The November 2019 Manufacturing ISM® Report On Business® has some grim statistics.
- PMI, new orders, production, and employment down 4th month
- Prices and inventories down 6th month
- Backlog of orders down 7th month
- New export orders contracting
GM Strike Ended
The GM strike ended on October 25. The Econoday consensus expected some improvement. Nope.
Tariffs
Today, in a surprise Tweet, Trump Restores Steel and Aluminum Tariffs for Argentina and Brazil.
This will raise input prices on US manufacturers when prices have fallen for 6 months.
Perhaps Trump still expects a deal with China but China is demanding more than Trump wants to give.
Sources in Beijing informed the Global Times that China insists the tariffs must be rolled back as part of the first-phase trade deal. A US pledge to scrap tariffs scheduled for December 15 cannot replace the rollbacks of tariffs. #ChinaUSTrade #TheBusinessSource pic.twitter.com/5IJuHMuTNM
— The Business Source (@GlobalTimesBiz) December 1, 2019
Phone Chips
Also recall Trump banned US companies from buying US-manufactured chips for its phones.
Guess what?
China was once very dependent on US chips for its phones. The Latest Chinese Phones Have No US Parts.
Trump has since rescinded the parts ban, but now it’s too late. Trump cut off supplies so China looked elsewhere.
US farmers are still suffering.
Another Recession Warning
Here’s yet another recession warning: Freight Volumes Negative YoY for 11th Straight Month.
Trump’s trade policies have been an absolute disaster.
No, we are not “winning big” no matter how many times Trump repeats that lie.
Mike “Mish” Shedlock
ES futures monthly chart shows bearish rising wedge
We are nowhere close to market euphoria and irrational exuberance.
We are in the healthy stages of doubt, worry, and confusion, especially with the China/USA trade issues. Our markets will continue to churn upward on the same doubt, worry, and confusion that has gotten us here. Nothing is broken with the absolute unknowing of the things we know nothing about with any certainty except the uncertainty of the Trump Administration. Uncertainty and hope have out maneuvered lack of faith, fear, and panic in our US markets and will continue to be fed more good news than bad news to keep the momentum to Blue Sky markets going into 2024 and beyond. No major recession until after 2032.
I need to mark my calendar, when does this coming recession occur?
Nattering nabobs of negativism…
The market”s going up, because it’s going up.
Isn’t that enough for you?
No and it shouldn’t have been enough in 1929 either with poor valuations and margin buying.
If the past two trading days are any indication, the “market” may finally be getting the idea that a recession is possible.
85% are algorithm trades…. NO , they won t get it …till it is too late… all of a sudden ! The final meltdown, whether soon or years from now , will be fckn awful !
Personally I think the only reason stocks have risen as much as they have is because with real bond yields so low (because of QE) the traditional switch into fixed income doesn’t look particularly attractive either. If stocks trade sideways for a bit, the risk of holding them for the low dividend yield becomes very questionable.
Black Friday weekend sales.
Normally – when sales are good – you can’t turn on the tv without someone saying how awesome things are. This year? Silence was DEAFENING.
Of course, online sales saw big gains, but still much smaller than B&M. Did find this from Forbes:
By comparison, things were not so sunny at malls and shopping centers this past Friday. RetailNext provided an early look at in-store shopping activity across tens of thousand of stores operating under its RetailNext smart-store platform.
The results: Traffic was down 2.1%, average transaction values dropped 6.7%, and overall sales declined 1.6%.
Who goes to the mall anymore to shop ? Everything you need is there on your smartphone.
yeah sure, just received another pair of shoes… again….. and send it back… again , free of charge…..
The real question is whether GDP will continue to hover between 0 and 2% or go actually go negative. My bet is we don’t go negative. Supply chains are adjusting to new realities in trade. There will be periods of stuffing the channel because of trade issues which cause inventory overhang which lead to slowdowns in manufacturing. Trump has been a net positive for some southeast Asian countries.
FWIW, you are way off the China chip thing. China was never that reliant on US chips as there were always alternate suppliers in Europe and Asia. China also has their own domestic chip capabilities with Huawei’s HiSilicon (both arms of the Chinese government).
At some point you may see US chip companies just change their HQ address some non-US location to sell back into China. Most smaller US chip companies already do this with incorporated addresses in places like Bermuda despite having most of their employees in the US. They are at a huge advantage now as they can sell into China while larger US-based competitors can’t.
Hmmm… well, it’s pretty clear from what you say what China’s strategy is. I’d be interested in hearing a clear articulation of what the US strategy is.
“There is no greater danger than underestimating your opponent.”
― Lao Tzu
The US strategy is to rename your company and move it offshore and keep selling to China. While the US government allows corporations to basically do what they want and operate independently, China owns their corporations and keeps trying top down central management of the entire economy. I know which model actually allows for more innovation. Do you?
And not just more innovation but also more liberty and freedom. If you gave Chinese citizens a choice on where to live, how to think and what to believe, I’m guessing a fair chunk of them wouldn’t stay in China. Capital controls in China in 2014 have been a boom for the West coast of North America and other parts of the world.
You are perhaps correct about innovation (and I somewhat resent your question.) However, I think my comment was unclear. The strategy I’d like explained is the government strategy. As far as I can see it is a free for all allowing companies to act only in their own best interests without concern for what might be in the best interests of the nation strategically. Maybe that worked in the simpler times of the 20th century. But the world has gotten a good deal more complex. Clearly China and other countries are seeking hegemony over us, and our only strategy I see currently is to complain about it.
China is just an export driven economy that is reliant on cheap money to keep their game going. They can’t have the dollar become worthless to further their strategy. The US can replace China with other countries but China cannot easily replace US consumption.
To repeat my earlier point.
“There is no greater danger than underestimating your opponent.”
― Lao Tzu
GDP will continue to grow as long as The Fed continues to print more of it. Which they, per history, will continue doing as long as banksters, apparatchiks, politicians, asset owners, ambulance chasers and the other zero-to-negative value add dilletantes they serve, benefit from it.
They only take a break from the printing when some of the gains start overflowing onto others than the leeching classes. To teach the darned serfs to stop being so uppity.
Of course, economically, GDP is no more meaningful, than any other figment of the imagination of “empirical” pseudo economists and their well indoctrinated, starry eyed groupies. Whether it happens to read 2% or -2%, is entirely at the money printers’ discretion.