Did the Regulators Just Ring the Bell on the Deal making Spree of 2009-2014

Most analysts miss major changes in the financial system.

 

The reason for this is that they only look at the economic data for signs of what’s happening. If you’re looking for a competitive edge in your forecasts, however, you need to learn to “read between the lines” on news releases.

 

Which is why I believe 99% of analysts are overlooking the following story (hat tip Bill King’s King Report).

 

Three longtime banks for private equity firm KKR & Co LP (KKR.N) have snubbed a request for a $725 million buyout loan over concerns it is too risky to pass muster with U.S. regulators, sources familiar with the situation said on Thursday.

 

The banks had funded a similar deal six months earlier…

 

Now, the three banks have refused to bankroll a bid by KKR-owned Brickman to buy rival landscaping company ValleyCrest Companies LLC, as they seek to cut back on making new loans that do not comply with the leveraged lending guidelines, the sources said. Dell Inc DELL.O founder Michael Dell's investment firm owns ValleyCrest.

 

It is unusual for banks that lead the financing of a leveraged buyout of a company not to be tapped for smaller follow-on financings.

 

            Source: Reuters.

 

KKR is one of the premiere name brand private equity firms in the world. Here we find that “longtime” banks, or banks that have done business with KKR for decades, have decided NOT to fund a KKR deal due to new leverage guidelines.

 

Even the article itself notes this is unusual.

 

This story is of MAJOR importance as it indicates the following:

 

1)   The deal-making spree of the last 3 years is peaking out.

2)   New regulations are beginning to affect the wave of liquidity that has buoyed stocks in the last 5 years.

 

Does this mean stocks will collapse right now? Not necessarily. But it is a clear sign that things are changing behind the scenes in the financial system.  The smart money is taking note… will the rest of the market?

 

In time…

 

 

This concludes this article. If you’re looking for the means of protecting yourself from what’s coming, you can pick up a FREE investment report titled Protect Your Portfolio at http://ift.tt/170oFLH.

 

This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

 

 

 

 




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Two Ukraine Helicopters Shot Down: Watch As Gunship Engages Eastern Militia In Intense Fighting

Earlier today, we read reports out of Russian Itar-Tass stating that east Ukraine militia had shot down a Ukraine gunship and a Su-25 fighter jet, as well as four APC. We were waiting for an official confirmation from Ukraine as the level of propaganda on both sides is somewhat tricky to filter. We got at least partial proof moments ago from Ukraine’s military spokesman Seleznyov, who said via Bloomberg:

  • UKRAINE SAYS 2 SOLDIERS DEAD, 42 WOUNDED TODAY IN EASTERN OP
  • UKRAINIAN SEPARATISTS SHOOT DOWN 2 HELICOPTERS: SELEZNYOV

Here is what else Itar-Tass reported from a conflict which suddenly all Western media has forgotten:

People’s militia in the city of Sloviansk, east Ukraine’s Donetsk Region, have downed a fighter plane Su-25 and a Ukrainian helicopter gunship as well as four armored personnel carriers (APC), Sloviansk People’s Mayor Vyacheslav Ponomarev told ITAR-TASS on Tuesday.

 

Ukraine’s military has amassed armored vehicles and self-propelled mortars and howitzers near the town of Sloviansk, Stella Khorosheva, spokeswoman for the Sloviansk people’s mayor, told ITAR-TASS on Tuesday.

 

The military equipment numbering 100 units includes Grad salvo systems, Khorosheva said.

 

An An-30 plane has been sighted over Sloviansk, making periodic flyovers. According to Khorosheva, clashes began at around 6.00 am local time on Tuesday.

 

“A report said that Ukrainian troops had broken through in the area of the village of Semyonovka,” she said, adding that Ukraine’s National Guard was using tanks.

 

“It looks like they’ve brought here all their army and (military) equipment,” she said.

 

Earlier, a people’s militia representative told ITAR-TASS that Ukrainian military aircraft had delivered several missile strikes at Semyonovka and that the village of Cherevkovka had come under missile and machine-gun fire as well.

 

“There have been no casualty reports yet, because everybody is holding the line or is in shelter,” the militia representative said.

It is unclear if the downed Ukrainian Su-25 is the same one as the one caught on tape launching bombs at Ukraine civilians in the town of Lugansk.

And while we don’t have a clip which captures the latest downing of the two Ukraine helicopters (or the fighter jet) here is a YouTube video from earlier today showing two Ukraine helicopters engaged in heavy fighting with forces on the ground near the city of Slavyansk. 1:58 into the clip it becomes visible when the helicopter pilot engages his gun at ground targets.




