SPDR S&P 500 ETF TRUST SPY S
October 18, 2012 - 11:57am EST by
roc924
2012 2013
Price: 146.00 EPS $10.10 $11.50
Shares Out. (in M): 808 P/E 14.5x 12.7x
Market Cap (in $M): 118,000 P/FCF 0.0x 0.0x
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0.0x 0.0x
Borrow Cost: NA

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Description

Paul McCulley and David Rosenberg like to look at core capex orders as a broad economic indicator. Prior to today, these orders have shifted to a negative trend twice in the past twenty years following multi-years of growth. Both of these trend changes in capex orders occurred at the beginning of the only two multi-quarter declines in S&P500 operating earnings in the last 20 years and two 50% peak to trough market declines. Today, orders have shifted to a negative trend for the third time in 20 years and it looks like S&P500 earnings will decline y/y in 3Q12 after posting many quarters of growth.  The market is within 1% of its 52-week high and valuations are near the levels associated with important prior market tops.

I started looking at this to get the big picture view of a broad industrial company that my quant short screen is identifying. My screen looks at micro data. Things like cash flow, accruals, earnings revisions, insider selling, valuation, etc. Perhaps the micro data was picking up something afoot in the macro data?

I note with the opening paragraph that there were two shifts to negative trends in U.S. core capex order growth rates* before today’s. But let’s start with a little broader definition, as I did when first looking at the data, and define a trend change as a shift from any zero or positive monthly growth to three consecutive negative monthly y/y growth rates. This picks up all the major periods of declining orders. The data is in a table at the end of this report. Here are the beginning months of the major negative trend shifts using this definition:

  1. December 2000
  2. September 2007
  3. October 2008
  4. June 2012

Looking at the first three instances, by the time we knew the trend changed, the market had already fallen from the prior 6-month peak by 20%, 6% and 37%, respectively, on its way to further declines. Today is an outlier. The market is up 2% since we found out at the end of September that the order trend turned negative beginning in June 2012.

The order weakness in October 2008 could be viewed as a continuation of the soft patch that began in September 2007. Let’s say that we only want to look at trend changes according to the definition above and those trend changes that have occurred after a string of multi-year growth in orders. Defined this way, the trend change might capture major turning points better and therefore be a bigger surprise to the market. Under these criteria, there are only three periods in the last twenty years that this has occurred. These three trend changes started in:

  1. December 2000
  2. September 2007
  3. June 2012

You’ve probably already noted that the two very major market peaks of the last twenty years, in March 2000 and October 2007, occurred near the first two trend changes in capex orders. While the market was down a lot from its peak by the time you knew about the order change trend of December 2000 (you knew at the end of March of 2001), the market still had another 33% decline to go from the end of March ’01 before it hit bottom in October 2002. From the end of December 2007, when you knew capex order growth had changed for the worse starting in September 2007, the market declined 54% until it hit bottom in March of 2009.

Capex orders have made major negative trend shifts only when S&P500 earnings start major declines. It makes some sense. Companies tend to cut back on investment when they think earnings could decline. At the same time, companies are probably unlikely to cut investment a lot when they think the earnings decline will be mild. Do companies cut back only when they see a big shift in their business coming? Right now orders are down 10% from their recent seasonally adjusted 52-week high(data not shown in table; using a lookback window of 12 months to calculate declines from peaks requires seasonal adjustment). This has happened three other times in twenty years: February 2000 (within one month of the S&P500 peak), December 2000, October 2008 and more recently, July 2012. In September 2007, although the trend had shifted negative, orders were still only down by 3-4% from recent seasonally adjusted highs, but this was a big change from the prior string of growth rates.

There are only two periods of consecutive quarters of y/y declines in operating earnings in the last twenty years. These periods of declining earnings started with the same quarters as the two shifts to a negative trend in capex orders:

  1. December 2000
  2. September 2007

It looks like September 2012 quarter's earnings will decline after a string of growth. Will this be the start of a multi quarter earnings decline?

What about valuation?  Those familiar with Robert Shiller’s CAPE (http://www.econ.yale.edu/~shiller/data.htm) will note that today’s valuation of the S&P500 has been associated with other major market peaks in 1901, 1937, and 1966. After these peaks in the market it took investors decades to recoup their investment in the S&P500 in real terms. Only the stock market bubbles of 1929 and 1999 peaked at significantly higher CAPEs. Do you think we are entering an environment for equities like 1929 or 1999? Or does it feel more like the 1901 and 1937 market rebounds that occurred after very significant recessionary periods in the U.S.?

There are other economic indicators that portend a decline in the market, not the least of which is real hourly earnings growth. Finally, John Hussman has done extensive work on prospective market returns and his estimate for prospective market returns is in the most negative 0.5% of historical observations.

Putting it together, we have a market that is up and near its 52-week highs despite a negative trend change in capex orders that has occurred only twice in the last twenty years. Both of these trend changes in capex orders occurred at the beginning of the only two multi-quarter declines in S&P500 operating earnings in the last 20 years and two 50% peak to trough market declines. Finally, valuations are very high by historical standards. Perhaps this is a reasonable time to be short stocks.

Risks

There are all kinds of risks here. Prior correlation is not causation, though I do believe there are sound economic reasons why this data should continue working. This data fits with my bearish position and therefore bias. Timing a short on the market is very difficult and I’m probably early, as usual. History doesn’t repeat itself. The sample size is small.

