ISM: Oh Oh

Recession Is Over

If you’re wondering both what the dip is this morning and why it’s not an all-on rout (e.g. -300 on the DOW) it’s found right here.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July’s reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month. This is also the lowest reading for the PMI™ since July 2009.

Three is a trend; we now have the third month confirmation to go with the regional Fed surveys.  Anyone arguing that a recession is not now baked into the cake is simply arguing against all historical references and drinking Kool-Aid.

In contraction were New Orders, Production, supplier deliveries, customer inventories, order backlog, exports and imports.  Worse, prices increased (from decreasing sharply) and employment slowed in advancement while inventories advanced (which is bad, not good.)

So why isn’t the market down 300+ on what is a clear recession signal?  Simple — everyone assumes “The Fed will save us” with more QE.

Hint: They may QE, but it won’t save anything; QE is counter-productive as it simply depreciates the currency and credit currently in the system, thus destroying purchasing power which in the end is all that matters to the economy.  As your purchasing power is destroyed your ability to drive economic activity is also destroyed.

Our Lily Pad is being choked off and we had better start killing off those lilies or we’re all dead.

(If you don’t understand what this graphic represents, you need to read The Riddle of the Lilly Pad. It’s something you should have learned in grade school.)

We must, in fact, kill at least half of them in the present doubling time (that is, we must reduce the debt by more than 50% systemically over the amount of time it is doubling, or we must cease adding new debt immediately) — or we’re done.

The game is up and Bernanke’s thesis has been invalidated.

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