Strong Bull

In all the day-to-day media hype and drama what’s important is often overlooked.

The Manufacturing Index arguably fits that description.

There’s a longstanding perspective that the US is poorly and they just ship in what they need from overseas.  

Eh, no.

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The ISM Manufacturing chart above reveals how September came in significantly ahead of expectations, topping 60 for the first time in over 13 years.

Expectations were for a headline index figure closer to 58.1, making this the strongest result since October 2014. In fact, on an absolute level this month's mark was the highest since May 2014.

In addition, respondents make remarks as part of these filed reports, along with running tallies of certain aspects of the index in order to get a sense of "trend."

The comments snapshot, disruptions from the hurricanes aside, shows frequent use of one word in particular: “Strong.”



The next snapshot shows the inventory segments in the data:

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Now, long-time readers will be remember our use of the term the "FedEx Economy."  

In a nutshell, thanks to all those planes and overnight delivery, Fred Smith changed the way our entire pipeline of supplies work.  

(By the way - recessions begin with too much inventory - not low sales as too many have been wrongly taught.)

Focus on the inventory reading at the customer level.  Note how low we are and how far we have fallen since a year ago.  

In reality the supply chain simply does not exist beyond 3-4 weeks. All the while, the positive parts of the index, showing orders, backlog, demand and exports are all green and moving up - some far higher than a year ago.   

Here’s the point: If a hurricane can cause a supply crunch then imagine how tough it would be to actually get a recession started.

Think about that over coffee.  

Latest from Rocket Man

Needless to say, North Korea quickly left the front page given other events in the news.  

It’s a non-event unless it actually triggers a correction, which would make it instead a real value.

I really like how the following quote puts this situation into context:  

"The Kims have been in power in N. Korea for 69 years by keeping their country on a war footing.  Actually going to war is out of the question."

Waves Rolling In

Earnings season will be with us shortly, but first don't be surprised if we get a light employment number shortly.  

We should not be concerned if the storms hit hiring for a few weeks during the events themselves.  

Expect a bounce-back next month.  

I know this is repetitive at times - but strength and demand are headed our way.  

So, pretend you’re at the beach and focus on the horizon, not on the sand.  


Mike Williams
Founder and Managing Partner