This could be like July-Aug 1998. Capex orders hit their low point in July, which we knew at the end of August. But at this point the market had corrected by 20%, so there was less opportunity to short. Today the market is within 1% of its 52 week high. Also, in 1998 capex orders chopped around and there were a few quarters of declines, but not three in a row. Also, the capex order data is weaker today than in late 1998. It’s twice as weak in fact. In 1998, seasonally adjusted capex orders declined only 5% from the high point in the prior 12 months whereas today orders are down about twice that in July and August 2012 form the recent peak in December 2011. As in 1998, we have the Fed trying to engineer loose monetary conditions, but this attempt seems rather much longer in the tooth now than back in 1998.

 

*Not seasonally adjusted year/year growth in total U.S. new orders of nondefense capital goods excluding aircraft from http://www.census.gov/cgi-bin/briefroom/BriefRm . The idea to look further into U.S. core capex orders came from David Rosenburg’s chart showing this data versus U.S. total private employment with periods of recession shaded.

 

S&P Dow Jones Indices
S&P 500 QUARTERLY DATA

Quarter end

 

Operating EPS

Y/Y growth

3/31/1991

1Q91

$4.77

 

6/30/1991

2Q91

$4.79

 

9/30/1991

3Q91

$5.11

 

12/31/1991

4Q91

$4.63

 

3/31/1992

1Q92

$4.93

3%

6/30/1992

2Q92

$5.21

9%

9/30/1992

3Q92

$5.12

0%

12/31/1992

4Q92

$5.61

21%

3/31/1993

1Q93

$6.25

27%

6/30/1993

2Q93

$6.57

26%

9/30/1993

3Q93

$6.92

35%

12/31/1993

4Q93

$7.16

28%

3/31/1994

1Q94

$7.17

15%

6/30/1994

2Q94

$7.75

18%

9/30/1994

3Q94

$8.03

16%

12/31/1994

4Q94

$8.80

23%

3/31/1995

1Q95

$8.64

21%

6/30/1995

2Q95

$9.50

23%

9/30/1995

3Q95

$9.78

22%

12/31/1995

4Q95

$9.78

11%

3/31/1996

1Q96

$9.39

9%

6/30/1996

2Q96

$10.31

9%

9/30/1996

3Q96

$9.92

1%

12/31/1996

4Q96

$11.01

13%

3/31/1997

1Q97

$10.56

12%

6/30/1997

2Q97

$11.13

8%

9/30/1997

3Q97

$11.03

11%

12/31/1997

4Q97

$11.29

3%

3/31/1998

1Q98

$10.92

3%

6/30/1998

2Q98

$11.43

3%

9/30/1998

3Q98

$10.45

-5%

12/31/1998

4Q98

$11.47

2%

3/31/1999

1Q99

$11.73

7%

6/30/1999

2Q99

$13.21

16%

9/30/1999

3Q99

$12.97

24%

12/31/1999

4Q99

$13.77

20%

3/31/2000

1Q00

$13.97

19%

6/30/2000

2Q00

$14.88

13%

9/30/2000

3Q00

$14.17

9%

12/31/2000

4Q00

$13.11

-5%

3/31/2001

1Q01

$10.73

-23%

6/30/2001

2Q01

$9.02

-39%

9/30/2001

3Q01

$9.16

-35%

12/31/2001

4Q01

$9.94

-24%

3/31/2002

1Q02

$10.85

1%

6/30/2002

2Q02

$11.64

29%

9/30/2002

3Q02

$11.61

27%

12/31/2002

4Q02

$11.94

20%

3/31/2003

1Q03

$12.48

15%

6/30/2003

2Q03

$12.92

11%

9/30/2003

3Q03

$14.41

24%

12/31/2003

4Q03

$14.88

25%

3/31/2004

1Q04

$15.87

27%

6/30/2004

2Q04

$16.98

31%

9/30/2004

3Q04

$16.88

17%

12/31/2004

4Q04

$17.95

21%

3/31/2005

1Q05

$18.00

13%

6/30/2005

2Q05

$19.42

14%

9/30/2005

3Q05

$18.84

12%

12/31/2005

4Q05

$20.19

12%

3/31/2006

1Q06

$20.75

15%

6/30/2006

2Q06

$21.95

13%

9/30/2006

3Q06

$23.03

22%

12/31/2006

4Q06

$21.99

9%

3/31/2007

1Q07

$22.39

8%

6/30/2007

2Q07

$24.06

10%

9/30/2007

3Q07

$20.87

-9%

12/31/2007

4Q07

$15.22

-31%

3/31/2008

1Q08

$16.62

-26%

6/30/2008

2Q08

$17.02

-29%

9/30/2008

3Q08

$15.96

-24%

12/31/2008

4Q08

-$0.09

-101%

3/30/2009

1Q09

$10.11

-39%

6/30/2009

2Q09

$13.81

-19%

9/30/2009

3Q09

$15.78

-1%

12/31/2009

4Q09

$17.16

-19167%

3/31/2010

1Q10

$19.38

92%

6/30/2010

2Q10

$20.90

51%

9/30/2010

3Q10

$21.56

37%

12/31/2010

4Q10

$21.93

28%

3/31/2011

1Q11

$22.56

16%

6/30/2011

2Q11

$24.86

19%

9/30/2011

3Q11

$25.29

17%

12/30/2011

4Q11

$23.73

8%

3/30/2012

1Q12

$24.24

7%

6/29/2012

2Q12

$24.97

0%

9/28/2012E

3Q12E

$25.02E

-1%E

 

 

U.S. Census Bureau

Source: Manufacturers' Shipments, Inventories, and Orders

Nondefense Capital Goods Excluding Aircraft: U.S. Total

Not Seasonally Adjusted New Orders [Millions of Dollars]

 

Data available with less than one month lag. September 2012 data is due October 25th.