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If You Want More Doctors, Maybe Depending on the Feds is a Bad Idea

The
fiasco
at the Veterans Health Administration is only the tip of
the iceberg; the United States is running out of doctors, and soon
we’ll all be begging for scraps of medical care, warns Marina Koren
of the National Journal.

The part about the physician shortage is probably true (though
it assumes that the shape of the health care industry, and who
provides care, is unchangeable). But that shortage is likely
inevitable in a country that has come to depend on Uncle Sugar to
foot the bill for graduate medical education
(GME)—residencies—which has become a bottleneck now that the
federal government is broke and in a lousy position to increase
spending on anything.

Writes
Koren
:

America is running out of doctors. The country will be 91,500
physicians short of what it needs to treat patients by 2020,
according to the Association of American Medical Colleges. By 2025,
it will be short 130,600.

Like at the Veterans Affairs Department, demand will be highest
for primary-care physicians, the kinds of doctors many people go to
first before they are referred to specialists.

While students are applying to and enrolling in medical schools
in record numbers, high interest does not necessarily mean more
doctors. The number of residences—crucial stages of medical
training—has not risen with the number of applicants, thanks to a
government-imposed cap. The Association of American Medical
Colleges has pushed Congress to change the law, predicting that
there won’t be enough residencies for young doctors by next
year.

Sure enough, the American Medical Association is
waging a campaign
to “SaveGME,” which just means that it’s
lobbying for more federal bucks to subsidize residencies. As it is,
the federal government places a cap on residency slots that it is
willing to subsidize through Medicare and Medicaid. That’s because
the current process is expensive with “the public investment per
physician in training comes to half a million dollars or more,
according to
HealthAffairs
. Health insurance companies also
subsidize residency slots with higher payments to teaching
hospitals, but the feds are the biggest source of funding for
GME.

Note that in terms of physician training, this is the
chokepoint. Medical schools are
opening all over the place
. But medical students pay for their
education, while residents are paid, so everybody wants Uncle Sugar
to pick up the tab.

But what if the feds did find some loose change in the already
well-probed seat cushions to expand residencies? Would that
necessarily alleviate the doctor shortage?

Not so much. The shortage is in primary care. Researchers

find that
“despite evidence tying access to primary care
physicians to improved community health outcomes and decreased
costs, medical student interest in primary care and, thus, medical
school output of primary care physicians, has been declining.”

The researchers propose all sorts of schemes for coordinating
care and cherrypicking potential students who would want to go into
primary care, without asking why students might not choose to enter
a field where they would seem to have guaranteed employment.

But medical students aren’t idiots. The realities of primary
care, according to Dr.
John Schuman
, are “fifteen-minute visits with patients on
multiple medications, oodles of paperwork that cause office docs to
run a gauntlet just to get through their day, and more
documentation and regulatory burdens than ever before.”

So new doctors make logical choices—many become subspecialists
working for hospitals where somebody else fields the
paperwork
and the paychecks are regular.

We have a shortage of primary care physicians largely caused by
a bankrupt government that we’ve become dependent on to subsidize
the education of primary care physicians. There just may be a
common thread here.

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Seattle Prepares for Robot Revolution by Setting $15 Minimum Wage

If conservatives are anti-science, socialists are anti-math.Our labor participation rate is
terrible
and our
economy shrank
by 1 percent in the first quarter of the year.
So it’s the perfect time to raise the minimum wage to a degree
unseen in America before, right?

That’s what Seattle has done. Yesterday the Seattle City Council

unanimously voted
to raise the city’s minimum wage to $15 over
the next seven years. Labor activists are actually considering
forcing a public vote to speed up the process so that it hits the
new minimum in three years. The city recently elected its first Socialist
council member, Kshama Sawant
, so perhaps the move shouldn’t
have come as a surprise. The City Council dulled the edge of the
new minimum a bit by allowing for a lower training wage for
teenagers and disabled workers. This prompted outrage from Sawant
and labor supporters, who I guess want to drive teens and the
disabled out of the job market entirely.

Franchise owners are planning a lawsuit because the law counts
them as big businesses and only gives them three years to phase in
the increase. From
The Seattle Times
:

Local franchisee David Jones, who owns two Subway stores in
Seattle, puts his cost of a $15 minimum at $125,000 annually. He
pays the stores’ 18 employees $10.50 an hour, on average; he
figures he’ll have to raise sandwich prices by a dollar or more to
maintain profits.

“I’m going to increase prices and work hard to provide the best
service possible so that I don’t lose sales,” he said, noting that
his nonfranchise competitors will have four more years to phase in
the increase. “The playing field is not even.”

