GDP, Philly Fed, Retail, Trannies

A quick review of some recent data points:

• Major retailers have dissappointed, either in revs, profits or forecasts: Wal-mart, Best Buy, Circuit City, etc.

• Transports, including FedEx, Yellow RoadWay, and Landstar, have all warned of reduced tonnage volume, profit pressure, and poor outlook.

• Dr. Copper, the metal with the PHD in economics, is now at 6 month lows. 

December Philly Fed survey consensus was +4.0, down from from 5.1 in November. It came in at a negative
-4.3 (lowest
since Apr ’03’s -6.8) New orders negative for a second month
in a row, Backlogs plummeted;

• Economic growth in the U.S. slowed in the third quarter to a 2%
annual rate, dragged down by the biggest decline in home building in 15

• NAHB’s index of builder confidence for
sales of new, single-family homes slipped in December to near its lowest level in 15 years; The large inventory of unsold homes has not been reduced.

• New Home Building Permits, which foreshadow future activity, fell 3% in November from October and were 31.3% lower
than a year earlier.

Is this what a soft landing looks like? (We think not)

The slow motion slow down continues . . .

UPDATE: December 23, 2006, 11:17am

Hey, wontcha look at that : Nouriel Roubini offered up a similar list:

Hard Landing and Soft Landing News of the Week   

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What's been said:

Discussions found on the web:
  1. Mike M commented on Dec 21

    After reading this I expect the market to surge ahead!!

  2. j d ess commented on Dec 21

    these are the best of times. why, just yesterday i watched larry kudlow declare it so. ipso, fatso.

  3. Fred commented on Dec 21

    I think it would be interesting to read the “analysis” of the economic numbers in late 1994….Sounds familiar to me.

    A little fear induced air pocket in here is just what the Dr ordered.

    As Cramo says, SELLSELLSELL!!

  4. GerryL commented on Dec 21

    I am very curious to see how the low end retailers do for Christmas. Companies like Wal-Mart, Target and Dollar General. I think what is going to happen is the low end is hurting and will eventually take the high end with them.

    I find it really funny when somebody on CNBC talks about how good retail is because they were in Tiffany’s and it was packed.

  5. winjr commented on Dec 21

    “I think it would be interesting to read the “analysis” of the economic numbers in late 1994….Sounds familiar to me.”

    Sounds alien to me. Back in 1994, the housing sector was saying adios to it’s recession; today this sector has just told the elevator man “basement, please”. In 1994, foreclosures were close to their peak. Today, the ball is just starting to roll.

  6. j d ess commented on Dec 21

    ipso fatso?

    credit bart simpson

  7. Gary commented on Dec 21

    Copper broke down through 300 yesterday and lumber has been in a steep decline since May. Two of the most widely used commodities when the economy is expanding are falling apart. Doesn’t bode well for the economy in my opinion. Makes you wonder if Goldilocks is about to be eaten by the three bears.

  8. Aaron commented on Dec 21

    By trannies do you mean transportation, or transsexuals? Because spending on sex-reassignment surgery isn’t really as cyclical as shipping.

  9. Mike_in_FL commented on Dec 21

    Just a question I’ve been pondering: Can the “real” economy and the “finance” economy continue to live in separate worlds?

    On the real front …

    The economic news looks grim. Growth is slowing. The yield curve has been inverted for months. Housing is in the dumps. Autos stink. Retail is struggling. yadda, yadda, yadda.

    On the finance front …

    Stocks are at/near new highs, emerging markets are going crazy, yields on many kinds of high-risk debt are at or near record low spreads vs. U.S. Treasuries, and Goldman Sachs is handing out $10 million checks like candy.

    Can this apparent divergence between the “real” economy and the “finance” economy continue? Or put another way, is the real economy about to rebound and improve, as the finance economy appears to be projecting? Or is the finance economy about to go kerflooey, bringing it in line with the real economy? Lots to ponder this holiday season, IMHO.

  10. James commented on Dec 21

    There is no doubt that the fed and other CB’s are providing liquidity to “soften” the slowdown.

  11. BDG123 commented on Dec 21

    Soft landing! Soft landing! Soft landing! Oops, that concrete isn’t so soft.

