Read ‘U.S. Manufacturing - Again’, e-mailed today to the over 10,000 opt-in (for e-mail) Subscribers to StockResearchPortal.com, a Resource Stock Research Website focused entirely on Mining and Oil & Gas Stocks. In summary, this Post discusses:

· the Institute for Supply Management (‘ISM’) U.S. Manufacturing Index that was reported yesterday;

· briefly, the advancement of the ‘efficient market theory’ by a ‘high-end’ Investment Advisor – and my view on the ‘efficient market theory’ (don’t rely heavily on it); and,

· what I see as an important distinction that must be made when discussing U.S. manufacturing, as contrasted to discussing U.S. Jobs.

In part, the e-mail reads:

“U.S. Manufacturing

An article Sunday titled ‘Who Said Manufacturing Is Dead?’ discusses the Institute for Supply Management (‘ISM’) that was due (and was reported) yesterday (September 1). The author says there has been a high correlation between the ISM monthly reported number and the S&P 500 over the past two years – and produces a chart in support of that. Apparently the ISM index stood at 52.8 one year ago, was reported at 55.5 for July, and according to Econoday, will have to drop to the ‘42’ area for overall U.S. GDP to ‘go negative’. While I find all this interesting, I am much more interested in long-term well considered prognostications than I am in month/month statistics. I commented on the article Sunday as follows:

It seems to me there is a disconnect in the thinking of many between U.S. manufacturing and U.S. unemployment. To be clear, I don’t think with technological change introductions that result in higher productivity - and often more permanent unemployment - that U.S. manufacturing for export de facto has to deteriorate from here. In fact, it might strengthen. That is good for the U.S.

However, as I see it, U.S. manufacturing for domestic consumption invariably will have to suffer if the U.S. unemployment rate does not drop as a result of meaningful job creation at continuing ‘comparatively high hourly labor rates’. If U.S. unemployment worsens from here or U.S. average labor rates paid to those with jobs deteriorate - and I think there is a real chance of both of those things occurring in tandem - then it seems to me U.S. domestic manufacturing will have to retract over time.

My comment received neither ‘thumbs-ups’ nor ‘thumbs-downs’ – which I find curious, as my comment was neither long nor complicated, in circumstances where I see it as somewhat contentious.

As reported in an article today titled ‘So How’d You Like That ISM Number’ the August ISM number came in yesterday morning at 56.3. The U.S. markets reacted very positively – the Dow was up 255 points (2.5%) yesterday. Karl Denniger, the article’s author, says that in light of other prevailing economic factors he is not ‘impressed’ by the ISM August number viewed in isolation – or at least that is how I read what he says. If you are an equities investor you can read the article by clicking here. I commented on it as follows:

Good for you, Mr. Denniger. I for one agree with you, and think you ought not ‘to be impressed’ with yesterday’s market performance.

The people whose livelihoods are more dependent on ‘good markets’ than on ‘bad markets’ strike me …..” to continue click here

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The e-mail also included ‘Today’s Featured StockResearchPortal.com Data Component’ – being ‘My Trading Portfolio’, described as follows:

StockResearchPortal.com offers Trading Portfolio tables that each trading day show updated price and volume changes for Companies in our Company Universe on that trading day. You can find these tables by clicking on the gold ‘My Trading Portfolio’ button in the upper center of our Home Page, or on ‘My Trading Portfolio’ in the middle Main Navigation Bar on any webpage. We invite readers to visit StockResearchPortal and review this feature.

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An article today titled ‘Spending vs. Saving: Good or Bad?’ advocates saving by U.S. Consumers as ‘the road to recovery’.  I commented on this article, which I suggest you read - reading time 5 minutes - as follows:

“U.S. Recovery: Spending vs. Saving

As I see things, the fewer moving parts something has, the easier it is to understand and hence deal intelligently with in a short time period. The corollary to me is that the more moving parts something has, the more complex it is to understand to the point where if indeed it can be adequately understood at all, the longer is the time frame necessary to deal with it.

I do not believe the U.S. economic problems (note the plural) are as simple as consumer spending vs. consumer savings - nor do I think it likely Mr. Harding does either. That said, I do think there is little doubt that U.S. consumer spending has been the most important part of the ‘gas’ that has fueled the U.S. economy for decades - and that if a car runs out of gas it ceases to be able to deliver its occupants to wherever it is they want to go.

