Carty Capital Management
CFP | Fiduciary




Good Morning,

In all the hype and drama of day-to-day financial media events, most of the audience tends to be driven to overlook many of important items.  One of those elements in the latest data is the Manufacturing Index.  The long held belief is that somehow the US does that poorly these days.  The chatter has been beaten into the minds of the audience for so long that we just assume we really did ship it all overseas.


Uh - no - we didn't.


Let's take a look:




The ISM Manufacturing chart above shows that reports for the month of September came in significantly ahead of expectations, topping 60 for the first time in over 13 years!


Economists/analysts were forecasting the headline index to come in at a level of 58.1 - a bit short wouldn't you say?  Relative to expectations, September's report was the strongest since October 2014, and on an absolute level, this month's print was the highest since May 2014.


But there is more:  it is important to check what the internal data tell us.  Respondents make remarks when they file reports.  There are also running tallies of certain aspects of the index so one can get a sense of "trend".


Let's first look at the comments snapshot.  The obvious disruptions from the hurricanes are clear and understandable - but what other word do you see being used repeatedly?




On this next snapshot below, I like to track internal data to see if there are any values to be picked up from same.  I bring your attention to the inventory segments in the data below:





Long-time readers will recall our multiple mentions of the "Fedex Economy."  In a nutshell, thanks to all those planes and overnight delivery, Fred Smith changed the way our entire pipeline of supplies work.  By the way - recessions begin with too much inventory - not low sales as too many have been wrongly taught.


That's another morning note - but for now, focus on the inventory reading at the customer level.  Note how low we are - and how far we have fallen since a year ago.  The supply chain simply does not exist beyond 3-4 weeks.  All the while, the positive parts of the index, showing orders, backlog, demand and exports are all green and moving up - some far higher than a year ago.


Here is the point:  If a hurricane can cause a supply crunch - imagine how tough it would be to actually get a recession started.


Think about that over coffee.


Latest from RocketMan


Needless to say, N Korea quickly left the front page given other events in the news.  This entire N Korea process is one that flares up every decade.  It is unlikely to end.  It is a non-event, unless it actually triggers a correction which would make it instead, a real value.


I really like how Ken puts it best though:


"The Kims have been in power in N. Korea for 69 years by keeping their country on a war footing.  Actually going to war is out of the question."


Waves Rolling In


I know this is repetitive at times - but strength and demand are headed our way.  Pretend you are at the beach - focus on the horizon - not on the sand.


Earnings season will be with us shortly but first - don't be surprised if we get a light employment number tomorrow.  We should not be concerned if the storms hit hiring for a few weeks during the events themselves.  Expect a bounce-back next month.


In Summary


The next earnings flood is headed our way.  Do not overlook the impact of the latest manufacturing data as noted above.  It will get lost in the mess - but you won't let that happen.


Let's keep praying for a correction - even a mild one.  It would only take a week or two before there would be no one feeling bullish, and the world would keep on ticking.


Demographics Rule The Long-Term Game


Planning is critical as always.


But we must stay focused on the right pitch and be confident that is remains very early in the game.


Long-term currents win over time - not short-term, emotional waves.


I will use that line again from our videos:


Think Demographics, Not Economics.  We are in great shape!


Until we see you again - may your journey be grand and your legacy significant.


InvestingMike Williams