    I love the proud 1994 crowd. Do they They understand anything of economics or cycles or the dislocations that cause market movements? For that, they will learn a lesson by giving me their money.

    Does anyone know why the market blew north in 1995? Bueller? Bueller? Anyone? Well, I’ll say six months or a year or whatever after I first posted it on here. A 40% drop in long rates. That was coupled with tremendous expansion of the homebuilding market. DOH!

    Expecting that any time soon with homebuilding rates still a few trillion units above long term trend? Bueller? Bueller? Anyone?

  12. scorpio commented on Dec 21

    we’ll take out 1995 on the other side of this nice multi-generational double top

  13. Magnus commented on Dec 21

    Financing and finance/bank/broker stocks did well until early 2001, they were the last group to hit new highs and then turn down so I would asume this could happen again

    There are many myths being shouted at CNBC, broker stocks leading the way is one of them, if I was a bull I would always prefer having semi stocks leading the way, at the moment semi’s reached their 2 year cycle low earlier this year (that cycle is so obvious anyone can see it, look at KLAC 20 year back), despite semi’s having hit this low they are lagging badly, not the best of reactions starting the new cycle

    I bought the last semi cycle low in 2004, despite it’s fenomenal trac record I did not try to buy that low this year

  14. GerryL commented on Dec 21

    I am watching Kudlow right now. Kudlow and another economist are talking about how the housing problem hasnt spilled over to other areas. How come economists are willing to admit that there is a long lag time in everything but housing?

  15. BDG123 commented on Dec 21

    Magnus is exactly right. Part of topping is a run to financial assets. The semis made a lower lower and lower high. The trend in semis is DOWN.

    Now, that said, I’d rather own megacap semis/semiequips than most of this other ridiculously priced stuff if someone held a gun to my head.

  16. Bill a.k.a. NO DooDahs commented on Dec 21

    What was the metal with the PHD in economics saying when it hit speculative, multi-decade highs? You weren’t talking about how that was an indicator of a strong, vibrant world economy with $4 copper, were you?

    Talk about cherry-picking data. Whoa!

  17. Barry Ritholtz commented on Dec 21

    Actually, I was: I discussed the Asian exapnsion, how the U.S. is now in competition with China for raw materials, and how commodity bull runs tend to make new all time highs — and called for highs in all the base/Industrial metals: Aluminum, Copper, Steel, etc.

    And in fact, that same historical approach — new bull market should make new highs — is why I remain bullish on the Precious metals, most of which have NOT made new highs: Gold, Silver, Platinum, etc.

    See this:

  18. Bill a.k.a. NO DooDahs commented on Dec 21

    Barry, read the question.
    “You weren’t talking about how that was an indicator of a strong, vibrant world economy with $4 copper, were you?”

    You were talking about new highs in speculation, NOT about it showing economic strength. Throughout copper’s bull run, “Dr. Copper,” “the metal with the PHD,” you were talking about a structurally weak economy. It’s talking out of the side of your face to say copper’s recent six-month low is a sign of a weak economy, when you didn’t point to copper’s multi-decade high as being a sign of the healthiest economy ever, which is should be if copper really was predictive (it isn’t).

    Good luck on the PMs. I kissed them goodbye earlier in 2006 … nice ride, though.

    BR No, I was talking about several factors:

    1) Asia was booming, thanks primarily to China.
    2) When I rec’d EWJ, it was about $6
    3) All dollar denominated commodites rose in price, thanks to low rates/cheap money/increased money supply/weakening dollars.
    4) Demand for Copper was also booming

    please do me a favor, and use the Google search pn the site. This stuff is all old news, and you are out of sync with what’s been said before — years ago in some instances.

  19. Teddy commented on Dec 21

    Are Hank and Ben back from China yet? And what happened? Will we see a Chinese carry trade in 2007 to “stabilize” the SLOW decline of the dollah,ie,another crack in the reserve status of the dollah whereby US external debt has to be paid back in the local currency of origin of that debt?

  20. BDG123 commented on Dec 21

    The economy is structurally weak. And, with real estate cratering (the only thing holding copper up along with speculative hedge funds), it’s time for a dumper. $1 copper is economic growth. $4 copper is 400% higher than the highest high in the last one hundred years. If you think that is from economic growth, I still have that land in St Bernard Parish.

