Bad News Manifests in Manufacturing Sector

Biting the Hand that Feeds

After a short revival, the manu- facturing sector manifested some signifi- cantly sour data again this week. New York area manufacturing noted a sharp contraction in activity and the nation's Industrial Production data showed a lull as well.

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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Bad News Manifests in Manufacturing Sector

Sometimes readers get annoyed at me when I mention a prescient scribbling that manifests into reality. Some of you guys think I do it to show off, but truth be told, I simply want the new reader who just tapped in today to know, "Hey, we called this!" I'm sorry that it happens so often that it perhaps looks like I have an ego issue… That said, I did it again; deal with it!

Wall Street Greek was so certain there would be a double dip in manufacturing, on stalling inventory restocking, that we got started warning readers before anybody had whispered a word on it. In those months long passed, we would talk about how the manufacturing sector was the only pillar holding up the economy, besides government crutches. We noted that the depth of this last recession took activity down to "generational lows." We coined that term as well. I heard some copycat try to take credit for it on Bloomberg Radio this week. As manufacturing sector weakness manifested, all of the popular press and the rest jumped on board and buried our wise words under a ton of noise.

What Had Happened…

November's reading of the Empire State Manufacturing Survey - General Business Conditions Index fell into negative territory for the first time since mid-2009. The latest reading at -11.1 only tells half the story though. Consider that November's index is 27 points short of October's mark. Twenty-seven! That precipitous decline was greatly the result of an even steeper drop in New Orders; the New Orders Index plummeted 37 points to -24.4. The remainder of the report covering employment and capital spending remained in positive territory, but these areas would lag the falloff in orders anyway. The surveyed managers continue to see better times ahead, but another month of light ordering activity would change that. Until now we've all counted on international demand to continue to drive orders for US made goods, and with the dollar devaluation and Federal Reserve support, that is expected to continue. It didn't in November though.

October's Industrial Production Report produced more bad news this week. Production was unchanged; but hold, on because that was not due to manufacturing, which showed a 0.5% gain in October. Rather, Utilities production fell 3.4% on unseasonably warm weather. Production of nonindustrial supplies slipped -0.5% as well though. And production of Consumer Goods, which you might imagine are important to the US economy, stuck still after two consecutive months of decline.

A bit of better news was found in the production of business equipment, which increased 1.1%. Again though, this might be an area that drops back after managers grasp renewed business softness. By the way, economists were looking for a 0.3% increase in production, so the news was a disappointment, at least against expectations.

Capacity Utilization stuck at 74.8%, again missing economists' forecasts which set the bar at 74.9%. When September's capacity utilization was measured lower than August, it marked a warning siren on that manufacturing double-dip we had been worried about.

For now, the manufacturing sector continues to depend and survive on foreign demand for bargain-dollar-priced goods and slowly increasing US demand. If our forecast plays true though, the US Federal Reserve's action will lead to similar currency devaluation by our trading partners, and only speed what we see as the next crisis. Fiat currency is at threat of falling to a value less than the paper it's printed on. Welcome back the barter economy and the gold standard. It's apparent that smart money has already found a home in gold, and where do you think it will run to when Iran is finally confronted and oil and all commodity prices soar?



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).

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