The Market Ticker
Commentary on The Capital Markets- Category [Macro Factors]

Oh my....

New orders for manufactured durable goods in March increased $9.3 billion or 4.0 percent to $240.2 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 1.4 percent February decrease. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders increased 2.6 percent.

Transportation equipment, also up two of the last three months, drove the increase, $9.5 billion or 13.5 percent to $80.3 billion.

The entire increase was driven by transportation, including aircraft.

Pay very careful attention right here ladies and gentlemen because this is a quite-reliable leading recession indicator:

That's three months of negative new-order numbers sequentially in non-defense, non-aircraft.  Aircraft have to be excluded because their swings are utterly enormous; 30% swings (as with this month) or even 100%+ swings (as for defense aircraft and non-defense a couple of months ago) are quite common and trash any sort of comparisons that include them.

The only bright spot is a very material (10%) rise in computers and related products in both new orders and shipments this month.  That's a serious outlier but the three-month series of declining orders for both fabricated metals and machinery are extremely bad news.

In addition inventories are at the highest level since the initiation of this series in 1992; inventory builds add to GDP but if unsold wind up destroying corporate balance sheets when they have to be disposed of at fire sale prices or written off entirely.

In the context of the number of people calling for Nasdaq 10,000 (!) by 2016 this morning, a clean double from where it is today, I think it's quite safe to say that the macro and market environment looks disturbingly like late 1999 or the first few months of 2000.

The warning is a two-edged sword -- in 1999 it was evident that the economy was slowing and tech valuations were ridiculous.  Today those valuations are even more ridiculous (Amazon's stock is up $50, more than 10%, on deteriorating margins in their "cloud" business and the economy is slowing again) but in 1999 the Nasdaq doubled before it all blew up.

Be careful.

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Life marches on, and the American refusal to fact facts and math continues.

The Fed's latest Z1 was recently posted, and with it we can now get a look at the full year 2014 view of money, debt and personal income growth (or the lack thereof.)

Let's start with the macro-level view -- top-down:

As you can see after a period of time we are now increasing our debt-to-GDP ratio once again.  That is, the slope is once again diverging from so-called "economic growth."  This has been the case, in point of fact, since roughly 2010, but last year it reversed trend including financials which had been shrinking.

This is a problem because your income hasn't been going up.  In fact, here's the latest picture there:

Since roughly the start of 2012 you have seen income go back underwater compared against total monetary inflation; that is, the average person is losing ground.

You might think that the fall in house prices and stocks was bad for the ordinary person if you listened to the media but in fact exactly the opposite is true.  If you are one of those ordinary people you probably don't own much of either (in terms of actual ownership) and thus lower prices are to your benefit.

Ex-financials, with one short period of time, you've been in trouble since 2000.

Great if you're one of the rarified few at Goldman Sachs, ruinous if not.

Finally, in the economy as a whole, we are back to negative real GDP -- and have been since 2011.  The trend is in fact accelerating and with interest rates at effective zero (and real rates negative) there is little that the government or Fed can do to prop up the real economy in this regard.

The red light is on, in short.

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Nothing interesting in here, really... other than further confirmation of the last few months.

Real DPI increased 0.2 percent in February, compared with an increase of 0.9 percent in January. Real PCE decreased 0.1 percent, in contrast to an increase of 0.2 percent.

In other words income stagnated materially while spending fell.

The problem with these figures is found in the internals, however -- not so much the headline:

Nonfarm proprietors' income decreased $0.7 billion, compared with a decrease of $5.3 billion.

I ain't gonna work so hard no more (or worse, business sucks and therefore I can't produce so much no more.)

Which is it? I don't know for others, but I do know for myself -- it's the former.  If this is catching on (and I suspect it is), well.....

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