    Oh, and btw, it is predictive. Is is highly correlated historically. Bill, if you are going to post, you need to get your ass in the game. Your critical commentary might be worthwhile if there was any fact behind it. Critical just to be critical is the worst of both worlds. You are an ass and you don’t know what you are talking about. At least get one of them right.

  21. muckdog commented on Dec 21

    Yet, the 7th year of a Presidential cycle has been a fantastic year for the stock market going all the way back to the Mayan Empire.

    Everyone on the planet, plus a very large percentage of those from off-planet, expect some massive selling in the market once the 2006 Tax Year wraps up. What if…

  22. DD commented on Dec 21

    ahahaha…we have become so stupid pat buchanan is the only one speaking anything of sense…hahahaha…when pat buchanan is the only person that can actually tell you people what’s going on, you are truly F’d! HAHAHAHAHAHA

  23. Magnus commented on Dec 21

    Everyone on the planet, plus a very large percentage of those from off-planet also knows about about the pres cycle in the market

    If it has anything to do with how the government works, with dem taking over congress and senate I guess it is easy to suggest that the gov won’t be able to do much “propping” to try and buy their next election

  24. Gary commented on Dec 21

    Actually the sixth and seventh year of the decade show a high percentage where major tops were made in the markets. Some of the worst declines in history came after a year ending 6 or 7 top. Of the 15 largest bear market declines 8 of them occured when the market topped in a year ending in 6 or 7. Which is not to say that it will neccesarily unfold like that this time. However we do have quite a few indicators signalling a slowdown and any recession must start with a slowdown. So all in all I don’t think I want to be buying like it’s 1974 again. I’d rather be in cash and miss a little on the upside than risk being caught in vicious bear market. Sooner or later it is going to be like 1974 and I want to be ready to buy not sell out of desperation.

  25. The Learning Curve commented on Dec 21

    RIMM Shot!

    Barry Ritholz, dedicatee of the 2007 Stock Trader’s Almanac, on recent economic data points, asks “Is this what a soft landing looks like? (We think not).” Maybe it does, BR. A 2% GDP in the rear-view mirror is slower than we’d like, but…

  26. tired-bear commented on Dec 21

    all of them should not effect DOW. Nothing matters for the indexes. Buy! you’ll be ok!

    happy holidays

  27. Barry Ritholtz commented on Dec 21

    Not that I think there is a lot of parallels between the two years, but the last time we didn’t get a major correction in year 6 of the presidential cycle — indeed, the only time int he past 60 years — was 1986. (And then we got 1987).

    Interesting, n’est pas?

  28. charts commented on Dec 21

    in 1994/95 the US constuction industry was expanding, not dying. Go look at permits. They were going up, not down.

    That is a huge difference.

  29. Eclectic commented on Dec 21


    Hugely funny observation!… Imagine that being a headline on the front page of the WSJ rather than being posited by our apocopin’ headmaster.

    Or better yet; Brian Williams opens up the NBC nightly news, during and after the theme music, with his s-l-o-w-l-y-o-v-e-r-p-r-o-n-o-u-n-c-i-n-g:

    “G-D-P, P-h-i-l-l-y F-e-d, R-e-t-a-i-l, T-r-a-n-n-i-e-s…… a-n-d t-h-o-s-e a-r-e t-h-e t-o-p-i-c-s w-o-r-r-y-i-n-g A-m-e-r-i-c-a-n-s t-o-n-i-g-h-t”

  30. Larry Nusbaum commented on Dec 21

    Copper prices crashing? That’s music to my ears. Now maybe the drug addicts will stop ripping off the copper from our commercial buildings (air conditioning coils, ground wires and electrical wire) to sell for their next fix.

  31. Eclectic commented on Dec 21


    All the data points you quoted are, to now, safely buried intellectually from the consciousness of Ma and Pa America.

    The only financial reading they do is to open their mutual fund statements (if they open them) and they get the answer to what the status of the economy is from whether the numbers go up or down.

    They don’t read all that other stuff we pontificate about… they don’t want to be confused by the facts.

  32. My1ambition commented on Dec 22

    (I guess when you show up late in the thread all’s been said already and only thing left is to argue. lol.)