Period

Orders

y/y growth

Jan-1992

NA

 

Feb-1992

34,095

 

Mar-1992

38,808

 

Apr-1992

34,840

 

May-1992

34,557

 

Jun-1992

40,582

 

Jul-1992

32,578

 

Aug-1992

33,874

 

Sep-1992

40,599

 

Oct-1992

36,634

 

Nov-1992

36,968

 

Dec-1992

41,875

 

Jan-1993

32,942

 

Feb-1993

36,180

6%

Mar-1993

41,217

6%

Apr-1993

36,725

5%

May-1993

35,986

4%

Jun-1993

41,990

3%

Jul-1993

34,445

6%

Aug-1993

37,126

10%

Sep-1993

42,777

5%

Oct-1993

39,880

9%

Nov-1993

40,104

8%

Dec-1993

47,061

12%

Jan-1994

35,603

8%

Feb-1994

40,979

13%

Mar-1994

45,806

11%

Apr-1994

41,284

12%

May-1994

40,779

13%

Jun-1994

49,067

17%

Jul-1994

38,263

11%

Aug-1994

42,246

14%

Sep-1994

48,695

14%

Oct-1994

45,533

14%

Nov-1994

44,983

12%

Dec-1994

50,223

7%

Jan-1995

42,629

20%

Feb-1995

45,785

12%

Mar-1995

51,930

13%

Apr-1995

44,023

7%

May-1995

46,332

14%

Jun-1995

53,540

9%

Jul-1995

40,132

5%

Aug-1995

44,665

6%

Sep-1995

53,961

11%

Oct-1995

49,638

9%

Nov-1995

48,844

9%

Dec-1995

55,290

10%

Jan-1996

43,364

2%

Feb-1996

50,577

10%

Mar-1996

55,519

7%

Apr-1996

46,081

5%

May-1996

48,230

4%

Jun-1996

56,383

5%

Jul-1996

45,169

13%

Aug-1996

47,604

7%

Sep-1996

55,286

2%

Oct-1996

52,030

5%

Nov-1996

51,080

5%

Dec-1996

55,851

1%

Jan-1997

46,338

7%

Feb-1997

53,877

7%

Mar-1997

61,241

10%

Apr-1997

51,554

12%

May-1997

51,281

6%

Jun-1997

62,721

11%

Jul-1997

52,355

16%

Aug-1997

53,356

12%

Sep-1997

67,170

21%

Oct-1997

57,237

10%

Nov-1997

54,844

7%

Dec-1997

64,145

15%

Jan-1998

50,712

9%

Feb-1998

58,520

9%

Mar-1998

65,995

8%

Apr-1998

52,884

3%

May-1998

54,982

7%

Jun-1998

67,063

7%

Jul-1998

50,247

-4%

Aug-1998

53,455

0%

Sep-1998

66,657

-1%

Oct-1998

55,593

-3%

Nov-1998

55,516

1%

Dec-1998

66,655

4%

Jan-1999

50,057

-1%

Feb-1999

57,443

-2%

Mar-1999

68,252

3%

Apr-1999

56,099

6%

May-1999

57,158

4%

Jun-1999

65,869

-2%

Jul-1999

55,180

10%

Aug-1999

57,253

7%

Sep-1999

70,226

5%

Oct-1999

59,930

8%

Nov-1999

59,619

7%

Dec-1999

71,003

7%

Jan-2000

57,431

15%

Feb-2000

59,012

3%

Mar-2000

72,174

6%

Apr-2000

60,777

8%

May-2000

61,352

7%

Jun-2000

76,000

15%

Jul-2000

57,277

4%

Aug-2000

59,490

4%

Sep-2000

73,857

5%

Oct-2000

62,435

4%

Nov-2000

59,675

0%

Dec-2000

68,274

-4%

Jan-2001

54,915

-4%

Feb-2001

58,884

-0.2%

Mar-2001

66,295

-8%

Apr-2001

52,599

-13%

May-2001

55,190

-10%

Jun-2001

61,050

-20%

Jul-2001

48,146

-16%

Aug-2001

50,644

-15%

Sep-2001

55,618

-25%

Oct-2001

49,212

-21%

Nov-2001

49,182

-18%

Dec-2001

56,526

-17%

Jan-2002

42,789

-22%

Feb-2002

48,412

-18%

Mar-2002

53,345

-20%

Apr-2002

48,822

-7%

May-2002

50,055

-9%

Jun-2002

52,868

-13%

Jul-2002

45,479

-6%

Aug-2002

48,032

-5%

Sep-2002

52,641

-5%

Oct-2002

49,319

0%

Nov-2002

46,816

-5%

Dec-2002

51,883

-8%

Jan-2003

45,327

6%

Feb-2003

47,059

-3%

Mar-2003

57,501

8%

Apr-2003

48,109

-1%

May-2003

49,652

-1%

Jun-2003

54,417

3%

Jul-2003

45,642

0%

Aug-2003

46,884

-2%

Sep-2003

56,636

8%

Oct-2003

51,742

5%

Nov-2003

48,908

4%

Dec-2003

57,197

10%

Jan-2004

46,444

2%

Feb-2004

50,618

8%

Mar-2004

62,214

8%

Apr-2004

51,868

8%

May-2004

50,819

2%

Jun-2004

57,480

6%

Jul-2004

49,092

8%

Aug-2004

48,984

4%

Sep-2004

60,802

7%

