Durable Goods April 2008

The initial data on GDP was encouraging — down "only" 0.5%, much better than the consensus of -1.1%. Ex-transportation, bookings for goods meant to last several
years rose 2.5%. But overall, new orders for durable goods fell 3.4% from April 2007.

The March durable goods order was revised down from +0.1% increase to a decreased of -0.3%.

The  coverage focused on an the apparent "strength" in the report. "Quite encouraging" said Barron’s; Healthy said Marketwatch.

Really? Let’s have a look at the chart:

click for ginormous chart
Durable_goods_april_08_2

chart via Jake

April_08_durables
chart courtesy of Barron’s Econoday

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What's been said:

Discussions found on the web:
  1. micheal schumacher commented on May 28

    “we don’t suck as much as we thought we did so let’s take the market up on the open”

    hello???? this thing on?

    Just as bad as the fiction in the WSJ today on BSC. No mention ,at all, of Goldman’s letter circulated on the same day basically absolving themselves as any counter to the remaining BSC trades…no THAT had nothing to do with it at all…the kicker is this line:

    “Schwartz ate cold pizza from the box”

    Oh the humanity!!!!!

    Ciao
    MS

  2. John Borchers commented on May 28

    I see orders getting cancelled left and right. I’m going against the crowd. I just started AAPL Put short for June $180.

  3. micheal schumacher commented on May 28

    premium on those (that expire in how many days?? 24) are ridiculous..

    Good luck…I hope you do well but the options writers are just as out of control as the NYmex…

    Ciao
    MS

  4. Vermont Trader commented on May 28

    BR – how does inflation factor into durable goods?

    Hope you are all watching KEY….

  5. John Borchers commented on May 28

    MS, The premium I paid on AAPL is nothing compared to FSLR. It appears the market may now be getting aware of how solar is just as useless as ethanol. FSLR down almost 20% this week alone.

  6. micheal schumacher commented on May 28

    solar=ethanol=bird flu

    Just the most recent pump and dump fostered upon a willing public.

    If you know the premiums are ridiculous than why go through the pain just to give money away???

    Ciao
    MS

  7. pl commented on May 28

    How much of the DURABLE GOODS ORDERS were for military and war on terror use?

    thx

    pl

  8. Neal commented on May 28

    I see two things in the durable goods report:

    First, almost every electricity generator is in the middle of large projects.

    Second, the expectation of continued runaway price inflation in materials (metals) and energy is pushing purchases forward in the timeline. Think of it a period of order compression, where if you followed the normal schedule of purchasing you would lose money on the price increases.

    It’s not that there are more orders, its just the recognition that if you don’t order now for old, current and new jobs now, you’ll lose big-time on the material pricing.

    The pricing I’m getting from steel suppliers are qualified as “good for 24 hours only”. Try doing a 2 year project on that basis, and especially when you have to hold your bid for 30-60 days without contract award.

    I know when I get a contract for steel fabrications, I now order the steel within a day or two of the order rather than waiting 4 -6 months when I would actually need the steel.

    This order compression is temporary and should be followed by a drop in orders to less than normal levels.

  9. Jake commented on May 28

    Defense new orders for capital goods in April increased $0.4 billion or 4.8 percent to $8.8 billion (up 14.3% YoY).

  10. Jim Haygood commented on May 28

    The word ‘GDP’ in the first line of the post should read ‘durable goods.’

    Thanks for the chart, which tells all. Journalists covering the report obviously were directed to do a PR-Wire puff piece. We are not fooled.

  11. techy commented on May 28

    john..

    why not simply short and sell puts to get more gains??

  12. micheal schumacher commented on May 28

    “reduced loss risk”

    paying $5 for a 180 put(current price of 185.xx) that expires in 24 days implies that you have already lost….

    Ciao
    MS

  13. John Borchers commented on May 28

    No, it doesn’t.

    You have to look at it the professional way. If you are shorting the common stock you must have an idea where the share price will go and when. Shorting over time you will most likely lose. So, to win in the game of shorting you must already know how the timing is going to work otherwise you can’t possibly ever make money at it.

    With this in mind now you use options to get the same thing. You have to look very carefully at the option’s strike, time remaining and likely volatility. Your timing and calls must be better than 95% of the other people in the market. You have to find the options that are priced wrong.

    I learned very quickly once by shorting Phelps Dodge (now FCX) that even though copper prices are unreasonably bubbled some other dipshit company stupid enough to buy the one you have shorted at a 30% premium can come in overnight.

    Those are the two reasons.

  14. micheal schumacher commented on May 28

    time value will eat away your gains faster than they will appreciate.

    “You have to find the options that are priced wrong.”

    I do not disagree with that however in a stock as widely traded (and optioned as AAPL) the likelihood of identifying that is pretty low.

