There is a little anecdotal macro work here in the form of the machine tool sales data, but #304 went on to get very deep in the macro, finding some negatives and some positives before finally settling into normal management of precious metals, stocks, commodities, etc.

Bullish Headlines (8.16.14)

“Stocks Falter as Heat Rises in Ukraine-Russia Conflict” MarketWatch

“Russia-Ukraine Tensions Escalate” MarketWatch

“S&P 500: What Does Soros Know That We Don’t” MarketWatch [ref. massive put position]

“Ukraine Tensions Flare as Poroshenko Touts Strike on APCs” Bloomberg

“EU Warns Putin of More Sanctions as Ukraine Crisis Grows” Bloomberg

Hype everywhere and not a fundamental reason for a stock decline to be found. On Friday I went out for a short while with the market strong and came back to a downward reversal. ‘Hmmm…’ thought I, ‘maybe the 1960 level would act as firm resistance to the S&P 500 after all’. Then I caught the gist of the negativity per the above headlines, let it settle for a while and decided that the market probably has higher to go.

Economy: Machine Tool Sales & Manufacturing

The bull depends on corporate profits generated in an okay general economic environment nurtured by a 5.5 year helping of ZIRP policy (with periodic side orders of QE and bond market manipulations like Op/Twist). On Friday I talked with a contact from my old perch in manufacturing, and the information he provided was indicative of a potential future slowdown in manufacturing. My contact is a machine tool dealer specializing in used equipment and his input is that with the machine tool market slowed to a crawl…“guys are not spending; they are just waiting to see how the next election is shaping up”. He also notes that shops are still very busy, but they are not committing to add capital equipment.

Indeed, he says new equipment dealers are up to their old tricks, slashing prices by up to 40% in order to hold market share without making a profit. I have seen this before myself, and it is not a positive economic harbinger when the builders of $150,000 to $700,000 pieces of high tech manufacturing equipment give them away at or below cost.

I searched for data to confirm our conversation and found a source that corroborates my contact’s information (he is by the way, down to a skeleton crew after being very busy for much of the last 2 years).

The data source is a site called EDA Industry Insight, which you can find linked under Technical & Data on the right side bar at biiwii.com. When ever I find something useful, it is linked there. This is a growing library of macro data tools that are linked there for my use and for the NFTRH service, as well as public use for those interested.

When viewing the data above for the new equipment sellers, notice two things…

1) New Machine Tool sales are running well below the post-2009 average, which is of course negative. In fact it may be quite negative considering that dealers are slashing prices to even get these sales of about 1200 units a month, nationally.

2) Year-end consistently tends to spike. This is not a coincidence. It is a structural phenomenon in the industry as people hold out and finally get off the fence and buy before year-end for tax or other strategic reasons.

Bottom Line:  No macro trend unfolds and becomes readily apparent over night. Indeed, a bump in year end sales may put this developing negative to bed until early 2015. But just as we caught the first signs of a manufacturing revival in the Semiconductor equipment industry ramp up, we’ll keep the pulse of this developing issue going forward. We are not trying to look right with the existing trend, we are trying to anticipate new ones.