Oct-2004

53,617

4%

Nov-2004

52,777

8%

Dec-2004

60,835

6%

Jan-2005

53,726

16%

Feb-2005

55,559

10%

Mar-2005

63,587

2%

Apr-2005

57,167

10%

May-2005

55,517

9%

Jun-2005

64,329

12%

Jul-2005

51,825

6%

Aug-2005

57,928

18%

Sep-2005

63,565

5%

Oct-2005

59,944

12%

Nov-2005

57,179

8%

Dec-2005

65,763

8%

Jan-2006

58,489

9%

Feb-2006

60,261

8%

Mar-2006

73,072

15%

Apr-2006

60,864

6%

May-2006

63,006

13%

Jun-2006

69,666

8%

Jul-2006

58,337

13%

Aug-2006

61,593

6%

Sep-2006

72,445

14%

Oct-2006

67,494

13%

Nov-2006

63,458

11%

Dec-2006

69,895

6%

Jan-2007

60,794

4%

Feb-2007

60,761

1%

Mar-2007

74,343

2%

Apr-2007

66,041

9%

May-2007

63,330

1%

Jun-2007

70,272

1%

Jul-2007

60,833

4%

Aug-2007

64,300

4%

Sep-2007

69,393

-4%

Oct-2007

66,192

-2%

Nov-2007

61,680

-3%

Dec-2007

71,807

3%

Jan-2008

64,511

6%

Feb-2008

64,953

7%

Mar-2008

73,618

-1%

Apr-2008

68,726

4%

May-2008

66,805

5%

Jun-2008

73,057

4%

Jul-2008

64,486

6%

Aug-2008

63,169

-2%

Sep-2008

69,573

0%

Oct-2008

59,999

-9%

Nov-2008

55,416

-10%

Dec-2008

59,019

-18%

Jan-2009

43,604

-32%

Feb-2009

45,483

-30%

Mar-2009

53,470

-27%

Apr-2009

44,766

-35%

May-2009

45,133

-32%

Jun-2009

53,535

-27%

Jul-2009

46,764

-27%

Aug-2009

45,969

-27%

Sep-2009

56,156

-19%

Oct-2009

50,861

-15%

Nov-2009

48,018

-13%

Dec-2009

56,564

-4%

Jan-2010

46,919

8%

Feb-2010

50,294

11%

Mar-2010

63,350

18%

Apr-2010

54,019

21%

May-2010

56,491

25%

Jun-2010

64,396

20%

Jul-2010

52,879

13%

Aug-2010

57,058

24%

Sep-2010

65,207

16%

Oct-2010

56,990

12%

Nov-2010

57,546

20%

Dec-2010

65,624

16%

Jan-2011

55,809

19%

Feb-2011

56,989

13%

Mar-2011

69,523

10%

Apr-2011

60,787

13%

May-2011

62,973

11%

Jun-2011

68,186

6%

Jul-2011

60,158

14%

Aug-2011

61,719

8%

Sep-2011

69,949

7%

Oct-2011

66,456

17%

Nov-2011

59,193

3%

Dec-2011

69,733

6%

Jan-2012

61,141

10%

Feb-2012

66,331

16%

Mar-2012

72,129

4%

Apr-2012

62,476

3%

May-2012

65,019

3%

Jun-2012

66,406

-3%

Jul-2012

55,709

-7%

Aug-2012

58,514

-5%

I do not hold a position of employment, directorship, or consultancy with the issuer.
Neither I nor others I advise hold a material investment in the issuer's securities.

Catalyst

 Earnings decline/recession
    sort by    

    Description

    Paul McCulley and David Rosenberg like to look at core capex orders as a broad economic indicator. Prior to today, these orders have shifted to a negative trend twice in the past twenty years following multi-years of growth. Both of these trend changes in capex orders occurred at the beginning of the only two multi-quarter declines in S&P500 operating earnings in the last 20 years and two 50% peak to trough market declines. Today, orders have shifted to a negative trend for the third time in 20 years and it looks like S&P500 earnings will decline y/y in 3Q12 after posting many quarters of growth.  The market is within 1% of its 52-week high and valuations are near the levels associated with important prior market tops.

    I started looking at this to get the big picture view of a broad industrial company that my quant short screen is identifying. My screen looks at micro data. Things like cash flow, accruals, earnings revisions, insider selling, valuation, etc. Perhaps the micro data was picking up something afoot in the macro data?

