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"Time To Hike Rates?" The Last 2 Times ISM Manufacturing Was Here, The Fed Unleashed QE1 & QE3
While it is hoped that the economy can continue to expand on the back of the "service" sector alone, history suggests that "manufacturing" continues to play a much more important dynamic that it is given credit for... and that is a major problem as ISM Manufacturing just fell below 50 for the first time since Nov 2012, crashing to 48.6 - the weakest since June 2009. Across the components, new orders collapsed (worst since Aug 2012), and prices paid crashed.
When ISM Manufacturing dropped to this level in early 2008, people largely ignored it at first... then The Fed unleashed QE1 to save the world... same again in 2012...
As New Orders collapsed...
What respondents had to say...
- "The oil and gas industry is realizing that [the] ‘low’ oil prices are now the new reality with expectations to continue at this level for some time." (Petroleum & Coal Products)
- "Still seeing deflation in raw materials." (Chemical Products)
- "Bookings and new orders are lower than expected." (Computer & Electronic Products)
- "Automotive remains strong." (Fabricated Metal Products)
- "Business is still good." (Transportation Equipment)
- "Downturn in China and European markets are negatively affecting our business." (Machinery)
- "Strong dollar is slowing our sales to China as they can buy in Europe." (Primary Metals)
- "Medical device continues to be strong." (Miscellaneous Manufacturing)
- "Incoming orders have leveled off from the summer." (Furniture & Related Products)
- "Month-over-month conditions are stable." (Food, Beverage & Tobacco Products)
Still - it's only manufacturing right? As we explained previously,
While it is hoped that the economy can continue to expand on the back of the "service" sector alone, history suggests that "manufacturing" continues to play a much more important dynamic that it is given credit for.
The decline in imports, surging inventories, and weak durable goods all suggest the economy is weaker than headlines, or the financial markets, currently suggest.
For now, however, that detachment can last a while longer as global Central Banks continue to suppress interest rates and flood the financial system with liquidity. With levels of subprime loans for autos and houses, debt issuance and share buybacks once again sharply on the rise, the "party" rages on. However, it is worth remembering what happened when the bartender previously shouted "last call."
This won't end well...
The last time ISM was here, The Fed first unleashed QE1.. and again QE3 in 2012 - Seems like a perfect time to raise rates!!
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As new orders collapsed for the last time, a new world order emerged...
With such great news, the stock market can only go up.
Sooooooo... another tanker on Q1 GDP again next year? Thank God they now have "double seasonal adjustment technology" fully developed and deployed to protect us.
And right on cue the "downvote the whole thread" guy makes his appearance.
-1=0
The new normal.
NIRP
No rate hike, EVER. The last rate hike in June 2006 was the last that will occur for this version of the USD.
Somewhere in the anus of the intelligentia, such a policy is called "a courageous act". lmfao...... doing nothing but killing capital is somehow courageous...
Nothing feeds the traditional Santa Claus rally like collapsing manufaturing.
Somehow I feel so hurt and betrayed, knowing someone would down vote me. Not because I am a dick (which is OK), but because his life is so empty that only his emotionally bankrupt mother would care...
Let's help him out. -1 for you and -1 for me.
I'll fire up Firebug and replace all -1's in the HTML source code. Now take THAT you down vote mofo.
Fuck it. My new minitab software will fix that quick.
Some days I have ZH SuperPowers™. A single click can generate 5 or 6 up or down votes. Perhaps an evil force has learned my powers and now uses them across various comments instead of all on a single comment.
Let us pray this has not happened.
'tanker'? Indeed... Lot's of 'em -- parked all over the place. Some enterprising soul might come up with a graphic correlating parked tankers with energy sector layoffs...
Contagion! http://hedgeaccordingly.com/2015/12/brazil-russia-turkey-potential-sourc...
How about a mini rate bump and a QE drop at the same time. That would confuse a lot more people.......
Buyers assuming no lift off will not be happy when the fed no longer has their backs...they've been saying this over and over again for the last 3 weeks...
"NO MORE QE...time to take their medicine", Janet Smellin AKA Mr. Fischer
LOL!!! Irrelevant as much of the world's GDP is simply pushing paper/digits back and forth.
Unlike producing a real product, there are no real input costs for such bullshit.
Rally on!
Listen proles! This is going to be the best Christmas ever damn it! The beatings will continue until morale improves.
I'm tired of the whole "it's not about more stuff making you happier, it's about being happy with the stuff you've got" bullshit.
I want a fucking helicopter for Christmas. A real one. Red with white stripes.
I don't want a helicopter, but I would like one to dump a whole shit load of cash on me. Preferably not a black helicopter though. When they come after me I know what that means.
