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Thoughts on Manufacturing & Pending Home Sales

The Institute for Supply Management says its index of manufacturing activity in September slipped to 52.6 from 52.9 in August. The index was forecast to come in at 54. Readings above 50 mean the sector is expanding.

Didn't we already know that manufacturing numbers were going to stink?  Insiders have been selling hardcore for months now, like rats fleeing the ship. 

If I had to bet, I would say that revenues are still going to be off and earnings might be positive again.  A company can always have more layoffs to shore up the numbers.  But this stat is interesting because it's demand.  No demand, no manufacturing.  I expect this number to continue downward - no clunkers program.
 

The worse-than-expected report is overshadowing a better reading on housing. The National Association of Realtors says pending home sales in August rose 6.4 percent from July to 103.8. Economists surveyed by Thomson Reuters expected the index would rise to 98.6.
 

These numbers are simply capitulation of loss.

What you have is people, who want to move, who have put their house up hoping for a profit.  They held out in hopes that they wouldn't have to drop the price of their homes.  After 1 year on the market, they have no hope of selling to break even and now they are dropping their prices.  Their neighbors did.  This is absolutely true because we did it.  After 7 months, we had to accept a loss to move out of the city of Chicago.   It hurts for sure.

Why does anyone care about pending home sales anyway?   That doesn't help the builders, carpenters, tradesmen, etc.  Seriously, people always have to move for one reason or another.  The smart ones are moving now because they know there will never be another time in our lives to get a house cheap and at a low interest rate.  Not to mention the first time buyer credit.  When that goes away Dec 1 and winter rolls in, the numbers on housing all over will reek even more than today.   We already saw a huge dropoff after the clunkers program went away.  I expect the same dropoff when the home credit goes bye bye too.

What I think would be a more impressive stat is a ratio of profit to loss on those pending home sales.   That number would be 95 to 1 if I had to guess.   I'm not a huge numbers guy.  It's obvious without the stats.  No one is making a profit on selling their homes.   How can you have a housing recovery, let alone a bottom, if we're talking home loss all over the place?  You can't.