Investors were too busy watching stocks get pounded yesterday to notice a bit of good news. Factory orders rose 1.3%. That was more than twice what economists were expecting.
That prompted Pierpont Securities chief economist Stephen Stanley to say “Manufacturing is unambiguously the strongest part of the economy…” He’s not kidding.
Weed out the 67% decline in domestic aircraft orders and you get a 3.1% jump in factory orders. That’s the biggest gain since 2005.
Bookings (ex-transportation) were up 4.5% and shipments were up 2.3%. These gains were also better than expected.
Businesses are spending again. And that’s a very important factor for the economic recovery.
Texas Instruments recently reported an earnings blowout and said that production is at an “all-time high”. We’ve heard similar reports from Intel, Caterpillar and other companies that are directly impacted by corporate spending.
Consumer spending has been stronger than expected. That’s helped corporate profits and encouraged companies to invest in inventories and equipment.
The hope is that this virtuous cycle will expand to include investments in new employees. That would be a textbook example of a recovery.
I remember the recession of 2001-2002 well. It officially ended in November of 2001, but near-recession conditions continued into 2002.
The ensuing recovery of 2003-2004 was a “jobless recovery.” Unemployment bottomed in 2003 at 6%. So did the stock market. It bottomed in October 2003 and charged ahead.
Employment eventually followed. But it took a long time. It only improved to 5.5% in 2004.
Alan Greenspan started hiking interest rates on
While the economy struggles, that’s an appropriate stance. But I would argue that the Fed needs to be quick on tightening once employment improves.
Because I think we can all agree that Greenspan was too slow in raising rates.
Was Greenspan too slow to start raising rates? Or was the pace of rate hikes too slow?
You’ll recall that Greenspan took 2 years to normalize interest rates in a series of quarter-point moves. During that time, the housing bubble took off.
Now, here’s what’s bugging me at the present time. The economic recovery that followed the 2001 recession was based on low interest rates and a housing bubble.
So it stands to reason that the surge in employment between 2004 and 2006 was focused in the financial and housing sectors. In other words, we added traders, construction workers, loan officers and real estate agents. Those occupations make up the bulk of the unemployed right now.
Now, if the recovery of 2003-2004 was based on the growing housing bubble, then that means we never really dealt with the imbalances that led to the recession of 2001. In fact, those imbalances have been made worse, because we know have a higher Federal deficit and higher unemployment.
So how do we get out of this mess?
Clearly, we will need to see new industries support a sustained economic recovery. Alternative energy, technology, and biotechnology are three areas where the
The push toward energy independence seems to be the most obvious and universally beneficial initiative. I would very much like to see our government put forth a coherent energy policy. That was lacking under the previous administration and it’s lacking under the current one.
Structural change is what’s needed to overcome the imbalances in the
Many small Oil & Gas exploration companies are already moving to answer
In 2008, the U.S. Geological Survey confirmed that there is 3 billion barrels of recoverable oil form the Bakken formation in the
Needless to say, small Oil & Gas exploration companies are drilling as fast as they can to tap into the Bakken’s incredible potential. And I’m adding the stocks to the Energy World Profits portfolio as fast as I can.
In fact, I just recommended one today. It’s a small operation that’s just turning the corner to profitability. The company is expected to go from a $0.03 loss in 2009 to a $0.14 a share profit in 2010 and $0.38 a share in 2011. Needless to say, it won’t be a $4 stock for long…
Drilling in the Bakken may not solve
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