I promise to drop bags of cash on every ZH member when y'all give me my helicopter for Christmas. But I still want it in red. If I go flying over some of your houses in a black one I'd get my ass shot off.
With the payloads you are talking about , you need something more than a Robinson.
http://www.robinsonhelicopter.com/
I will suggest this:
https://en.wikipedia.org/wiki/Mil_Mi-26
It may be bloated and cost more, but look at in terms of efficiency.
Helicopter? You need Thunderbird 2.
I'll settle for a GT350R
It's climate change that's the problem; yup, Emperor Goebbels says so. SO, BTFD.
www.traderzoo.mobi
He's like bagdad fucking bob this "president". Total fucking tool...
"Nothing a little lot moar QE won't solve." - Bernanke the Courageous
Courage to act, shit. These mf'ers really do have an inflated sense of self. Like laying it down at Iwo Jima. Surprised the One doesn't give him the Congressional Medal of Honor.
"this won't end well"...
Yes, precisely why your oligarchs will never let it end.
Bad news is good news.
The markets are up, a lot.
NO RATE HIKE NOW BITCHES!
world completely hooked on ZIRP for shit growth. debt is the cancer. simple as that. she MIGHT raise 25 bps simply because she will lose any "credibility" (among those who believe in this scheme) only to have to take rates back down to zero & negative in the future. its not politics, its math. countries have been borrowing way beyond they're means to doll-out candy to the natives who want "fair, economic justice."
absolutely fucking histerical to think this is the way forward. hope all this living beyond our means was worth it. fucking roach-motel global economy we are now stuck in because of selfish assholes who can't see more than 2 feet in-front of them.
Gee, what could have possibly caused that HUGE spike (up) at the onset of 2009...? I guess it was simply the resiliency and determination of the American economic spirit, right? Please say right...?
Nothing that a new major war in Syria cannot fix
Senators McCain and Graham Are Nuts------- Want 20,000 More US Troops in Syria and Iraq
http://davidstockmanscontracorner.com/senators-mccain-and-graham-are-nuts-want-20000-more-us-troops-in-syria-and-iraq/?utm_source=ReviveOldPost&utm_medium=social&utm_campaign=ReviveOldPost …
No self respecting nutcase would suggest that.
Something bad happened?
Quick go to the liberty warehouse and see if there's any freedoms left we can give up to fix this.
If I had to guess I would say the end of QE3 was a significant event. But that's just an observation.
We're into December and then on to 2016. Interesting times.
So expect a larger and bolder QE. It won't stop until someone's currency dies.
The problem is what are they going to QE??? QEinfinity had to end because there was nothing else to buy. The government isn't spending enough for them to do any significant monetization. Unless congress approves some new round of deficit spending the FED is impotent. They may raise rates only to accelerate the oncoming "recession" (and yes I know we've never exited the real recession) just so Congress can give them the spending necessary so they have something to monetize. I think this plays out very similarly to 2008 but in a tighter time frame.
Crash takes hold whether the FED raises or not. Housing Bubble 2.0 pops. Congress goes all in on new spending with a huge increase in the EIC to boost spending and a massive first time buyer credit to put a floor under housing. The FED monetizes it all.
SPX 2016: The Year of the Bear
http://goldenopportunitytrading.blogspot.com
...ah, technical analysis in world that abandoned all technicals and market fundamentals a long time ago...
Lol trying to make sense of an insane world.
Charts mean nothing.
If the Fed wants Dow 90,000 points it will happen tomorrow.
O/C no one will benefit from Dow 90,000 but the few people around the Fed's camp fire/inner circle....
The U.S. monetary system is rigged for the few, we are all wasting our time playing this game because the outcome is pre-determined by the rules.
Best thing everyone can do is quit playing, flip the table, let them win because that means everything goes on fire-sale and we win.
If one person owns all the assets, eventually he will lose control and all the assets will go on sale.
Just let them win, its the only way they can lose.
Its as if the few manipulated stocks that are holding the market up is the tip of the iceburg that is visible above the water.
Data and uncertainty means nothing anymore since the Federal Reserve has been buying stocks via their primary dealers to keep the market propped up no matter what happens.
The Fed's covert stock buying program is becoming blatantly obvious !!
All the QE ended up in useless assets that dont produce anything (stocks, bonds) etc.
Everything is being done to paper over the top 5%'s Problems and to keep the government solvent while the rug is pulled out from the bottom 95%.
You cant keep people marching without someone holding the torch in the front lines, the torch must stay lit at all costs even if it means the 20-30% at the back of the train have to die.
The economy is going nowhere until the debts of common people are alleviated.
Its like trying to pull a 10,000 ton anker with a bicycle, doesn't matter how hard you peddle the bike is going nowhere with such a heavy debt load.