    I note with the opening paragraph that there were two shifts to negative trends in U.S. core capex order growth rates* before today’s. But let’s start with a little broader definition, as I did when first looking at the data, and define a trend change as a shift from any zero or positive monthly growth to three consecutive negative monthly y/y growth rates. This picks up all the major periods of declining orders. The data is in a table at the end of this report. Here are the beginning months of the major negative trend shifts using this definition:

    1. December 2000
    2. September 2007
    3. October 2008
    4. June 2012

    Looking at the first three instances, by the time we knew the trend changed, the market had already fallen from the prior 6-month peak by 20%, 6% and 37%, respectively, on its way to further declines. Today is an outlier. The market is up 2% since we found out at the end of September that the order trend turned negative beginning in June 2012.

    The order weakness in October 2008 could be viewed as a continuation of the soft patch that began in September 2007. Let’s say that we only want to look at trend changes according to the definition above and those trend changes that have occurred after a string of multi-year growth in orders. Defined this way, the trend change might capture major turning points better and therefore be a bigger surprise to the market. Under these criteria, there are only three periods in the last twenty years that this has occurred. These three trend changes started in:

    1. December 2000
    2. September 2007
    3. June 2012

    You’ve probably already noted that the two very major market peaks of the last twenty years, in March 2000 and October 2007, occurred near the first two trend changes in capex orders. While the market was down a lot from its peak by the time you knew about the order change trend of December 2000 (you knew at the end of March of 2001), the market still had another 33% decline to go from the end of March ’01 before it hit bottom in October 2002. From the end of December 2007, when you knew capex order growth had changed for the worse starting in September 2007, the market declined 54% until it hit bottom in March of 2009.

    Capex orders have made major negative trend shifts only when S&P500 earnings start major declines. It makes some sense. Companies tend to cut back on investment when they think earnings could decline. At the same time, companies are probably unlikely to cut investment a lot when they think the earnings decline will be mild. Do companies cut back only when they see a big shift in their business coming? Right now orders are down 10% from their recent seasonally adjusted 52-week high(data not shown in table; using a lookback window of 12 months to calculate declines from peaks requires seasonal adjustment). This has happened three other times in twenty years: February 2000 (within one month of the S&P500 peak), December 2000, October 2008 and more recently, July 2012. In September 2007, although the trend had shifted negative, orders were still only down by 3-4% from recent seasonally adjusted highs, but this was a big change from the prior string of growth rates.

    There are only two periods of consecutive quarters of y/y declines in operating earnings in the last twenty years. These periods of declining earnings started with the same quarters as the two shifts to a negative trend in capex orders:

    1. December 2000
    2. September 2007

    It looks like September 2012 quarter's earnings will decline after a string of growth. Will this be the start of a multi quarter earnings decline?

    What about valuation?  Those familiar with Robert Shiller’s CAPE (http://www.econ.yale.edu/~shiller/data.htm) will note that today’s valuation of the S&P500 has been associated with other major market peaks in 1901, 1937, and 1966. After these peaks in the market it took investors decades to recoup their investment in the S&P500 in real terms. Only the stock market bubbles of 1929 and 1999 peaked at significantly higher CAPEs. Do you think we are entering an environment for equities like 1929 or 1999? Or does it feel more like the 1901 and 1937 market rebounds that occurred after very significant recessionary periods in the U.S.?

    There are other economic indicators that portend a decline in the market, not the least of which is real hourly earnings growth. Finally, John Hussman has done extensive work on prospective market returns and his estimate for prospective market returns is in the most negative 0.5% of historical observations.

    Putting it together, we have a market that is up and near its 52-week highs despite a negative trend change in capex orders that has occurred only twice in the last twenty years. Both of these trend changes in capex orders occurred at the beginning of the only two multi-quarter declines in S&P500 operating earnings in the last 20 years and two 50% peak to trough market declines. Finally, valuations are very high by historical standards. Perhaps this is a reasonable time to be short stocks.

    Risks

    There are all kinds of risks here. Prior correlation is not causation, though I do believe there are sound economic reasons why this data should continue working. This data fits with my bearish position and therefore bias. Timing a short on the market is very difficult and I’m probably early, as usual. History doesn’t repeat itself. The sample size is small.

    This could be like July-Aug 1998. Capex orders hit their low point in July, which we knew at the end of August. But at this point the market had corrected by 20%, so there was less opportunity to short. Today the market is within 1% of its 52 week high. Also, in 1998 capex orders chopped around and there were a few quarters of declines, but not three in a row. Also, the capex order data is weaker today than in late 1998. It’s twice as weak in fact. In 1998, seasonally adjusted capex orders declined only 5% from the high point in the prior 12 months whereas today orders are down about twice that in July and August 2012 form the recent peak in December 2011. As in 1998, we have the Fed trying to engineer loose monetary conditions, but this attempt seems rather much longer in the tooth now than back in 1998.

     

    *Not seasonally adjusted year/year growth in total U.S. new orders of nondefense capital goods excluding aircraft from http://www.census.gov/cgi-bin/briefroom/BriefRm . The idea to look further into U.S. core capex orders came from David Rosenburg’s chart showing this data versus U.S. total private employment with periods of recession shaded.