Seattle is at about the middle of the pack in metropolitan area
unemployment rates
—4.8 percent in April. There’s also already
some information about how a $15 minimum wage may affect the area.
Voters set a minimum wage for jobs at hotels and parking garages
serving the Seattle-Tacoma International Airport to $15 last fall.
The change went into effect with the new year. The Seattle
Times
looked at some of the impact in February. While
acknowledging that it’s still too soon to truly evaluate the
consequences,
noted some price increases and “casualties”
:

The 215-room Clarion Hotel closed its full-service restaurant in
December, laying off 15 people, said general manager Perry Wall.
The hotel also let go a night desk clerk and maintenance employee
and is considering a 10 percent increase in room rates for the
spring travel season, Wall said.

He estimates that without a reduction in head count, the hotel’s
annual payroll costs would have increased $300,000. It still
employs about 30 people for jobs Wall describes as more in-demand
than ever.

“I just think unskilled workers are going to have a harder time
finding jobs,” he said. “You’re going to have people from as far
away as Bellevue or Tacoma wanting these jobs, and they’re going to
come with skills and experience. For $15 an hour, they’ll go that
extra distance.”

Blog
United Liberty
tracked down some interesting comments
from workers at the blog for
Northwest Asian Weekly
. They found a couple of workers
who were affected by the new wages. Things didn’t quite turn out as
planned:

“Are you happy with the $15 wage?” I asked the full-time
cleaning lady.

“It sounds good, but it’s not good,” the woman said.

“Why?” I asked.

“I lost my 401k, health insurance, paid holiday, and vacation,”
she responded. “No more free food,” she added.

The hotel used to feed her. Now, she has to bring her own food.
Also, no overtime, she said. She used to work extra hours and
received overtime pay.

What else? I asked.

“I have to pay for parking,” she said.

Several business leaders in Seattle’s Asian community submitted
a commentary to the weekly warning about the terrible impact of the
wage increase on immigrants and minority-owned small businesses.

Read it here
.

And here’s a chart showing how many adults between the ages of
18 and 34 who are living with their parents. Anybody remember how
they used to make such a big deal of this number when Gen-Xers were
first entering the job market? Take a look at
the difference now
:

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Read Reason’s Complete June 2014 Issue

June 2014Our entire June
2014 issue is now available online. Don’t miss: Scott Shackford on
the gamer congressman; Emily Ekins on gamers against government
meddling; Jesse Walker on the history of game panics; Ron Bailey on
the moral case for designer babies; Matt Welch on when the left
turns against free speech. Plus our complete “Citings” and “Briefly
Noted” sections, the Artifact, and much more.

Click here to read
Reason‘s complete June 2014 issue.

Also, find all of the issue’s gaming content (plus video and
other online-only extras) at Video Game Nation.

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Rand Paul’s Unlikely Enthusiasts Now Include Nat Hentoff and Ana Marie Cox

|||One of the big
questions about the presidential aspirations of the
libertarian-leaning Republican Sen. Rand Paul (Ky.) is whether,
when faced with the chance of electing the first female president,
non-Republicans would really pull the lever for the author of the
Life
Begins at Conception Act
.

The jury’s still out on that, and may well always be, but it’s
at least interesting that the senator is getting positive notices
from unusual quarters. Most recently there’s Ana Marie Cox, in a
Guardian
piece
titled “Ted Cruz’s Tea Party allegiance only makes the
case for Rand Paul stronger: There are two Republicans who can take
down Hillary Clinton, and Rand Paul isn’t much of a Republican. If
the GOP wants to survive, it might be to time to ride the
libertarian wave.” Sample:

The key indicator for the Cruz-Paul matchup, at this ultra-early
stage, is found in state
head-to-head polls against Clinton
: in the most recent polls
from Iowa and North Carolina, Paul is the GOP nominee who comes the
closest to besting Clinton – beating not just Cruz but Christie and
Jeb Bush, too. In New Hampshire and Colorado, he’s the only
Republican that can beat her. […]

Cruz’s considerable ego flourishes in the spotlight, while Paul
has a cagier – and more wonkily sedate – approach to grandstanding.
Search the internet for wacky
Rand Paul quotes
. He puts his most right-wing proposals in
deceptively simple language: framing the elimination of Social
Security, for instance, as “I think the average American is smart
enough to make their own investments.” His other gaffes are in
support of libertarian ideas that sound weird only in the context
of being a Republican in 2014: “I think torture is always wrong,”
for instance, or saying he would have voted against invading Iraq.
[…]

Paul’s libertarianism is unapologetic; where he’s strayed from
GOP orthodoxy, it’s largely in the direction that the American
public is going – and not just his call for National Security
Administration oversight (supported by
59% of Americans). On marriage equality (also supported by 59% of
Americans), Paul told his party that they need to “agree
to disagree
“. In contrast, Cruz has introduced
a bill
 that would invalidate the federal benefits of
same-sex marriages if the couple moves to a marriage-restricted
state – and he asked listeners to “pray” that marriage equality
rulings be reversed.