The idea that a population where a large number are without jobs or question their job security can either spend or save at levels it did when jobs ‘were more available and presumed secure’ I see as impractical at best, and nonsensical at worst. I am reminded of a child’s rhyme I once heard: ‘Michael, Michael motorcycle, ran out of gas and fell on his ___’.

The American economy is highly complex with many continuously moving parts, and with new and unexpected ones rearing their respective heads every day - the BP spill, the latest Hurricane, a new ‘trading partner’ issue, a ‘terrorism threat’, etc., etc. I don’t have an ability to understand all the complex inter-workings of it. I will say, that intuitively I think the core issues - that unfortunately I think …….” continue reading

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“An article today titled ‘Time to Relax Frannie’s Underwriting Criteria’ is a commentary on, and criticism of, a New York Times article that apparently was critical of government policies it claimed were less lenient than they should be - and that as a result potential ‘investors’ in, who would then become ‘renters of’, U.S. residential real estate are participating less in the current U.S. Housing market than they otherwise might.  I think the author of the ‘Time to Relax …’ article makes good points, and suggest you read it here - reading time 3 minutes.  I added the following comment to it:

Presumably those ‘investors’ with adequate income and capital to covenant new loans are able to borrow for whatever purpose they have in mind. Whether U.S. residential real estate is a good investment in this environment is, of course, another question altogether.

As I see it, one of the principal reasons the U.S. banking system is in the ‘jam’ is because it seemed from 1999 - 2008 to forget about (abandon may be the far better word) the importance of borrower income and underlying asset loan covenants. Why would now it make sense for U.S. banks to lower covenant requirements in the face of high unemployment, an uncertain consumer environment, and a loss in manufacturing jobs that aren’t very likely to return?

I am a strong believer that while the current U.S. Administration inherited a ‘complete economic mess’, its stimulus packages and administration of them has done two things:

· created false hope …….” continue reading

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“ I consider an article yesterday titled ‘The Seven Sins of GLD‘ written by Jeff Neilson to be a ‘must-read’ for anyone owning, or considering owning, SPDR (NYSE symbol GLD) Gold Shares as a proxy for physical gold, as contrasted to owning the physical metal or bullion coins directly.  If you take the time to read the article - reading time 10 minutes - I recommend you then ‘think for yourself carefully’ and form your own views and make your own decision as to whether ‘GLD’ or for that matter any other gold or silver ETF is ‘right for you’.

The article addresses seven concerns that Mr. Neilson has with respect to GLD, each discussed in detail under the headings:  (1) Lack of Transparency, (2) Damages, (3) Structure, (4) Fees, (5) ‘D-Day’ (apparently the sunset on guaranteed GLD fees is November 11, 2011), (6) Quality, and (7) Custodian.  I commented on the article as follows:

Hello Jeff: Again, an article well worth reading, and one I am going to briefly summarize and link to tomorrow in my www.stockresearchporta… morning e-mail.

I too have read the GLD prospectus carefully, and in fact have discussed both the trusteeship and gold holdings with the GLD marketing group in New York on at least two occasions. You may be aware there is a periodic independent audit of the physical gold in the Trustee’s vaults, and …….” continue reading

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“Hyperinflation - Must Read

I strongly recommend you take the time to read ‘Hyperinflation, Part II: What It Will Look Like‘ - reading time 10 minutes.  I commented on this article this morning as follows:

Mr. Lira, I have found your article extremely interesting, and excellent ‘food for thought’. That said, I will greatly appreciate it if you take the time to reply to this comment. I am very interested in your views on how, if at all, you think the fact of the Chinese Government’s holding of massive amounts of its wealth in U.S. Treasuries and other U.S. debt will influence the likelihood of hyperinflation occurring in the U.S. I am of a mind that the U.S. is caught between a ‘rock and a hard place’ because of possible consequences to China of U.S.$ being significantly discounted pursuant to the U.S. directly or indirectly discounting its currency in order to bring an element of balance back to its cumulative debt - and its continued reliance on China and other countries to purchase its treasuries on an ongoing basis.

You might want to address this comment by writing a further article. In any event, thank you for this one, and please respond to this comment. For you information, I think this article ought to be read by anybody who has an interest in equities - and today I am sending a link to this article (along with this comment) to the approximate 10,000 ‘e-mail opt-in’ Subscribers to www.StockResearchPorta… - a website focused on Resource Stock Research.

Bullion/Shorting Alternative?