Families burdened with high debts, mortgages, medical expenses, tuition costs have no leverage to pay for their own consumption and the consumption of government and financial institutions which have grown disproportionately out of control.
The govt and banks are consuming more of the average joes paycheck than average joe consumes himself.... it just cant go on much longer.
Students were sold on the idea that incurring huge tuition costs would net them a great paying job........ that was a lie.
Homeowners were sold on the idea that getting into debt and buying a house would ensure their house would perpetually skyrocket in value and allow them a comfortable life... that was a lie.
Americans were promised job security by the fictionalization of america into a "service economy" and the offshoring of manufacturing jobs . . . . that was a lie.
I guess by converting the economy to a "service based economy" they meant that everyone would endup poor , in debt and in "service" to the government and banks.
Everyone has been reduced to bar tenders to serve alcohol to the poor and destitute hopeless individuals left in the wake of 2big2fail.
Why not hike rates? the only parts of the economy that would die are the fake parts.
Kill the parasites, Hike rates.
I would agree, in typical austrian fashion, but unfortunately the rot is so deep that legitimate business depends heavily on all the malinvested bubble bullshit now too. Maybe we could've had a clean break in 07/08/09 but they just went along and made the problems even more structurally embedded...
Expect a larger QE this time.
Larger and and larger doses of QE until the patient dies.
No clearing of the bad banks, just printing and bailing out.
Not a free market, it's rigged.
Who gives a royal ... about rate hikes... this is old rehashed news. Let's move on.
Long ink and paper.
This is going to get bumpy.
The only option is to lower the USD exchange rate and continue buying US debt here. If they raise interest rates, the banking system will start unravelling carry trades. They have to trash the currency to where it belongs to maintain the economic facade before Obama leaves office. They can no longer just prop stocks and pretend. The current USD exchange rate is literally tearing the guts out of the real economy because everyone else is debasing. That is just how fiat works.
All we need is one guy in the global economy to actually go to work and do something then we can rehypothocate that to an entire global economy but if he calls in sick we are so screwed.
The Fed is already doing stealth QE buying stocks !
No way
This is mattress money
Didn't you know stat that show most Americans dont have 100 in bank account?
It's because they're actually stashing their millions under mattress
The Fed is blatantly unforecastable. The evidence is clear. To imagine they are (or remain) anyway connected to our future is scary.
In the market world of fiat free money, all trends are infinite until utter catastrophe or Fed intervention. There are no warning signs visible when money is free, and there is no caution. Just people chasing numbers with their free money, no matter which way.
No trend will end without intervention or complete failure of that market. That is the law.
What if everybody orders 1 extra round next time they're at a bar? Just 1 extra round? All that money will jump start the Food&beverage segment of the economy and all the bartenders and waitresses will buy more iPods and Tablets....Done!
I keep reading about Muslim fanatics raping and murdering anything that moves. Why wouldn't all that Bastiality boost GDP?
It looks like they have the conditions in place to raise so I suspect they will bump it up .25. But that will expose the ongoing recession that runs just beneath the surface. Then we get NIRP as they cut .5% and probably QE (whatever) as well.
A rate hike today should be solely based on simply coming off the zero bound and out of 'crisis mode' and for no other reason.
Actually, seems like an even more perfect time for stocks at ATH!!
Signed
johny quant
the manufacturing base in america has been hollowed out since 1997. there is no real manufacturing.
Note: america has been running large deficits and now to make matters worse the gov't is taxing everything that walks or talks.
think about asshole baby`bush lowering the tax rate for americas 1% during war`tyme. but, it only gets better when the grandiose (giveaway`trickle-down reaganomics) gift, 'that-never-stops-giving' for the 1% has still remained unchanged under the 'Hopey`Changling Pres'.... 2X are nat'l deficit in 6yrs.
yes please hike rates and crush the economy master yellen !
is there even a suggested relationship between QE and manufacturing, ie the real economy. come on people nothing to see here, move along
ponders when the market will start pricing Government credit risk and compendatoin for inflation rather than funny money Fed QE and what an accurate default risk this would be..
Maybe the exhaustion of Social Security Trust funds via draw down of $6T in treasuries to partially fund $100T of liabilitiies in the next twenty years is a key factor in the default rate? Probably default in twenty to thirty years = contribution to default probability of 2-3%
Maybe the roll-off of $2T of treasuries by the Fed as it moves to getting out of the market since it is evident that cenral banks cannot influence the economy in any way shape or form and that only fiscal policy has any significance for a balanced economy; leaving whats left of the discretionary spending from the tax base in the economy as able to repay debt? contribution to default probability of 1/2% to 1%
Maybe the impact on debt sustaibaility of the interest rate on debt itself, made up of compensation to investors for actual inflation plus default risk above - say a "normal" real rate of return of 1-2% above 2-3% inflation.
total interest rate = default risk sometime in the next , say, 25 years of 4% plus inflation compensation of 1% plus inflation of 2% = nominal 30-50 year bond rate of 7%
current 30 year bond rate = 3%, upcoming price loss (and required reduction in social security spending/pensions) = 30 year duration times 4% yield increase = ummm... more than 100% = bond mathematics and quantification of default risk needs rewriting.
