. Now we need ISM to pre-announce its data was wrong!

Thu, 09/02/2010 - 11:30 | 559656 nevadan
nevadan's picture

Assuming a bad NFP number tomorrow it seems reasonable that the market needs to be higher to defend ES 1040.  Just building a moat for defense of the castle.

Thu, 09/02/2010 - 11:47 | 559688 traderjoe
traderjoe's picture

See my comment above. The B/D model impact is bigger this month that last. You can compare 2009 to 2010 here: http://www.bls.gov/web/empsit/cesbd.htm. Expect 2010 to be slightly higher than the 2009 number for each month. 

With the economy flatting, slightly declining, the B/D model should have a larger proportional impact on the reported results, IMHO. Unfortunately, I think this means the number won't significantly disappoint. 

Thu, 09/02/2010 - 11:34 | 559663 Something Wicke...
Something Wicked This Way Comes's picture

You can't keep stealing little Jimmy's lunch money forever. It doesn't take a rocket scientist to figure out that every number is manipulated. GDP is a fraud, the CPI and PPI are manipulated for max upside effect...the prob is that we all know this and are frustrated. The other little Jimmys' are going to figure this out.

I can't short or put this market because the herd hasn't figured it out yet. Like all things life, timing is everything. That big ol debt pile is a complete game stopper and sooner or later it's gonna be game over until that unwieldy mess gets addressed...the rest of this shit is just shit.

Thu, 09/02/2010 - 11:43 | 559678 anony
anony's picture

"Our rulers live in a different country".



Thu, 09/02/2010 - 11:48 | 559692 tempo
tempo's picture

About 25% of the ISM is related to Treasury rates which are now in bubble territory.  Also only 15% of GDP is mfg and ISM is a mfg index.  Its a false positive and shorts will come in big time at 1085 to 1090 if we get there.

Thu, 09/02/2010 - 11:53 | 559716 Ripped Chunk
Ripped Chunk's picture

I sure could use a vacation from this bullshit three ring circus sideshow of freaks

Time to bring it down again.
Don't just call me pessimist.
Try and read between the lines.

I can't imagine why you wouldn't
Welcome any change, my friend.

I wanna see it all come down.

Thu, 09/02/2010 - 12:16 | 559770 RichardENixon
RichardENixon's picture

What's an old geezer like you doing quoting Tool. I thought I was the world's oldest Tool fan, and I know you're older than I am, Ripped.

Thu, 09/02/2010 - 11:53 | 559719 bmwmc
bmwmc's picture

When Intel reported strong earnings and upbeat forecast the market went shit for the sky high.  I believe it soared 200+.  Then a month later Intel downgraded its forecast.  No -200 give back.  You'll see the same fuck job when ISM is revised. 

Thu, 09/02/2010 - 11:55 | 559724 bmwmc
bmwmc's picture

On a positive note Jimmy Choo's is going to IPO...Bitchez!

Thu, 09/02/2010 - 11:56 | 559726 Johnny Yuma
Johnny Yuma's picture

Yesterday's action was typical for a summer trading session in front of a 3 day weekend. The day's move occurred in the first 2 hours and went to sleep afterward.The ES ran straight back up into another 50% retracement zone and has traded somewhat sideways since. I've observed this sprint into the next measured move many times. If we break past 1093, it's most likely a straight shot to 1109.75 +/-... Major resistance there with it being half way back from April's high to July's low plus the 200 DMA is right above that level at around 1112's.


The daily news is merely a catalyst to get the market to move into it's next measured move. I've seen it time and time again and yesterday was no different. The level we're at today 1082 - 1093's are far more important than yesterday's rally to 1082 as it will decide our direction for the next trend.

Thu, 09/02/2010 - 11:56 | 559727 unionbroker
unionbroker's picture

 simple math you muliply the regional negatives together and you get a positive

Thu, 09/02/2010 - 12:04 | 559745 Something Wicke...
Something Wicked This Way Comes's picture

You can't make money without volatility. Period. Thus you must create volatility even if its based on nothing. It's like those two starving buzzards in the tree that say fuck it, I'm starving...let's go kill something.

Thu, 09/02/2010 - 12:17 | 559772 Invisible Hand
Invisible Hand's picture

The pattern I see is that the initial number is always distorted high (i.e. revisions are always down).  That, to me, indicates purposeful mis-information.  If it was sampling error or incomplete data, you would think that about half the time, these numbers would be revised up.

Anyway, they then revise the number down before the next number in the series and then proclaim that the newest data point is an increase from the (conveniently) downward revised value (burying the original overstated number down the memory hole).

Are economic statistics starting to feel like something out of "1984" to anyone?

Thu, 09/02/2010 - 12:17 | 559773 D-Falt
D-Falt's picture

In film-making, the projector works based on the principle of persistance of image.  They keep firing up the images faster than our retinae can finish chemically processing them.  The USG is doing a similar thing with these roided-up numbers.  They just gin the next fake number out faster than we can get around to comparing it to the real world conditions.  You just see the movie.  The won that ends with all the traders screaming "Buy! Buy! Buy!"....

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