The economy is weaker than it looks
The third-quarter GDP number continues a streak of misleading economic data.
At first blush, Friday's first read on GDP growth in the third quarter was pleasantly strong. Growth re-accelerated to 2% from 1.3% in Q2 and seemed to fit with recent signs of hope, including a drop in the unemployment rate, rising consumer confidence and a rebound in housing. Even the drop in business spending seems to have reversed, with a good headline number from Thursday's durable goods report.
But once again, the devil is in the details. Stripping away the statistical oddities (like the way a huge surge in part-time jobs dropped the unemployment rate to 7.8% last month) reveals an economy still vulnerable to the fiscal cliff and unresolved issues in Europe. It's an economy that has CEOs and small-business owners, who tend to have a better feel for what what's happening down in the trenches, much more worried than average consumers.
Take Thursday's durable goods report. The overall number was boosted by a big jump in airline and defense orders. But after digging in, the team at Capital Economics noted that capital goods shipments outside of defense and aircraft declined, maintaining a recent trend of weakness as businesses cut back on investment spending. The three-month-on-three-month annualized growth rate in this core measure fell to minus 4.9% in September, as shown in the chart above.
Economists at JPMorgan are looking at the way durable goods orders have fallen below shipments in a big way for the first time since the early stages of the 2007-09 recession. Clearly not a good sign.
What about Friday's GDP numbers? Well, those were boosted by a huge jump in government spending, specifically on defense. With big cuts headed to the Pentagon as part of the fiscal cliff, such a spending rate isn't likely to continue.
Real, hard measures of the economy maintain their downward trend: real consumption, real business investment, real inventories, and personal income.
Until these measures reverse and move higher, I will remain skeptical.
For now, I continue to recommend that my clients focus on targeted short positions in energy and emerging markets as well as longs in haven assets. Holdings include a short in Hercules Offshore (HERO) and a long in the Direxion 3x Treasury Bull (TMF) and ProShares UltraShort Oil & Gas (DUG).
Disclosure: Anthony has recommended DUG, HERO short, and TMF to his clients.
I found all three positions with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)
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see how your response is it means nothing to me because I will make I can grow my food and kill
deer, moose, and ducks and fish what about you all when there is no more farmers to feed your stupid dumb as-, wait you all will more pain when OBAMA goes in remember this you sow what you vote for
You know when a person lives and works on the road of construction like I have and seen
greedly CEOs shut down projects and our so call government don't care about us individuals that builds America where locals can have jobs why should we really care about this stupid president we got we screwed us accept it if you are retired individual I wish you would waste your time words of crap somewhere else the young the people screwed us workers and they going to do it again
When we have to refer to 2% growth in GDP as "pleasantly strong" you know the economic policies of the last 4 years have been a failure.
Through the first 3 quarters of 2012 GDP has grown ( perhaps groan?) by an embarassing 1.7%. Another indicator that the policies of the last 4 years have failed is that the president and his supporters continue to compare their recovery to Bush's recession, completely ignoring the 8 million jobs created from mid-2003 through 2007 and the 40% increase in income tax revenue that occurred after the tax cuts which, btw is how you pay for tax cuts.
Okay, USB/UBS is getting rid of 10,000, the Private selector companies is down siding where they
give there employees less insurance coverage and no type of retirement, the BIG companies are using staffing companies to hire employees on a temp to hire deal- go on monster,careerbuilder your proof is there you need just look at the staffing companies, companies at present are hiring but about 0.02 percent daily where these companies watching what will happen in Congress about the one trillion dollar budget cut folks look back in the past when a same party president during the Korean Conflict did a budget cut we lost alot at that time also now lets think about the reality here when that goes in and 746 billion of that one trillion goes to the Department of Defense spending all those projects at Hampton Roads, Gales Ferry, and also Pasgoula there will be more than 200,000 people out of work lets think about the small company that aids the DoD what happens to them, but when we put Obama back in we will be in more trouble - why I say that is because is when someone has ran a business and knows how the lower/middle class feels and had to peeny pinch to get where he is now running but when you have someone that has not had a blister on there hand except writers cramp and butt blister will corrupt the system just seen on Public Boardcasting network a farmer in USA said Obama put over 200 regulations on the America Farmer and he said thats why the American Farmer will be no more when Obama goes back in but the young that has no idea what they are voting in should sleep with gult because there are companies going out of business, farmers is not growing for America, more foreigners taking our jobs because they will work for low wage and send it back home and double there money that we give them, this is my idea and hope it comes true Obama goes in we loose over 10,000 companies in each year he serves and the unemployment goes up nationally to round number 13% and we will be a country like Spain and Greece and Marshal Law is inaffect.........people look around you now we are heading backwards and they covering it up with lies from the mouth.
In only 11 days we at least get passed all this election crap so the politicians can focus on the fiscal cliff and see if they can delay or solve it before we start four more years of bickering and deadlock. The economy is never strong enough for Wall Street bears. We've only come back a 100% but if only and could off's want 100% more. Not going to happen in the world we live in.
The economy looks weaker ! No "S" Sherlock ! Housing is in the TOILET and getting flushed ! Consumer Confidence just got flushed as unemployment numbers climb! But the SPIN MASTERS keep on cooking the books and rigging the numbers ! All is well America all is well !
WOW .... and I keep asking myself ... who could be so dumb, so stupid, such a knucklehead that they would vote for Obama after the mess he's made in just 4 years??? The economy is a total mess. Debt is unpayable and the US is bancrupt. That's not a joke? It is for real?? There is no more money for any stimulus ..... so Obama is out of luck. It takes someone that has knowledge of economics to solve this mess Obama has put us in .... and Romney is the guy.
Please ..... get a grip on your idiotic self and vote for R+R. Boneheads!
"The banks ARE getting money from the Fed, they don't lend it, they buy stock. This is what is supporting the market."
The market is not being "supported" by banks. Prices are determined by earnings, not "Fed money" or Ben Bernanke. Price to earnings ratios today are no different today than they were 130 years ago. The only way a collapse could happen is if: 1) PE values were ridiculously high, which they aren't, or if 2) earnings collapsed. Earnings aren't collapsing and even if the economy went into another recession, the sheer volume of consumers on the planet guarantees that earnings will always bounce back in proportion to inflation.
All the garbage nonsense about how "fiat money" is going to cause a market collapse is sheer lunacy. You doom and gloom, conspiracy minded, tin-foil hat wearing loony birds have no idea what you are talking about. Inflation erodes the buying power of the dollar, and hurts savers, not investors. If anything, inflation also pushes stock prices up.
The time to worry about the stock market is when INTEREST RATES go up.
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Deals are the real worry, because they are the true measure of euphoria, which causes people to lose more money than just about any other emotion known to man.
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