Manufacturing is only important to people who live in the real world.
Those who rely on servants for everything only worry about the service sector.
“that detachment [PE ratio from reality] can last a while longer as global Central Banks continue to suppress interest rates and flood the financial system with liquidity.”
Key words here are, “a while longer”.
The general opinion, at least among this site’s staff and most of its commenters, it that any financial shock – such as a rate hike – will trigger an immediate economic slaughter; some think it will be on a world-wide basis.
I hate to spoil the party, of sorts. Oh, a slaughter will happen – but not immediately. What we are witnessing is a slow destruction of nothing less than so-called Western Civilization. And by “Western Civilization” I mean one where rights, liberties and private property are absolutely protected – a society that has never existed.
It will be slow because something like 95% of Americans live in a world of make-believe: they survive by a million different sets of pleasing falsehoods to quiet their fears; to feed hope for a better – but entirely fictitious – life (we are dealing with lies, remember); to assuage guilt of a thousand little, or great, crimes; to promise forgiveness without meaningful restitution; among other weaknesses and moral corruptions.
With this policy to guide their lives, these people, obviously, will believe no one be he who lies to them.
They will, in other words, be led, or ruled, only by liars. On the other side of this coin, they will learn to hate with a passion those who tell truth or possess a passion for justice.
This rejection of truth has remarkable consequences. The faculty of reason is the primary, perhaps the only, attribute that distinguishes man from beast. Thus, the demand for a steady diet of lies is effectively a rejection of the capacity for reason. As such, these people literally reject their humanity; and place themselves at the level of a wild beast; which, by the way, is an insult to wild beasts; for, they do not act against their nature.
This is the mental and ethical condition of a very large fraction of men thru-out the world.
And they will die or kill rather than allow truth – or allow accountability for crime; or, they will do this rather than accept the humanity that reason would give them. They are so desperate to maintain their insanity, they will even destroy their own children.
So, when the Federal Reserve raises rates, yes, there will be an economic shock, and cause economic destruction; and the average man will dutifully ignore such facts; he will, instead, patiently believe falsehoods propagated by media babblers, professors and bureaucrats – while his world crumbles around him. This, while he maniacally supports the murderous policy of tyranny made possible by the Federal Reserve.
Why? Because he follows a policy of not believing facts provided by HIS senses when such facts contradict what he wants to believe; instead he believes anyone who tells him what he wants to believe – anyone who will lie to him.
Lies, in other words – the babbling of another human being – are his reality.
Thus, while a very small percentage of men will know the frailty of the economic situation, their relative power will be very minimal and hardly cause a ripple in the on-going plunder or destruction of American society.
To overthrow this world-wide system of economic destruction requires a few private men who a) take matters into their hands; b) direct the power of a large fraction of other men; and, in so doing, c) alter or abolish this system of destruction.
But this three-step program is not possible when weak members of society, those with self-imposed blindness, will labor fanatically, to allow the plunder to continue; believe all lies offered to them; wait patiently for the “promised land, or recovery”; and hate maniacally all those who speak truth or justice.
With their obedience and demands for a steady diet of lies, the Federal Reserve can continue this slow plunder of the earth until there are literally no more goods and services coming to market.
In other words, as long as store shelves are relatively full, the system of lies and plunder will continue. It could last another 5 years, maybe ten.
In the meantime, all that we can do is take measures to protect ourselves from the proscription that occurs with every social breakdown – a time when street gangs, criminal and useless classes and the insolent in general take the opportunity to settle long-simmering arguments, eliminate dissidents or murder creditors, elderly (to stubborn to die) or competitors (in business, professions or the sexual hunt).
If we are to survive the coming nightmare, we have to combine with others of like minds to form alliances for mutual protection. And, according to my research, the only historically-proven method to accomplish this is a network of First-Amendment assemblies – the engine that powered the American Revolution.
It is only when store shelves go empty that system-wide destruction will take on that snowball effect, and be accompanied by an ocean of blood – as demonstrated so many times thru-out the story of folly and crime, commonly called history.
QE4ever, QE4folks, QE4people, QE4mainstreet
Take your pick... coming soon to a planet near you.