Quick! Get out the green spray paint and cover this up: “Durable Goods Orders in U.S. Unexpectedly Decreased“.

Orders for goods meant to [last] several years dropped 2.4 percent, the worst performance since January, the Commerce Department said today in Washington. Excluding transportation equipment, orders were little changed. Restrained consumer spending and near-record excess capacity mean companies will probably not boost investment in new plants or equipment in coming months. The report indicates the jump in auto sales from the Obama administration’s $3 billion trade-in program may not give other industries a jolt, raising concern any factory rebound will be uneven.

No problem, the banks will still be able to game the stock market and give the government their share, so all is well…

In essence, the government has passed the baton on to the banks so they can keep the party going.  This phenomenon has been most evident in bank earnings.  Banks are in the business of lending, but an odd thing has occurred while bank earnings soared – they were doing no lending!   Banks have been hoarding record amounts of cash as the government floods their balance sheets via various programs and bailouts.  Many assume that the banks are either attempting to loan the money or simply letting it sit on their balance sheets earning nothing.  But Moonraker’s analysis raises a more nefarious possibility – the banks are effectively creating a ponzi run stock market in which they use the bailout money to drive various market prices higher and thereby juice their own earnings.  It’s quite brilliant when you think about it – until the music stops.

Who’s in charge of the music?

New orders for manufactured durable goods in March decreased $1.3 billion or 0.8 percent to $161.2 billion, the U.S. Census Bureau announced today. This was the seventh decrease in the last eight months and followed a 2.1 percent February increase.   However, February’s previous gain was revised downward from 3.5% to only 2.1%.  Was that expected? The publisher’s know the revisions are ignored. Will next month”s revision of the March number be a decline of .4% instead of the currently posted increase of .8%?  Inquiring minds already know.

Northern Trust in its Daily Global commentary finds glimmers of hope in the new home sales report and durable goods orders released yesterday. Although this is now old news, it’s hard for us to see the “glimmer of hope” they see.  Sales of new single-family homes are down 43.8% in February from a year ago, after a 47.7% plunge in January. Sales of new homes have dropped 75.7% from the peak in July 2005.  The charts in the bigger picture hardly budged…



Northern Trust:

“The trough for new home sales appears to be January 2009…”

Regarding durable goods:

“Orders of durable goods increased 3.4% in February after a downwardly revised drop in January of 7.3% (originally estimated as a 4.5% decline). The 35.3% increase in orders of defense items and the 6.6% jump in bookings of non-defense capital goods excluding aircraft stand out in the report. Orders of aircraft (-28.9%) and autos (-0.6%) dropped but that of machinery (+13.5%), computers (+5.6%), and appliances rose (+1.6%) during February. The main message is that the pickup in orders of durables is significant but consistent monthly gains will be necessary to declare that the factory sector has pulled out of the current doldrums.”

We agree, one blip on the screen … it’s probably more seasonal than anything else.