But it’s not just about bending with the popular will. Paul has
staked out positions outside the GOP orthodoxy that are also on the
periphery of the average voter’s radar. He at least admits that
the Republican mania for voter ID laws is counter-productive:
“Republicans need to be aware that there is a group of voters that
I’m trying to court and that we should be trying to court who do
see it as something directed towards them.” Both Paul and Cruz
advocate drug sentencing reform, but Paul backs up that gesture
with the belief that felons’ voting rights should be
reinstated. 

There are to-be-sures to be sure; read the whole
thing
here
(hat tip: David
Boaz
).

Less surprising but more explicitly enthusiastic is a two-part
(so far) endorsement last month from the venerable
civil-libertarian journalist Nat Hentoff. From “My
Pro-Constitution Choice for President
“:

For me, Paul made real a fantasy I’d long held: that someone
running for the presidency, as he clearly is, would focus
insistently on what it means under our Constitution to be an
American – with basic individual rights and liberties no government
has the authority to suspend or erase.

In “The
Distinctive Core of Sen. Rand Paul
,” Hentoff works through his
hesitations about Paul’s approach toward foreign policy and The
Civil Rights Act, then concludes:

As of now, from what I know of all the candidates for the
presidency across the political spectrum, that advice for
regenerating the Constitution defines Rand Paul.

Hentoff’s archive (which includes more recent Paul-related
material) here. Reason
on “The
Most Interesting Man in the Senate
” here.

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Belief in Creationism Doesn’t Necessarily Mean You Don’t Understand How Science Works

Jesus on a dinosaurDan Kahan over at the
invaluable Yale Cultural Cognition Project has conducted an
interesting poll of 2,000 Americans inquiring into what they

know and believe about creationism and evolutionary biology
.
Based on his results, Kahan concludes that “belief” in evolution is
more of a measure of who people are and not what
they know
.

Specifically, Kahan contrasts the responses to versions of
survey questions about the origin of human beings as asked by the
National Science Foundation (NSF) and the General Social Science
(GSS) survey. The NSF asks: “Human beings, as we know them today,
developed from earlier species of animals. True or false? 55
percent selected true.

The GSS asks: “According to the theory of evolution, human
beings, as we know them today, developed from earlier species of
animals. True or false? 81 percent selected true. Kahan
observes:

By adding the introductory clause, “According to the theory of
evolution,” the GSS question
disentangles (“unconfounds” in psychology-speak) the
“science knowledge” component and the “identity expressive”
components of the item.

In other words, the NSF question comes off as asking people
about their religious beliefs, not their understanding of what
science says. Evidently many religious Americans can understand the
scientists’ explanation for how evolutionary biology works while
still believing in the special divine creation of Adam and Eve.
[

In any case, the new results of the
Values and Beliefs poll
by Gallup were just reported. Since
1982, Gallup folks have every so often asked:

Which of the following statements come closest to your views on
the origin and development of human beings? (1) Human beings have
developed over millions of years from less advanced forms of life,
but God guided the process; (2) Human beings have developed over
millions of years from less advanced forms of life, but God had not
part in this process; (3) God created human beings pretty much in
their present form at one time within the last 10,000 years or
so.

In this latest iteration, 42 percent of Americans believe that
humans were created by God in their present form within the last
10,000 years; 31 percent believe that a Celestial hand helped guide
the process of evolution; and 19 percent believe that humans
evolved without Divine intervention.

The Gallup poll researchers further observe:

Sixty-four percent of those who are very familiar with the
theory of evolution choose one of the two evolutionary explanations
for the origin of humans, compared with 28% among the smaller group
of Americans who report being not too or not at all familiar with
it. The majority [57 percent] of those not familiar with evolution
choose the creationist viewpoint.

These relationships do not necessarily prove that if Americans
were to learn more about evolution they would be more likely to
believe in it. Those with less education are most likely to espouse
the creationist view and to be least familiar with evolution, but
it’s not clear that gaining more education per se would shift their
perspectives. Many religious Americans accept creationism mostly on
the basis of their religious convictions. Whether their beliefs
would change if they became more familiar with evolution is an open
question.