    After reading this I expect the market to surge ahead!!

    Mark M, it seems you need a new lesson is contrarian thinking.

    1. If Godzilla was trouncing over Manhattan during rush-hour ripping up everythng in his path, would you “run with the crowd” or casually make your way towards him to “go against the grain”?

    Chances are you may want to run to a different location than everyone else, but my guess is that you’d be running.

    2. This is a fairly bearish (in all relative terms) Blog. Thinking contrarian is when EVERYONE is thinking one way – blindly, that’s when many people aren’t thinking at all. I don;t see many people too worried about a hard-landing or a recession.

    3. Housing, is a very illiquid market. If you think stocks are going lower you go to your broker, clean-house and then hit every poll on the internet telling them how you feel. Not with Real Estate. When selling a home you can be bearish for years and still not sell. Look at Japan. They were bearish for 10 years before housing turned around. Thinking “contrary” to the markets wouldn’t of earned you a dime.

    “Good luck on the PMs. I kissed them goodbye earlier in 2006 … nice ride, though.”

    Now Bill, are you a speculator or an investor? Has the supply and demand factors changed at all? Was there some mine that just spooned out some 200 Million ounces of gold I should know about? Has the government that endorses the US Dollar been any more frank in its numbers or observant in the way it treats its currency?

    This blog is called the Big Picture cause it gives you just that. He’s not bullish or bearish, he’s all-dressed.

  33. A Dash of Insight commented on Dec 22

    Economic Data Points and Interpretation

    The issue facing investment managers is whether the economy is hitting what Dallas Fed President Richard Fisher calls cruising altitude and speed and we call The Glide Path (negatively cited by many as a soft landing) or whether there is

  34. Juan de la O commented on Dec 22


    You should be able to find a downloadable copy of The Real and Financial Components of Profitability by Duménil and Lévy, which is an analysis of these two profit rates over the 1950-2000 period.

    NB that this is economic profit, not earnings.

    Figure 9 in the above provides a nice chart of their alternations, both actual and trend lines, from which it’s evident that:

    1950-1963 – Financial profit rate was generally above that of nonfinancial corporations whereas from
    1963-1985 nonfinancial sector profit rate dominated, a situation that inverted over the
    1985-2000 period.

    During the first period, the spread between the two was relatively narrow while during both the second and third periods this was not the case.

    I will try to post something about causalities tomorrow but thought you mind find that pattern of alternation interesting.

  35. Nouriel Roubini commented on Dec 22

    Hard Landing / Soft Landing News of the Week

    Hard Landing Macro News of the Week:

    • NAHB confidence index of home builders further down and at an historic low

    • Building permits down another 3% after falling 5% in the previous month; as low as they were in 1997.

    • Mortgage applications down 10% in the last week after some recovery in previous week

    • GDP growth revised down to 2% on even worse residential construction

    • Initial claims for unemployment benefits rising and continuing claims at their highest level since January

    • Philly Fed index of manufacturing strongly down again for the third month in a row

    • Stock market indexes falling today on US growth worries in spite of surge of M&A activity

    • Foreclosures in mortgages increasing
    Subprime borrowers in trouble: study says 20% of them may go into foreclosure
    Distressed loan problems spreading from secured mortgage loans to unsecured consumer loans (see HSBC)

    • Yield curve further inverted
    Transportation sector (leading indicator of economic activity) in trouble as bad news from Fedex, other transport companies and the Dow Transportation index fall suggest

    • Major retailers showing slow retail sales growth (Circuit City, Best Buy, Wal-Mart)
    Same store sales among major retailers in latest December week (ICSC-UBS survey) up only 2.4% relative to a year ago (i.e., flat in real terms).

    • Commodity prices falling, including copper and other metals (suggesting US and global economic slowdown).

    • PPI inflation up again

    • Current account deficit up in Q3 to $225 billion (annualized $900b)

    Soft Landing Macro News of the Week:

    • Housing starts up 6% after falling 14% the previous month; so they are still down 8% over the last two months

    • Leading indicators index slightly up this month

    • Dow Jones index reaching new highs before slumping towards the end of the week

    • M&A activity reaching a frenzy; but academic study suggests that such M&A waves are followed by underperforming stock markets

    Have I missed anything else…or is that it all for the soft landing news….?