     

    S&P Dow Jones Indices
    S&P 500 QUARTERLY DATA

    Quarter end

     

    Operating EPS

    Y/Y growth

    3/31/1991

    1Q91

    $4.77

     

    6/30/1991

    2Q91

    $4.79

     

    9/30/1991

    3Q91

    $5.11

     

    12/31/1991

    4Q91

    $4.63

     

    3/31/1992

    1Q92

    $4.93

    3%

    6/30/1992

    2Q92

    $5.21

    9%

    9/30/1992

    3Q92

    $5.12

    0%

    12/31/1992

    4Q92

    $5.61

    21%

    3/31/1993

    1Q93

    $6.25

    27%

    6/30/1993

    2Q93

    $6.57

    26%

    9/30/1993

    3Q93

    $6.92

    35%

    12/31/1993

    4Q93

    $7.16

    28%

    3/31/1994

    1Q94

    $7.17

    15%

    6/30/1994

    2Q94

    $7.75

    18%

    9/30/1994

    3Q94

    $8.03

    16%

    12/31/1994

    4Q94

    $8.80

    23%

    3/31/1995

    1Q95

    $8.64

    21%

    6/30/1995

    2Q95

    $9.50

    23%

    9/30/1995

    3Q95

    $9.78

    22%

    12/31/1995

    4Q95

    $9.78

    11%

    3/31/1996

    1Q96

    $9.39

    9%

    6/30/1996

    2Q96

    $10.31

    9%

    9/30/1996

    3Q96

    $9.92

    1%

    12/31/1996

    4Q96

    $11.01

    13%

    3/31/1997

    1Q97

    $10.56

    12%

    6/30/1997

    2Q97

    $11.13

    8%

    9/30/1997

    3Q97

    $11.03

    11%

    12/31/1997

    4Q97

    $11.29

    3%

    3/31/1998

    1Q98

    $10.92

    3%

    6/30/1998

    2Q98

    $11.43

    3%

    9/30/1998

    3Q98

    $10.45

    -5%

    12/31/1998

    4Q98

    $11.47

    2%

    3/31/1999

    1Q99

    $11.73

    7%

    6/30/1999

    2Q99

    $13.21

    16%

    9/30/1999

    3Q99

    $12.97

    24%

    12/31/1999

    4Q99

    $13.77

    20%

    3/31/2000

    1Q00

    $13.97

    19%

    6/30/2000

    2Q00

    $14.88

    13%

    9/30/2000

    3Q00

    $14.17

    9%

    12/31/2000

    4Q00

    $13.11

    -5%

    3/31/2001

    1Q01

    $10.73

    -23%

    6/30/2001

    2Q01

    $9.02

    -39%

    9/30/2001

    3Q01

    $9.16

    -35%

    12/31/2001

    4Q01

    $9.94

    -24%

    3/31/2002

    1Q02

    $10.85

    1%

    6/30/2002

    2Q02

    $11.64

    29%

    9/30/2002

    3Q02

    $11.61

    27%

    12/31/2002

    4Q02

    $11.94

    20%

    3/31/2003

    1Q03

    $12.48

    15%

    6/30/2003

    2Q03

    $12.92

    11%

    9/30/2003

    3Q03

    $14.41

    24%

    12/31/2003

    4Q03

    $14.88

    25%

    3/31/2004

    1Q04

    $15.87

    27%

    6/30/2004

    2Q04

    $16.98

    31%

    9/30/2004

    3Q04

    $16.88

    17%

    12/31/2004

    4Q04

    $17.95

    21%

    3/31/2005

    1Q05

    $18.00

    13%

    6/30/2005

    2Q05

    $19.42

    14%

    9/30/2005

    3Q05

    $18.84

    12%

    12/31/2005

    4Q05

    $20.19

    12%

    3/31/2006

    1Q06

    $20.75

    15%

    6/30/2006

    2Q06

    $21.95

    13%

    9/30/2006

    3Q06

    $23.03

    22%

    12/31/2006

    4Q06

    $21.99

    9%

    3/31/2007

    1Q07

    $22.39

    8%

    6/30/2007

    2Q07

    $24.06

    10%

    9/30/2007

    3Q07

    $20.87

    -9%

    12/31/2007

    4Q07

    $15.22

    -31%

    3/31/2008

    1Q08

    $16.62

    -26%

    6/30/2008

    2Q08

    $17.02

    -29%

    9/30/2008

    3Q08

    $15.96

    -24%

    12/31/2008

    4Q08

    -$0.09

    -101%

    3/30/2009

    1Q09

    $10.11

    -39%

    6/30/2009

    2Q09

    $13.81

    -19%

    9/30/2009

    3Q09

    $15.78

    -1%

    12/31/2009

    4Q09

    $17.16

    -19167%

    3/31/2010

    1Q10

    $19.38

    92%

    6/30/2010

    2Q10

    $20.90

    51%

    9/30/2010

    3Q10

    $21.56

    37%

    12/31/2010

    4Q10

    $21.93

    28%

    3/31/2011

    1Q11

    $22.56

    16%

    6/30/2011

    2Q11

    $24.86

    19%

    9/30/2011

    3Q11

    $25.29

    17%

    12/30/2011

    4Q11

    $23.73

    8%

    3/30/2012

    1Q12

    $24.24

    7%

    6/29/2012

    2Q12

    $24.97

    0%

    9/28/2012E

    3Q12E

    $25.02E

    -1%E

     

     

    U.S. Census Bureau

    Source: Manufacturers' Shipments, Inventories, and Orders

    Nondefense Capital Goods Excluding Aircraft: U.S. Total

    Not Seasonally Adjusted New Orders [Millions of Dollars]

     

    Data available with less than one month lag. September 2012 data is due October 25th.

