Have we turned the corner?
Pinnacle Digest’s Alex Smith especially likes those manufacturing numbers. 
Your first answer to my question may be no; however, convincing news continues to surface that suggests a complete turnaround could be imminent. First the short-term bad news: June's job losses had investors running for the hills as unemployment jumped to 467,000, up from May's 322,000. Many like to forget (or forget to report) what the top economists and White House analysts have predicted. So we will take it upon ourselves to remind you.
In January, the White House predicted that unemployment would peak at 9%. Guess what? US unemployment currently sits at 9.5% and is likely headed for 11%. President Obama has admitted that unemployment will most likely top 10%. With that stated, there are some very positive and profound numbers we believe investors need to take into account moving forward.
Thomson Reuters has reported that the credit/financial markets are indeed showing fundamental signs of thawing. There was a major increase in the issuance of stocks and corporate bonds in the second quarter of 2009 - reaching $338 billion, the highest quarter in a year.
We see two very important reasons why we believe the economy will begin to grow in the third quarter and beyond:
In late 2008 and early 2009 there was widespread inventory liquidation as manufacturers were forced to cut output and payrolls. This trend appears to be ending. Inventories need to be replenished to keep up with resurgent demand.
Global manufacturing expanded for the first time since May 2008 in the month of June. This is a very positive sign.
Many countries which depended on the U.S. consuming their products, not surprisingly, experienced the worst of the inventory liquidation. Since then, many of these countries have found ways to expand their manufacturing networks and are already reaping benefits from that effort.
IT'S NOT ALL ROSES
The best way out of this recession is not through government stimulus or a few good months of manufacturing numbers. We believe an increase in consumer spending will be at the heart of our recovery. For this to happen, we think an increase in employment and hourly pay is needed first.
Hourly pay grew at an annualized rate of 0.7% in the second quarter - the lowest on record since 1964. A top analyst at Goldman Sachs, Jan Hatzius, recently predicted wages will fall in 2010. Be sure to follow the average hourly wage in the U.S. over the coming months; we think this could be a key indicator on where our economy is headed.
Our team at Pinnacle is confident the recovery is taking shape, but we think it’ll take some time before GDP returns to a more favorable level.
All the best with your investments,
Alex Smith
Co-founder, PinnacleDigest.com
TradeKing All-Star Commentator
Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. In reading content in the Community, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.
PinnacleDigest.com maintains a cross-marketing relationship with TradeKing.
Your first answer to my question may be no; however, convincing news continues to surface that suggests a complete turnaround could be imminent. First the short-term bad news: June's job losses had investors running for the hills as unemployment jumped to 467,000, up from May's 322,000. Many like to forget (or forget to report) what the top economists and White House analysts have predicted. So we will take it upon ourselves to remind you.
In January, the White House predicted that unemployment would peak at 9%. Guess what? US unemployment currently sits at 9.5% and is likely headed for 11%. President Obama has admitted that unemployment will most likely top 10%. With that stated, there are some very positive and profound numbers we believe investors need to take into account moving forward.
Thomson Reuters has reported that the credit/financial markets are indeed showing fundamental signs of thawing. There was a major increase in the issuance of stocks and corporate bonds in the second quarter of 2009 - reaching $338 billion, the highest quarter in a year.
We see two very important reasons why we believe the economy will begin to grow in the third quarter and beyond:
In late 2008 and early 2009 there was widespread inventory liquidation as manufacturers were forced to cut output and payrolls. This trend appears to be ending. Inventories need to be replenished to keep up with resurgent demand.
Global manufacturing expanded for the first time since May 2008 in the month of June. This is a very positive sign.
Many countries which depended on the U.S. consuming their products, not surprisingly, experienced the worst of the inventory liquidation. Since then, many of these countries have found ways to expand their manufacturing networks and are already reaping benefits from that effort.
IT'S NOT ALL ROSES
The best way out of this recession is not through government stimulus or a few good months of manufacturing numbers. We believe an increase in consumer spending will be at the heart of our recovery. For this to happen, we think an increase in employment and hourly pay is needed first.
