Durable Goods Orders Doomsday Prophecy

Durables Doomsday Prophecy

Take heed, oh ye market mavens, for the directive issued by July's Durable Goods Orders is clear. Sell, says this barometer of economic demise, or rather demand! Sell, sell and sell some more, because your favorite modern day Greek oracle has prophesied yet another doomsday precisely.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Durable Goods Orders Doomsday Prophecy

Cataclysmic...Dire...Gloomy...Doomsday! Jim Cramer says those of us who use these types of words are drama kings & queens and fear mongers or bloggers. It's the safe thing to say, you know, that things are not that bad. It's easy to be the voice of reason, especially when history is on your side as you do so. This is why so many market strategists and television pundits missed the financial crisis of our generation, and why the courageous among us who do not fear speaking the ugly truth are now globally syndicated.

People like The Greek do not have seven digit TV contracts to guard, nor big bonus paying jobs to protect. We have not the worry of maintaining busty blond arm candy, nor the tie to image that the big snots are bound by. Heck, I am not even capable of lying, not even for my own sake. And so, I speak. In Cramer's defense, he also wields a special power and influence over masses. The big, bald & bold bad-man from Philly town (my brother) has the ability to spawn a flash-crash by his mere utterance of the wrong word. This great responsibility calls for cautious speak, and requires wisdom to pull off. So, give him some credit today for keeping the peace. He probably played a role in the market's recovery yesterday, as a matter of fact. Lucky for the few of you reading along with our little blog, we exist, providing you the opportunity to diverge from the herd of sheep, and to find higher ground in times of trouble (and Easter if you graze in Greece).

Make no mistake about it, today's durable goods orders report was meaningful, and heavily slanted toward the dark-side. It was perhaps a doomsday prophecy. We warned about it in our premarket report yesterday, but view it so important, we've decided to remind you again here. By the way, we were also warning about it last month, as seen via this link.

Back to Doom

First of all, durable goods orders were soft in aggregate, increasing substantially less than economists had expected. The 0.3% rise matched against economists' consensus expectations for a 2.5% leap. What were they thinking?! Well, the difference certainly was not explainable by transportation, considering that the transportation segment saw a 13.1% jump in orders, and nondefense aircraft soared 75.9%. Therefore, the miss must be explainable by economists' clinging to a baseline forecast that is simply flawed. They have followed historic trend and the guidance of an admittedly poor forecaster, the Federal Reserve and its chief, Ben Bernanke.

This is the problem with most gurus found by business television producers for their loud voices first and their minds second. They base all forecasts on historical trend, clinging to it like a crack addict to his pipe. I would venture to say too many of them are incapable of thinking outside the box. In times like these, you have to find yourself a source like Wall Street Greek, an expert voice off-Wall Street, to get a truly independent, unbiased and correct view of the situation.

Where market mavens got it wrong with this particular report was in what really matters. Excluding transportation, which can skew the measure due to its big ticket products, new orders fell 3.8%. The problem is that the deeper we dig into the data, the more fundamental flaws we find with our nation's economic situation.

Let's start with the meat of the matter of concern. An important component of durables orders is the line item found way down towards the bottom of the spreadsheet provided by the Department of Commerce. Orders for Capital Goods Ex-Aircraft and Defense is seen as an accurate measure of business investment, which reflects how companies feel about expanding their labor force as well as end market demand. What happened in this key segment is therefore troubling. In the most recent two months of measurement, this important barometer showed increases of 4.7% and 3.6%. Those results, however, were forgotten today, as July marked an 8.0% decrease in orders. Businesses may be retrenching, is the fear.

A look deeper only reveals more blood, infection and economic rejection. Manufacturing orders fell 0.5%, the third sequential showing, as far as we could tell by this latest spreadsheet. Machinery orders collapsed 15%! Over the last few months, the President and his friends at the Treasury and Federal Reserve have harped on the fact that software and hardware demand seemed solid. Not no more! Forgive my return to a slang from another life.

Orders for computers and electronic products fell 2.4% in July, with orders for computers and related products specifically falling 12.7%. Perhaps there's more reason to sell Dell (Nasdaq: DELL), than the potential impact to capital that might result from an acquisition of 3Par (NYSE: PAR). Maybe Hewlett-Packard (NYSE: HPQ) should hold on to its wondrous wealth as well. Tech firms might find even better pricing sometime soon.

