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Manufacturing such a big deal?

So much discussion going on about manufacturing activity being very bad lately, and that it will spill over to the rest of the economy, and eventually cause a recession.

I don’t understand this so much. Manufacturing is supposed to be only a small part of the whole US economy (like 10%), so why would it cause such big issues in the whole US economy?

Any views?

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1) Because the 10-15% manufacturing number is a lie used by talking heads.  It’s a very narrow definition if you actually lump in all manufacturing type industrial sectors used to compute industrial production data like autos, chemicals, oil production, etc it rises closer to 25%.  

2) Because industrial data is typically more cyclical and reliably leads moves in retail.  Sure, the consumer may very well maintain its strength and this could blow over, that is a very valid point of view, but in 2015/16 for instance, it lead to a substantial slow down and right now markets don’t know, so they have adjusted to that weighted probability (loosely speaking).

3) This is also not occurring in a vacuum.  You have a lot of industrial data in Europe (which is a much more industrial economy) which has fallen off a cliff, heightened European political issues and approaching and current US turmoil and China data that remains weak.  The big question is are things finding their footing or is the US (the last major pillar of support) about to catch the global cold?  If it does, you would expect a cycle of renewed declines overseas as well.  Again, it may not, but this is the risk.

4) There is also the very valid concern that monetary policy levers are less effective today than before and we are already in the overhang of one burst from tax reform.  Future moves may be unlikely given the political gridlock and distraction and consensus GDP estimates for the US have been steadily dropping for 2020 while global 2020 GDP estimates took a round of consensus downgrades this summer ranging from those published by IMF, World Bank and most central bank outlooks.

5) Valuations are not low and it is somewhat difficult to identify meaningful positive catalysts, the main one cited is a potential trade deal, which has proven to be a nebulous probability and my personal point of view (shared by people who are also not stupid) is that this is a far bigger issue than simply trade friction, which has become a distraction for people that don’t generally grasp fundamental economics and need a topic to focus their tunnel vision on.

#FreeCVM #FreeTurd #2007-2017

there are a lot of indicators too that have shown warnings signs. like low unemployment is actually a warning sign as it lags. inverted yield curve that has is now flatter. low rates as well with valuations. 

ism  is only slightly bad at 47. usually anything below 50 means a negative outlook.

if it keeps going down further then it is a major warning sign.

for comparitive reasons, during 2009, the ism had a low of 28 from a peak of 52 in 2008. and a peak of 61 in 2007.

https://www.youtube.com/watch?v=KELeTNVHUbI

^watch this guy’s stuff. explains it well.

I love my cheese. I got to have my cheddar.

It’s always different this time…

Hey Hamilton, have a holly jolly Christmas.

Black Swan wrote:

2) Because industrial data is typically more cyclical and reliably leads moves in retail.  Sure, the consumer may very well maintain its strength and this could blow over, that is a very valid point of view, but in 2015/16 for instance, it lead to a substantial slow down and right now markets don’t know, so they have adjusted to that weighted probability (loosely speaking).

+1

¯\_(ツ)_/¯ It be like that sometimes.

agree that trade is only one factor affecting the economy.

There are massive structural issues right now, zero % interest rates in every investment-grade sovereign country bond except the USA (which is dropping closer and closer to 0…). USA now at $22 trillion deficit , 106% Debt/GDP. china has atleast 3x that amount. 

south korea and japan having some relational issues, south korea’s grocery stores in china were hit hard by boycotts after they brought an anti-missile defense system to SK.

brexit , europe car production dropped off a cliff , india car production worst since 1999. Argentina heading for socialist policies (that failed miserably only a few years ago).

Canada dealing w blackface Trudeau, and capped oil production to avoid sales without proper transportation infrastructure.

Wonder what straw will break the camel’s back…I think we are teetering very closely.

Stockton_Malone wrote:

agree that trade is only one factor affecting the economy.

There are massive structural issues right now, zero % interest rates in every investment-grade sovereign country bond except the USA (which is dropping closer and closer to 0…). USA now at $22 trillion deficit , 106% Debt/GDP. china has atleast 3x that amount. 

south korea and japan having some relational issues, south korea’s grocery stores in china were hit hard by boycotts after they brought an anti-missile defense system to SK.

brexit , europe car production dropped off a cliff , india car production worst since 1999. Argentina heading for socialist policies (that failed miserably only a few years ago).

Canada dealing w blackface Trudeau, and capped oil production to avoid sales without proper transportation infrastructure.

Wonder what straw will break the camel’s back…I think we are teetering very closely.

90% of this is irrelevant, old news, a distant concern or all of the above.

#FreeCVM #FreeTurd #2007-2017

you must be a lot of fun at parties.

There is never one specific event that leads to a recession…all of these issues are brewing and I stand by my points.

This is an investment forum not a party.  By definition the person linking investment discussion to parties is not fun at parties.  You can stand by what ever you’d like.

#FreeCVM #FreeTurd #2007-2017

Stockton_Malone wrote:

you must be a lot of fun at parties.

Black Swan wrote:

This is an investment forum not a party.  By definition the person linking investment discussion to parties is not fun at parties.  You can stand by what ever you’d like.

¯\_(ツ)_/¯ It be like that sometimes.

Black Swan wrote:

90% of this is irrelevant, old news, a distant concern or all of the above adjacent.

ftfy