Hourly pay grew at an annualized rate of 0.7% in the second quarter - the lowest on record since 1964. A top analyst at Goldman Sachs, Jan Hatzius, recently predicted wages will fall in 2010. Be sure to follow the average hourly wage in the U.S. over the coming months; we think this could be a key indicator on where our economy is headed.
Our team at Pinnacle is confident the recovery is taking shape, but we think it’ll take some time before GDP returns to a more favorable level.
All the best with your investments,
Alex Smith
Co-founder, PinnacleDigest.com
TradeKing All-Star Commentator
Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. In reading content in the Community, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.
PinnacleDigest.com maintains a cross-marketing relationship with TradeKing.
Comments
Follow commentsSUPERNEWBY posted July 29, 2009 (03:48PM)
I don't even think we are close to recovery. There has been no real jobs created, more people are unemployed, and hiring is down across the board. Kelly services isn't even hiring at the rate it used to and they have a tremendous turnover. Although I may be new to the market I know one thing for sure, and that is it is going to be a long time until we come out of this recession.Persia posted July 29, 2009 (09:17PM)
How did you come with these data? who said Global manufacturing expanded ?!!!
Reading below 50 means contraction not expansion .you just making up stuff!!!!
The only positive sign is the rate of decline contracted. there was a vacuum of inventories therefore they had to bust the production.
2Q earning was a big joke. 77% of companies listed in S&P500 beat the estimate, 14% missed and 9% where in line, you might say this is fantastic, but here is the catch their year to year earning dropped in average of 31% and actual earning growth dropped 23.1% .
I bet you are scratching your head. Off course the talking-heads in CNBC and Bloomberg would not show you other side the coin, their job is to sell you stocks.
Can you guess how 77% of companies could beat the analysts estimate?
They came with this numbers just by cost cutting; they closed factories and fired employees to save money.
There is nothing wrong with cost cutting, but cost-cutting can only go so far. Here is the question, how many employees can they fire 3rd and 4th quarters? Which factories are they going to close next quarter to save money? Be smart read between the lines.
Do you want to know what is wrong with the US economy?
1) Every day over 10,000 houses add to the big stack of foreclosures .
2) One of every 9 houses in the US is abounded ;which delay the housing market recovery and hurt the price of other houses on the block.
3) Obama's administration did not address The shadow banking system and commercial real estate issues therefore they will be the next shoes to drop.
4) Credit system did not improve despite Bernanke efforts.
5) Banks are not willing to lend due to lack of liquidity and general weaking the credit market.
6) There is too much debt that cannot be paid include credit cards, car loans... that been scrutinized and made the situation worse.
7) P-PIP (Public-Private Investment Program) will be a failure. Please read my post about P-PIP.
8) They keep bailing out every body and Bernanke keep printing money, which will cause inflation on the long run.
9) Democrats stimulate package was a big joke. I call it "Democrats' wish list". It was anything except stimulate package. Here are two examples of what they did put in this package. Building a bicycle path in LA. Building environmental friendly golf courts!.
10) Unemployment on rise which makes the housing crisis worse, and this vicious cycle will continue for months to come. Over 70.9% of our GDP is consumer spending; with high unemployment you figure out if we are going to get + GPD by end of this year or not?
This crisis didn't start couple months ago and will not be done in couple months, it takes time
you just making up stuff.
http://the-us-microeconomics.blogspot.com/
TK All-star posted August 18, 2009 (01:33PM)
Thanks for your detailed comment, Persia. You raise some interesting points, enough so that I decided to respond in a separate blog post. Take a read and let me know what you think:http://community.tradeking.com/members/tk-all-star/blogs/38320-yes-manuf-is-on-a-comeback
And thanks again - it's always good to hear from someone with a passionate involvement in the markets.
All best,
Alex Smith
Co-founder, Pinnacle Digest
www.pinnacledigest.com
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