    Period

    Orders

    y/y growth

    Jan-1992

    NA

     

    Feb-1992

    34,095

     

    Mar-1992

    38,808

     

    Apr-1992

    34,840

     

    May-1992

    34,557

     

    Jun-1992

    40,582

     

    Jul-1992

    32,578

     

    Aug-1992

    33,874

     

    Sep-1992

    40,599

     

    Oct-1992

    36,634

     

    Nov-1992

    36,968

     

    Dec-1992

    41,875

     

    Jan-1993

    32,942

     

    Feb-1993

    36,180

    6%

    Mar-1993

    41,217

    6%

    Apr-1993

    36,725

    5%

    May-1993

    35,986

    4%

    Jun-1993

    41,990

    3%

    Jul-1993

    34,445

    6%

    Aug-1993

    37,126

    10%

    Sep-1993

    42,777

    5%

    Oct-1993

    39,880

    9%

    Nov-1993

    40,104

    8%

    Dec-1993

    47,061

    12%

    Jan-1994

    35,603

    8%

    Feb-1994

    40,979

    13%

    Mar-1994

    45,806

    11%

    Apr-1994

    41,284

    12%

    May-1994

    40,779

    13%

    Jun-1994

    49,067

    17%

    Jul-1994

    38,263

    11%

    Aug-1994

    42,246

    14%

    Sep-1994

    48,695

    14%

    Oct-1994

    45,533

    14%

    Nov-1994

    44,983

    12%

    Dec-1994

    50,223

    7%

    Jan-1995

    42,629

    20%

    Feb-1995

    45,785

    12%

    Mar-1995

    51,930

    13%

    Apr-1995

    44,023

    7%

    May-1995

    46,332

    14%

    Jun-1995

    53,540

    9%

    Jul-1995

    40,132

    5%

    Aug-1995

    44,665

    6%

    Sep-1995

    53,961

    11%

    Oct-1995

    49,638

    9%

    Nov-1995

    48,844

    9%

    Dec-1995

    55,290

    10%

    Jan-1996

    43,364

    2%

    Feb-1996

    50,577

    10%

    Mar-1996

    55,519

    7%

    Apr-1996

    46,081

    5%

    May-1996

    48,230

    4%

    Jun-1996

    56,383

    5%

    Jul-1996

    45,169

    13%

    Aug-1996

    47,604

    7%

    Sep-1996

    55,286

    2%

    Oct-1996

    52,030

    5%

    Nov-1996

    51,080

    5%

    Dec-1996

    55,851

    1%

    Jan-1997

    46,338

    7%

    Feb-1997

    53,877

    7%

    Mar-1997

    61,241

    10%

    Apr-1997

    51,554

    12%

    May-1997

    51,281

    6%

    Jun-1997

    62,721

    11%

    Jul-1997

    52,355

    16%

    Aug-1997

    53,356

    12%

    Sep-1997

    67,170

    21%

    Oct-1997

    57,237

    10%

    Nov-1997

    54,844

    7%

    Dec-1997

    64,145

    15%

    Jan-1998

    50,712

    9%

    Feb-1998

    58,520

    9%

    Mar-1998

    65,995

    8%

    Apr-1998

    52,884

    3%

    May-1998

    54,982

    7%

    Jun-1998

    67,063

    7%

    Jul-1998

    50,247

    -4%

    Aug-1998

    53,455

    0%

    Sep-1998

    66,657

    -1%

    Oct-1998

    55,593

    -3%

    Nov-1998

    55,516

    1%

    Dec-1998

    66,655

    4%

    Jan-1999

    50,057

    -1%

    Feb-1999

    57,443

    -2%

    Mar-1999

    68,252

    3%

    Apr-1999

    56,099

    6%

    May-1999

    57,158

    4%

    Jun-1999

    65,869

    -2%

    Jul-1999

    55,180

    10%

    Aug-1999

    57,253

    7%

    Sep-1999

    70,226

    5%

    Oct-1999

    59,930

    8%

    Nov-1999

    59,619

    7%

    Dec-1999

    71,003

    7%

    Jan-2000

    57,431

    15%

    Feb-2000

    59,012

    3%

    Mar-2000

    72,174

    6%

    Apr-2000

    60,777

    8%

    May-2000

    61,352

    7%

    Jun-2000

    76,000

    15%

    Jul-2000

    57,277

    4%

    Aug-2000

    59,490

    4%

    Sep-2000

    73,857

    5%

    Oct-2000

    62,435

    4%

    Nov-2000

    59,675

    0%

    Dec-2000

    68,274

    -4%

    Jan-2001

    54,915

    -4%

    Feb-2001

    58,884

    -0.2%

    Mar-2001

    66,295

    -8%

    Apr-2001

    52,599

    -13%

    May-2001

    55,190

    -10%

    Jun-2001

    61,050

    -20%

    Jul-2001

    48,146

    -16%

    Aug-2001

    50,644

    -15%

    Sep-2001

    55,618

    -25%

    Oct-2001

    49,212

    -21%

    Nov-2001

    49,182

    -18%

    Dec-2001

    56,526

    -17%

    Jan-2002

    42,789

    -22%

    Feb-2002

    48,412

    -18%

    Mar-2002

    53,345

    -20%

    Apr-2002

    48,822

    -7%

    May-2002

    50,055

    -9%

    Jun-2002

    52,868

    -13%

    Jul-2002

    45,479

    -6%

    Aug-2002

    48,032