I added the following comment to a recent article written by Jeff Neilson titled ‘Bullion as an Alternative to Shorting, Part II‘ - you can read ‘Part I’ by clicking here.  I am not suggesting buying physical gold is an alternative to shorting, but suggest you read the article - reading time 10 minutes:

Jeff, you may recall that I wrote a longer comment on your last article - the one before Part I of this series. Once again, I think you have written in both Parts I and II of this series articles that provide readers with excellent ‘food for thought’ - which is the best …….” continue reading

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“BHP Billiton on the  Global Economy

An article yesterday titled ‘3 Reasons Why The World’s Biggest Miner (BHP Billiton) Is Worried About The Global Economy‘ shows three charts on (respectively) austerity (i.e. Eurozone government expenditures/revenues - I say ’shocking’), debt levels (U.S. borrowing by sector - broadly known but I think worth your time to review and think about), and near-term slowing of China’s economy (Money Supply (M1) and credit growth - very interesting).  Those with their ‘feet in the mud’ (people who actually operate businesses and whose ‘jobs are on the line’) in my view are people to be listened to and whose views ought to be considered carefully.  I suggest you review these three charts carefully - review time 2 minutes.

I strongly suggest (for the same ‘feet in the mud’ reason) that you take the time to read ‘BHP Sounds The Alarm On Global Growth and Commodity Prices‘ excerpted from BHP Billiton’s recent mid-year report - reading time - 3 minutes.

Peter Schiff on ‘Carts and Horses’

Well-known author and would-be politician (currently running for a U.S. Senate Seat in New York State) Peter Schiff wrote an article in Seeking Alpha yesterday titled ‘Robert Reich, Carts and Horses‘.  Mr. Reich is a former U.S. Labor Secretary who currently teaches at a California University.  I commented on Mr. Schiff’s article this morning as follows:

Although Mr. Schiff does not explicitly say that the U.S. Government ought not to take on additional debt to promote spending by those ‘not rich’, I think from this article that is his position. If it is, I agree with him. I do, however, think it unlikely …….” continue reading

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“Rightly or wrongly, I am sensing a number of negative things starting to converge with respect to the U.S. economy, much like pieces of a bridge falling away, being patched up, falling away again - and with each event weakening the entire structure until it eventually falls down under its own weight.

As I am sure you are well aware, we are less than 3 months away from the U.S. mid-term elections.  This is a time when I typically would expect a great deal of current U.S. Administration ‘drum-beating’ and ’spending’ to ensure, as best it can, a good mid-term election result.  I remember August, 2008 particularly well (one month before ‘Lehman’ and its then aftermath). I had speculated a few months earlier on Dow ‘Puts’ with a January, 2009 expiry date. I sold those ‘Puts’ in mid-August, 2008 because at the time I sold I believed the then Bush Administration would do everything in its substantial power to  ’prop up’ the U.S. economy until after the November 4, 2008 election date - and if the Republicans were successful in being re-elected until the January 19, 2009 Inauguration Date.  Prior to the time I sold them I had been ‘extremely offside’ on them.  While I made a small profit on those Puts when I sold them, as you may know the leverage in such ‘Puts’ is enormous - either way.  To this day I don’t regret selling because I still think my logic at the time with what I then knew made sense on the day I sold.  That said, after ‘Lehman’ (mid-September, 2008) those ‘Puts’ increased in price by over 3X between mid-August, 2008 and the November 4, 2008 election day.

So what would I do if I owned (i.e. had speculated on with money I could afford to lose) a few Dow ‘Puts’ today with a January 19, 2011 expiry date, given similar political timing with the mid-term elections fast approaching?  For sure …….” continue reading

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“A Wall Street Journal article Saturday titled ‘Secondary Sources: Bankruptcies, Education, Death of Manufacturing‘ discusses one person’s view with respect to ‘What’s Next for (U.S.) Manufacturing’.  Coincidentally, last Friday I had a discussion with the President of a small firm in Toronto that supplies very high-end packaging equipment to ‘Fortune 500′ chemical and food manufacturers.  Most of his customers are in the U.S.  His potential order intake continues to be quite good, and he expects to close a goodly number of orders over the next three months.  He has, of late, noticed delays in some U.S. projects, but has found those projects are not being either dropped or canceled, but rather are being postponed ‘until next year’.  He attributes such postponements to companies (or individual processing plants) having exhausted their capital fund budgets for this fiscal year, but currently expects the projects his company has been working on to be ‘top of the list’ in the 2011 capital budgets of those companies now postponing orders - time will of course tell whether those order ultimately do get booked.

So why is this small company having the current success it has, particularly in the face of a comparatively strong Canadian $?  The answer is …….” continue reading

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