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October Durables Orders Drop Sharply

WASHINGTON (Reuters) - New orders for costly manufactured goods unexpectedly tumbled for a second straight month in October, the U.S. Commerce Department said on Tuesday, led by a big drop in demand for electronic and electrical equipment.

The value of total new orders for durable goods fell 1.3 percent to $200.9 billion in October. The Department also revised its September figure to a 1.9 percent plunge from the previously reported 1.3 percent decrease.

The October decline was sharply contrary to Wall Street analysts' forecasts for a 0.4 percent rebound in orders.

Durables are goods like new cars and refrigerators intended to last three years or more. Commerce said the September and October declines in orders were the first back-to-back monthly drops since November and December of 1996.

New orders for electronic and electrical equipment plummeted 15.3 percent to $32.3 billion -- the biggest fall since a 16.6 percent decrease in July 1997 -- after a 1.1 percent drop in September.

Transportation equipment orders increased in October by 3.4 percent to $48.3 billion after declining 4.7 percent in September. Transportation accounts for nearly one quarter of the value of monthly orders, so swings in demand affect the report strongly and add to its volatility.

Excluding transportation, October durables orders fell 2.6 percent to $152.6 billion, the largest decline in a year, since a 2.7 percent drop in October 1998, after a 1.1 percent September decrease. Reut08:40 11-23-99

Copyright 1999, Reuters News Service. All rights reserved. Replication or redistribution of Reuter's content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

-- Bill P (porterwn@one.net), November 23, 1999

Answers

Note that September was revised downward.

Durable goods and other nonessential/luxuries are in a deflationary trend.

Crude oil is rising fast. Look for essentials goods like food, clothing, medicines etc to follow. Sooner or later gold and silver should also make a move upward.

Get your last minute needs soon!

-- Bill P (porterwn@one.net), November 23, 1999.

On a similarly humorous note, Wall St. seems to be enjoying an inflation-free economy despite the 50% increase in oil. Recall that the PPI (measures inflationary pressures on production cost) shot up, in turn, causing the market to go down (for about twelve seconds). A week later the CPI (measuring inflationary pressures on the consumer prices) was "tame" and the market went up (for ever and ever; three cheers!). Normally this PPI/CPI ratio is bad news because it means that profits are getting squeezed. Fortunately, the market is no longer at risk (another three cheers!) since nobody cares about profits anyway. (They just confuse the situation.) Although the market is only returning 3% return on equity (the definition of a P/E of 35), next year and the year after that will be wonderful. In fact, if we sustain 20% growth over the next 8-10 years (once we get past that pesky Y2K), the market will return 12% on equity! (Of course, that assumes that everybody can emotionally handle a ZERO percent rise in equity prices for 8-10 years.) Unfortunately, this analysis is hopelessly flawed since we are now in the "new economy". We now measure internets in units of "eyeballs" (number of clicks on the site) and more traditional stocks will be valued in units of "boneheads" (the number of boneheads who are standing in line to pay more for the stock than you paid.) The real profits will be made on volume -- there are alot of boneheads out there and each has TWO eyeballs! The funny part of all "new paradigms" is that at some point they become old.

[sarcasm mode off]

The market is a classic bubble, waiting to burst. It may be time to buy some more Prudent Bear Fund (Wall Street's version of rice and beans.)

-- Dave (aaa@aaa.com), November 23, 1999.

Its starting. The sheeple see the clouds and are starting to get nervous. People are holding off buying cars, houses and other big stuff till after? The great seers are cornfused again, geez we thought the numbers would go up. The market herd should also start getting nervous, its like watching the old watering hole shot on the nature shows. You see the lions circling around. The wilderbeast or whatever have one or two start sniffing the air whats that I smell? Could that be the y2k lion or did Charlie over there fart? Oh look some good Koskinen spin grass, back to chomping yum yum. They are clueless until the last minute.

Gordo's earlier suggestion to sit this dance out is an excellent idea. When the elephants start dancing it is not wise to be a mouse at their feet. Think safety, think risk versus reward, hell think about the UFO invasion if that is what it takes to move before the stampede.

-- squid (Itsdark@down.here), November 23, 1999.

As the odious Frank Rick said in Sunday's New York Times, "only a millenial doomsayer would suggest that the biggest bubble in U.S. history is about to burst." An odd admission, when you think about it.

-- Spidey (free@last.Amen), November 23, 1999.