  36. JoeyB commented on Dec 22

    Hey BDG,

    How’s your 4 year cycle you were blathering about this fall going?

    Get your ass in the game?


    Rant on!

  37. JoeyB commented on Dec 22

    Mr Roubini:

    What does a robust Commercial Paper market, tight credit spreads, low unemployment, rising stock market, healthy corporate cash balance sheets (and consequent stock buybacks), rising tax receipts, continued foreign flows, rising earnings forcasts, etc, suggest about our economy?

    Thanks in advance!

  38. Larry Nusbaum commented on Dec 22

    Have I missed anything else…or is that it all for the soft landing news….?
    Posted by: Nouriel Roubini | Dec 22, 2006 6:19:10 AM

    You mean other than being wrong for two years? Not a thing. Well, maybe just one: “• Commodity prices falling, including copper and other metals (suggesting US and global economic slowdown).”….surprise, commodity markets are very volatile.Prices go up and down sharply.

  39. Teddy commented on Dec 22

    JoeyB, in 2007, I will be watching the new Congress to see if they vigorously support the justice system in bringing to trial the CEO’s and their conspiring employees who backdated options, then took on corporate debt to sell them at a huge profit. These people must go to prison to bring back some semblance of honesty to the market. We certainly didn’t see enough trials and convictions after the fraud revelations exposed with the crash.

  40. Eclectic commented on Dec 22

    It’s good rhetoric you’re using, JoeyB, to ask those questions and your rhetoric may give you stead over time.

    I will contribute to the discussion for the little it may be worth:

    Robust Commercial Paper market:
    **What portion of that market do you suppose might, in a crisis, only have access to third parties for derivatives contract settling? If all the derivatives couldn’t find a settlement party, then how robust would that market be in hindsight?

    Tight credit spreads:
    **Misallocation of risk?

    Low unemployment:
    **True, and it might just prevent any recession from worsening to rival the worst experiences since WWII. However, as I’ve said here before, the real currency of exchange (real money creation) is in all cases, labor, and in the U.S. and the Industrialized West, that currency is in a downward spiral. Indeed, employment is important, but the wages and benefits generated by that level of employment are just as important.

    Rising stock market:
    **I won’t say it’s meaningless, but to believe it’s a perfect leading indicator is to make it become like a perpetual energy machine. They impress and mystify, but they eventually stop when the unseen energy source gives out.

    Healthy corporate cash balance sheets (and consequent stock buybacks):
    **At least in the U.S. it’s possibly as indicative of a liquidity trap in domestic capital expenditure as it is indicative of a healthy economy. Part of the balance sheet improvement is that their levels of cap ex had previously been calculated to be spent on domestic cap ex, but what they are spending overseas on build-out and employment costs is pennies on the dollar, a boon to the balance sheet.

    Rising tax receipts:
    **Possibly only temporary; the relative levels of taxation and public employment are so large relative to what they were one and two centuries ago that they will fluctuate wildly with the economy, but hardly lead as indicators.

    Continued foreign flows:
    **In the U.S. we may have a domestic cap ex liquidity trap, and we do have unbridled consumerism (domestic demand) with a near-zero saving rate; in the rapidly growing third world it’s just the opposite, with capacity build-out of productive capacity on the moon, and their domestic consumer demand very low, but their saving rate is on the moon as well.

    Rising earnings forcasts:
    **True, but they may change very quickly.

    I personally hope we won’t have a serious recession or a dramatic stock sell off, but I don’t think the value in the stock market is as stellar as current optimism projects.

    The stock market is not the last ticket to the last train that will ever leave this town, and the ticket could get a lot cheaper.

  41. BDG123 commented on Dec 22

    Joey Buttafucco,
    If you’ve read any of my comments, you won’t find that I expected a low this fall. Nor was I saying the four year cycle would prevail. I think you need to get your facts straight. How’s Amy?

  42. jj commented on Dec 22

    Nouriel ,
    Is 2% GDP vs. a previous estimate of 2.2% your idea of a hard landing ?

  43. Andy commented on Dec 22

    ipso fatso

    Can’t credit Bart Simpson, since he stole it from Norman Lear’s Archie Bunker.

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