Manufacturing Activity Hits a 28-Year Low 21 comments
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Well, equity markets seem to be shrugging off the first bit of horrible economic news in the new year - the steepest contraction in manufacturing activity since 1980. The ISM’s gauge of new orders dropped to the lowest level since records began in 1948, while export demand was also the weakest since those records started in 1988. The group’s employment index decreased to 29.9 from 34.2 in November.
The Institute for Supply Management's manufacturing index (click on chart to enlarge) tumbled from 36.2 in November to just 32.4 in December, the lowest level since June of 1980 when the index registered 30.3.
The all-time low for this data series that began in 1948 was reached in May of 1980 at 29.4.
More details are available in this report at Bloomberg - none of them are good.
It's funny - everything was up yesterday except for gold.
The gauge of prices paid fell to 18, the lowest level since 1949, reflecting the drop in commodity costs. Economists had projected that the measure, which averaged 65 in 2007, would drop to 20.
All 18 industries tracked by the group contracted last month, the first time that’s happened since Norbert Ore took over as chairman of the ISM’s factory report in 1996.
“We’ve seen a tremendous amount of demand destruction,” Ore said during a conference call with reporters. “There is a significant inventory correction taking place,” he said, and added he couldn’t predict when manufacturing would recover.
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I wish the stock market crash will continue for long time and many factories will close, I hope the people will get to normalicy where one car per family, basic clothes and goods will be enough.
Greed and ideology of money must be killed with the current crash, I propose to establish a "One World Party" which will have the worldwide authority to confiscate millions and billions of dollars from various rich people around the world, I propose to allow any enterpreneur to make a forune of up to 100mln $ per family with all the rest of the wealth will be given back in taxes to the bearers country, why Warren Buffett needs 200 billion dollars? Why Bill Gates needs the same? Why Roman Abramovich needs his ill gotten billions why tycoons keep their billions when people lose their healthcare, their jibs?
Everybody with the wealth of excess of 100 mln $ please contact directly your IRS office in your country and return the money immediately, I promise 100 mln $ will be more than enough for you.
leading indicator.
(2) The above trend has been in place for many months and is widely known. We are probably much closer to the bottom than the top.
(3) If you look at the above chart the rebounds have been about as steep as the declines. When the turn comes it comes quickly.
(4) With the Fed flooding the banking system with liquidity many people are looking for dollar weakness, which should aid manufacturing.
As the author says, the markets seem to be prepared for bad news. We will see how bad it gets.
CEO's that try to rig the system in their favor are about as welcome as an NFL team owner who makes big money making side bets on games. Take the CEO of Nucor, for instance. He is asking for the Obama "stimulus" bill to include a 'buy America' clause. It takes brazen balls and a solid lack of good sense to plead that the feds to interfere more in free markets than they are already.
No wonder most big investors in the market have taken their ball and gone home.
"I don't know why gold enthusiasts think that their investment is any less risky, and can hold gains in a deflated world environment.
The short answer to your puzzle is this: COUNTERPARTY RISK. Gold doesn't have any, and every other asset, including cash, carries significant counterparty risk.
You are right, but only to the extent that you hold gold physically, since holding it in an account has the same risk like any paper asset. It might not even be there! Holding it in physical form poses issues of how to store it safely and how to use it to buy bread, or whatever you need to buy with it.
On Jan 03 04:39 PM SW Richmond wrote:
> BxCapricorn said:
>
> "I don't know why gold enthusiasts think that their investment is
> any less risky, and can hold gains in a deflated world environment.
>
>
> The short answer to your puzzle is this: COUNTERPARTY RISK. Gold
> doesn't have any, and every other asset, including cash, carries
> significant counterparty risk.
On Jan 03 05:02 PM prudentinvestor wrote:
> Mr Richmond,
>
> You are right, but only to the extent that you hold gold physically,
> since holding it in an account has the same risk like any paper asset.
> It might not even be there! Holding it in physical form poses issues
> of how to store it safely and how to use it to buy bread, or whatever
> you need to buy with it.
>
> On Jan 03 04:39 PM SW Richmond wrote:
I would argue that gold does have counterperty risk. If you want to exchange it for something it must have value to the person you want to exchange with. I will use an extreme example to make my point. if you need food and there is only one source (think political stability and fiat currency as we know it is gone) and that person needs fiber to make clothing, you will be in far better position to exchange something for the food if you have sheep (source of wool) than if you have gold.
I know this is an extreme example, but I use it to make a point. Gold has a perceived value which may, at some times. be much greater than at other times. There is no counter party risk to gold only if someone guarantees its value. Except for its greater cost and difficulty of production (and ultimately its exhaustion in mineral sources), it suffers from some of the same counter party risks as fiat currency.