    -5%

    Sep-2002

    52,641

    -5%

    Oct-2002

    49,319

    0%

    Nov-2002

    46,816

    -5%

    Dec-2002

    51,883

    -8%

    Jan-2003

    45,327

    6%

    Feb-2003

    47,059

    -3%

    Mar-2003

    57,501

    8%

    Apr-2003

    48,109

    -1%

    May-2003

    49,652

    -1%

    Jun-2003

    54,417

    3%

    Jul-2003

    45,642

    0%

    Aug-2003

    46,884

    -2%

    Sep-2003

    56,636

    8%

    Oct-2003

    51,742

    5%

    Nov-2003

    48,908

    4%

    Dec-2003

    57,197

    10%

    Jan-2004

    46,444

    2%

    Feb-2004

    50,618

    8%

    Mar-2004

    62,214

    8%

    Apr-2004

    51,868

    8%

    May-2004

    50,819

    2%

    Jun-2004

    57,480

    6%

    Jul-2004

    49,092

    8%

    Aug-2004

    48,984

    4%

    Sep-2004

    60,802

    7%

    Oct-2004

    53,617

    4%

    Nov-2004

    52,777

    8%

    Dec-2004

    60,835

    6%

    Jan-2005

    53,726

    16%

    Feb-2005

    55,559

    10%

    Mar-2005

    63,587

    2%

    Apr-2005

    57,167

    10%

    May-2005

    55,517

    9%

    Jun-2005

    64,329

    12%

    Jul-2005

    51,825

    6%

    Aug-2005

    57,928

    18%

    Sep-2005

    63,565

    5%

    Oct-2005

    59,944

    12%

    Nov-2005

    57,179

    8%

    Dec-2005

    65,763

    8%

    Jan-2006

    58,489

    9%

    Feb-2006

    60,261

    8%

    Mar-2006

    73,072

    15%

    Apr-2006

    60,864

    6%

    May-2006

    63,006

    13%

    Jun-2006

    69,666

    8%

    Jul-2006

    58,337

    13%

    Aug-2006

    61,593

    6%

    Sep-2006

    72,445

    14%

    Oct-2006

    67,494

    13%

    Nov-2006

    63,458

    11%

    Dec-2006

    69,895

    6%

    Jan-2007

    60,794

    4%

    Feb-2007

    60,761

    1%

    Mar-2007

    74,343

    2%

    Apr-2007

    66,041

    9%

    May-2007

    63,330

    1%

    Jun-2007

    70,272

    1%

    Jul-2007

    60,833

    4%

    Aug-2007

    64,300

    4%

    Sep-2007

    69,393

    -4%

    Oct-2007

    66,192

    -2%

    Nov-2007

    61,680

    -3%

    Dec-2007

    71,807

    3%

    Jan-2008

    64,511

    6%

    Feb-2008

    64,953

    7%

    Mar-2008

    73,618

    -1%

    Apr-2008

    68,726

    4%

    May-2008

    66,805

    5%

    Jun-2008

    73,057

    4%

    Jul-2008

    64,486

    6%

    Aug-2008

    63,169

    -2%

    Sep-2008

    69,573

    0%

    Oct-2008

    59,999

    -9%

    Nov-2008

    55,416

    -10%

    Dec-2008

    59,019

    -18%

    Jan-2009

    43,604

    -32%

    Feb-2009

    45,483

    -30%

    Mar-2009

    53,470

    -27%

    Apr-2009

    44,766

    -35%

    May-2009

    45,133

    -32%

    Jun-2009

    53,535

    -27%

    Jul-2009

    46,764

    -27%

    Aug-2009

    45,969

    -27%

    Sep-2009

    56,156

    -19%

    Oct-2009

    50,861

    -15%

    Nov-2009

    48,018

    -13%

    Dec-2009

    56,564

    -4%

    Jan-2010

    46,919

    8%

    Feb-2010

    50,294

    11%

    Mar-2010

    63,350

    18%

    Apr-2010

    54,019

    21%

    May-2010

    56,491

    25%

    Jun-2010

    64,396

    20%

    Jul-2010

    52,879

    13%

    Aug-2010

    57,058

    24%

    Sep-2010

    65,207

    16%

    Oct-2010

    56,990

    12%

    Nov-2010

    57,546

    20%

    Dec-2010

    65,624

    16%

    Jan-2011

    55,809

    19%

    Feb-2011

    56,989

    13%

    Mar-2011

    69,523

    10%

    Apr-2011

    60,787

    13%

    May-2011

    62,973

    11%

    Jun-2011

    68,186

    6%

    Jul-2011

    60,158

    14%

    Aug-2011

    61,719

    8%

    Sep-2011

    69,949

    7%

    Oct-2011

    66,456

    17%

    Nov-2011

    59,193

    3%

    Dec-2011

    69,733

    6%

    Jan-2012

    61,141

    10%

    Feb-2012

    66,331

    16%

    Mar-2012

    72,129

    4%

    Apr-2012

    62,476

    3%

    May-2012

    65,019

    3%

    Jun-2012

    66,406

    -3%

    Jul-2012

    55,709

    -7%

    Aug-2012

    58,514

    -5%

    I do not hold a position of employment, directorship, or consultancy with the issuer.
    Neither I nor others I advise hold a material investment in the issuer's securities.

    Catalyst

     Earnings decline/recession
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