In every story, there's a silver lining. It seems the Internet can't be stopped. Expanding uses of broadband and expanding demand for it have communications equipment orders up 3.9%, so Cisco Systems (Nasdaq: CSCO) may just be the Gillette of our generation. God knows, I've stopped shaving and live in the etherworld.

There was more good news delivered to Detroit as well, as motor vehicle and parts orders increased 5.3%. I ran into my brimstone tempered cousin this weekend, the one who has been transported to Detroit by the auto industry Gods. You remember him, the guy who talks too loudly, but also works too hard. Can you imagine driving from New York to Detroit after an intercontinental flight, because weather delay rerouted you ,and threatened to have you home a day late? That's what Iron Mike did so that he would not have to explain to his bosses the loss of a day, a legitimate reason mind you. I can't give credit to Detroit for making the guy so tough, because I witnessed Philly do it to us all. Well, Mike tells me Motor City is running at proper capacity now, so perhaps this is the difference between its economic development and the rest of the nation.

Maybe Detroit will fit a strange analogy some day, it being to us what Germany is to Europe. God knows, that day has not come yet, but she may be on her way. I think the combined efforts of our last two presidents got the D-town fix right, and you should agree, whatever one might say regarding Wall Street.

Found a video with a smart title, but a boring introductory speaker, that might evidence that the President has a clue about how to fix our economy. It's called Transforming the American Economy Through Innovation, and its found via the link here. I think you should fight the urge to fade into dreamland, and watch it. By the way, the follow up to the introductory speaker, is Joe Biden, so good luck with that! Actually, Biden will keep us on our toes, with his unpredictable tongue. So I expect you'll be glued to your screen. It's a solid speech, once you get past the political pokes.

Importantly, we must understand that this new paradigm that has infected our economy can only be cured with special medicine. As we've seen, blank checks sent to mail boxes nationwide, shovels of money to financiers on Wall Street, blind incentives to small businessmen, and intravenous to the unemployed are not going to solve what ails us now. What we need now is a new New Deal, and we need public works projects to build parallel energy resources that will eventually free us from our dependence on foreign oil. This will lead me into my next major project. For now, understand that this Durable Goods Orders data demands your attention, and offers yet another signal this week, to coincide with the coming revision downward of GDP, that our economy is diving into double-dip recession.



Article should interest investors in Caterpillar (NYSE: CAT), Whirlpool (NYSE: WHR), Ford (NYSE: F), Honda (NYSE: HMC), Toyota (NYSE: TM), Boeing (NYSE: BA), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Dell (Nasdaq: DELL), Cisco Systems (Nasdaq: CSCO), Taiwan Semi (NYSE: TSM), Intel (Nasdaq: INTC), Rio Tinto (NYSE: RTP), BHP Billiton (NYSE: BHP), Vale (Nasdaq: VALE), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), Northrop Grumman (NYSE: NOC), United States Steel (NYSE: X), Symantec (Nasdaq: SYMC), Sprint (NYSE: S), International Paper (NYSE: IP), Citrix Systems (Nasdaq: CTXS), Eastman Kodak (NYSE: EK), General Electric (NYSE: GE), Lennox (NYSE: LII), Spectrum Brands (NYSE: SPB), Helen of Troy (Nasdaq: HELE), National Presto (NYSE: NPK), iRobot (Nasdaq: IRBT), Xerox (NYSE: XRX), Pitney Bowes (NYSE: PBI), VeriFone (NYSE: PAY), Diebold (NYSE: DBD), Coinstar (Nasdaq: CSTR), HNI (NYSE: HNI), Herman Miller (Nasdaq: MLHR), Steelcase (NYSE: SCS), Knoll (NYSE: KNL), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur Pedic (NYSE: TPX), Acuity Brands (NYSE: AYI), Ethan Allen (NYSE: ETH), SORL Auto Parts (Nasdaq: SORL), United Technologies (NYSE: UTX), 3M (NYSE: MMM), Danaher (NYSE: DHR), PPG Industries (NYSE: PPG), ORIX (NYSE: IX), Cooper (NYSE: CBE), Textron (NYSE: TXT), Crane (NYSE: CR), Honeywell (NYSE: HON), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR (Nasdaq: FLIR), Transdigm (NYSE: TDG), BE Aerospace (Nasdaq: BEAV), CAE (NYSE: CAE), Alliant Tech Systems (NYSE: ATK), Triumph (NYSE: TGI).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.