Gold has its place in most investment portfolios, but, just because the nature of its counter party risk may differ from other assets does not mean it has no counter party risk.
As for the relevance of the ISM index to enthusiasm for gold, it's hard to use a change in one report like this as an argument in either direction. Gold probably makes the most sense for investors as a portfolio diversifier; its lack of correlation to large cap equities helps improve the portfolio's risk-return profile.
1) Firearms: Pistols: 9mm, 38spcl - Rifles: 22LR, 12 gauge pump, .223
2) Ammunition - lots of it - 10x times more than you think you need
3) Antibiotics, bleach, vitamins, pain killers and 1st aid kits
4) Fresh water & water purification tools/supplies. Salt + Sugar (Cholera)
5) Fuel supply - wood, diesel, gasoline, charcoal, solar - passive + active
6) Long-term storage food - safely stored in two/three separate caches
7) Warm clothing (lots of it), extra bedding, extra socks, good footwear
8) Guard dog(s) - very well trained (and not neutered)
9) Chickens & active coop (I kid you not - very important!)
10) Good supply of vegetable seeds & working rototiller
11) A discretly fortified dwelling 20+ miles from any major city
12) 4WD transportation - also ATV, dirt bike and motorized rowboat
13) Ham radio and a nearby network of like-minded/prepared friends
On Jan 04 04:01 AM sr9web wrote:
> Buy a few dozen gold coins and a few dozen silver coins and stash
> them in 3 hiding spots in your house. If it ever comes to it, much
> more than a few dozen coins is a waste... What's needed if a society
> breaks down is:
>
> 1) Firearms: Pistols: 9mm, 38spcl - Rifles: 22LR, 12 gauge pump,
> .223
> 2) Ammunition - lots of it - 10x times more than you think you need
>
> 3) Antibiotics, bleach, vitamins, pain killers and 1st aid kits
>
> 4) Fresh water & water purification tools/supplies. Salt + Sugar
> (Cholera)
> 5) Fuel supply - wood, diesel, gasoline, charcoal, solar - passive
> + active
> 6) Long-term storage food - safely stored in two/three separate caches
>
> 7) Warm clothing (lots of it), extra bedding, extra socks, good footwear
>
> 8) Guard dog(s) - very well trained (and not neutered)
> 9) Chickens & active coop (I kid you not - very important!)
>
> 10) Good supply of vegetable seeds & working rototiller
> 11) A discretly fortified dwelling 20+ miles from any major city
>
> 12) 4WD transportation - also ATV, dirt bike and motorized rowboat
>
> 13) Ham radio and a nearby network of like-minded/prepared friends
Definition
The risk that the other party in an agreement will default. In an option contract, the risk to the option buyer that the writer will not buy or sell the underlying as agreed. In general, counterparty risk can be reduced by having an organization with extremely good credit act as an intermediary between the two parties.
This content can be found on the following page:
www.investorwords.com/...
Gold held in your hands has no counterparty risk. The risk John L describes above is liquidity risk.
When you hold gold there is no need to trust a counterparty. I never said there was no liquidity risk, market risk, etc. Gold's current popularity (and the current popularity of US Treasuries) is almost entirely due to the current prevalence of counterparty risk.
Good point on liquidity risk vs counterparty risk from the definition point of view. I'll stand by my concern for gold as an ultimate reserve of wealth, taking into account the combination of both risk definitions. The value of gold is only a perceived value. It has a lower value than generally perceived based on its utility. In a primitive society, food, shelter and clothing will be valued above gold.
If we stay in a more advanced society, constructe has a good point about counterparty risk.
Anthony Alfidi has a good perspective on the value of gold.
You may want to keep #12. but it would be a mistake not to have a couple of horses, saddles, a wagon, horse drawn tools and a canoe. Where are you going to get fuel? You can only stockpile so much. And then?
You also might want PV solar and a windmill, plus a bank of storage batteries.
And enough land for forage for the horses.
I don't see why you guys are arguing. Counterparty risk is the risk that an individual contract will not be met. Liquidity and market risk are risks that many individuals (the market) will not honor the current value in the future.
These are related risks, at least the way I look at it.
On Jan 04 11:32 AM John Lounsbury wrote:
> sr9web - - -
>
> You may want to keep #12. but it would be a mistake not to have a
> couple of horses, saddles, a wagon, horse drawn tools and a canoe.
> Where are you going to get fuel? You can only stockpile so much.
> And then?
>
> You also might want PV solar and a windmill, plus a bank of storage
> batteries.
>
> And enough land for forage for the horses.