    Time value is very important with >24 days to expiry.

    Ciao
    MS

  15. John Borchers commented on May 28

    Time value of course eats away unless you find the right options.

    That same $180 put I got this morning at $500 is worth almost $600 now.

  16. Thomas Elliott commented on May 28

    http://www.extremetech.com/article2/0,2845,2308674,00.asp

    “Going Solar” at Extremetech.com

    2 different 7kw bids for about $50k but drop to under $40k after California’s rebates. Projected payback of less than 10 years. Expensive power (variable pricing by time of day) there and lots of sunshine help make it feasible. However, for most people prices really need to drop quite a bit still.

  17. micheal schumacher commented on May 28

    worth is relative but since you have one (1) of them I guess it is for shits and giggles???

    You implied you were building a position and with the time available this is not a long term hold either way…..why not go out a month more and not pay for just holding something??

    and really I do hope you make a killing I just question the time you have to do it in and the world knows an announcement is coming so it’s not like you are the only one….

    Ciao
    MS

  18. John Borchers commented on May 28

    Remember 1 of them is the equivalent to using $18.4K to short 100.

    You don’t want to go around loading up on options and when I meant building. I’ll look out next month and month after too.

    Right now those time premiums are too much.

  19. Stuart commented on May 28

    a noteworthy observation I came across re: the reporting of the durable good reports on CNBC. Can’t say I disagree at all.

    “One final thing. While the market liked the Durables report, have a peek inside and look at defense and non-defense. Defense orders up 4.8%, non-defense down 1.4%.

    CNBS, of course, made a lot of noise about the fact that “ex transport” durables were up, but they said nothing about the non-defense decline, nor the fact that inventories are at the highest level since the series tracking them was started in 1992.

    In other words manufacturers are building a lot of “stuff” but it ain’t getting sold, and the civilian economy continues to slow significantly. The entire “improvement” this month was on the back of defense spending, presumably to replace the bullets and bombs that our boys are expending over in Iraq.

    Our national lie-and-spin “bubblevision” network, of course, said the exact opposite this morning – that the civilian economy is stronger than expected and “there are no signs of a recession.”

    CNBS has become Goebbels-Vision at its finest, sucking the American Investor in through blatantly and intentionally omitting key pieces of information from their “reporting.””

  20. John Borchers commented on May 28

    T. Elliot.

    I totally disagree with those calculations that the energy payback is 10 years. They haven’t run their numbers right.

    $40k over 10 years is $4k per year. Who spends $4k per year on residental electric?

    Even if that were the case I forgot to mention that for my use $1200 year electric bill a 4kW system only supports 50% of my electric use. Why spend $50k when I can get electric cheaper from PPL burning coal or nuclear?

  21. Mr. Obvious commented on May 28

    OT:

    Dow Chemical Co. will raise product prices by up to 20 percent almost immediately to offset the soaring cost of energy and raw materials, and the CEO of the chemical giant lashed out Washington on Wednesday for failing to develop a sound energy policy.

    There’s no inflation to see here….move along…

  22. Marie commented on May 28

    Let them eat war.

  23. techy commented on May 28

    john.

    so u r speculating that apple is going to dive a lot in next 3 weeks?

    and u will book your profit and jump ship in case apple shoots up?

  24. donna commented on May 28

    I’m in San Diego and even with our high rates, it’s more cost effective so far to cut our usage than to add solar. We’ve done the dual pane windows, tankless water heater, new air and heating units, etc. I keep trying to justify solar but just can’t do it. It needs to get cheaper or the rebate needs to be larger.

  25. UrbanDigs commented on May 28

    With MS on this one. The time value seems to make this trade a higher risk than reward.

    Why not write the call? Get time value on your side? Don’t 90% of options contracts expire out of the money, or something?

  26. me commented on May 28

    “pushing purchases forward in the timeline.”

    When you start seeing “Quote good for 30 days” you know inflation is bad.

  27. Darkness commented on May 28

    If you are like me and you need more explanation on these numbers. I found a good, readable one on motley fool.

    “In presenting the data, the Census Bureau often provides figures that exclude certain classes of manufacturing, such as transportation and defense-related industries.”

    Seems to me that there is some conflict in that unfilled AND inventory are high.

  28. Douglas Watts commented on May 28

    Our yard is full of state-of-the-art solar panels that cost us $10 to purchase and install and almost $0 to maintain. They will generate enough free power this summer to pay for most of our food for the next 6-8 months.

    These solar panels are attached to the stems of our tomatoes, peppers, peas, beans, spinach and potatoes.

  29. michael schumacher commented on May 30

    thus endeth the lesson.

    APVRP 3.70 -.85

    Hope you got out already….

    You should have waited until the day of the announcement bought them before it and then sold them directly after it.

    Ciao
    MS

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