Kahan’s point is that it is possible for people to understand
the workings of evolutionary biology without changing their
religious beliefs.

Nevertheless, and with due respect, I can’t quite bring myself
to think that such a position is an example of F. Scott
Fitzgerald’s observation:

The test of a first-rate intelligence is the ability to hold two
opposed ideas in the mind at the same time, and still retain the
ability to function.

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J.M. Smucker Boosts Prices On Most Coffee Products By 9%

It took the Fed long enough but finally even it succumbed to the reality of surging food prices when, as we reported previously, it hiked cafeteria prices at ground zero: the cafeteria of the Chicago Fed, stating that “prices continue to rise between 3% and 33%.” So with input costs rising across the board not just for the Fed, but certainly for food manufacturers everywhere, it was only a matter of time before the latter also oo threw in the towel and followed in the Fed’s footsteps. Which is what happened earlier today when J.M. Smucker Co. said it raised the prices on most of its coffee products by an average of 9% to reflect higher green-coffee costs.

WSJ reports that the price increases primarily impact Folgers and Dunkin’ Donuts brand products and exclude products made for single-serve coffee machines. But don’t blame it on monetary policy: it’s all the weather’s fault:

Coffee prices have been elevated amid concerns that unusually hot and dry weather in Brazil’s key growing regions will dent coffee-bean output.

 

Smucker, whose U.S. consumer-foods business includes its namesake fruit spreads and Jif peanut butter, plans to provide more details when its releases its fiscal fourth-quarter financial report on Thursday.

Why wait so long with the price hike? “The company in February had cut its full-year sales and earnings guidance, citing a more competitive pricing environment and lower expectations for sales volume… In the fiscal third quarter, Smucker’s U.S. coffee business posted a 2% volume increase, but lower prices helped weigh on sales, which were down 8% in the quarter. The segment’s profit, however, grew 4% on lower coffee costs, marketing expenses and manufacturing overhead.”

In other words, it could wait no longer, since volumes did not make up for the loss in sales.

And now time for the old bait and switch: boost prices by 9% and at the same time reduce package sizes by 9% in effect lowering the price! So far it has worked with fooling most of the people all of the time. Will it work this time too?




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‘Two Weeks’ To Prepare For Cyber Attack On Bank Accounts – UK Government

 

Today’s AM fix was USD 1,244.25, EUR 914.42 and GBP 742.26 per ounce.
Yesterday’s AM fix was USD 1,244.75, EUR 915.26 and GBP 743.49 per ounce.
Gold fell $7.70 or 0.62% yesterday to $1,243.10/oz. Silver slipped $0.06 or 0.32% to $18.75/oz.

 




Gold fell to the lowest since February 3 and prices completed a sixth day of declines for the longest losing run since August. Gold bullion in Singapore traded sideways around the $1,244/oz level prior to ticking slightly higher to over $1,246/oz at the open in London (0800 BST). Silver for immediate delivery rose 0.5% to $18.849 an ounce after sliding to $18.635 on May 30, the lowest since June 2013. Platinum traded at $1,437.75 an ounce from $1,435.56 yesterday, when prices fell to a three-week low of $1,433.

Palladium added another 0.2% to $833.74/oz. The metal climbed to a 34 month high of $845.24 an ounce on May 28 amid a strike in South Africa and prospects of further sanctions against Russia, the world’s biggest producers.

Gold held near a four-month low as risk appetite saw advances in the dollar and global equities. The Standard & Poor’s 500 Index reached a new record high and the dollar climbed to a two-month high against 10 major counterparts.

Gold declined 3.3% in May, the biggest monthly drop this year, despite quite strong fundamentals.  The euro also weakened 1.7% versus the dollar in May and there is speculation that the European Central Bank will become even more dovish when policy makers meet this Thursday, June 5. Goldman alumni Draghi adopting an even loose monetary policy should support gold prices.



Gold in U.S. Dollars – 5 Years – (Thomson Reuters)

On Friday, the U.S. nonfarm payrolls data will be watched for signs regarding the fragile U.S recovery. As usual, a good jobs number should see gold sold by traders and a poor jobs number should see gold buying.

Gold remains 3.6% higher this year partly due to robust global demand and due to heightened geopolitical risk.


Since May 29, the 14 day relative-strength index has been below the level of 30 that suggests a potential impending rebound to technical analysts.


‘Two Weeks’ To Prepare For Cyber Attack On Bank Accounts –  UK Government
Computer users are being urged to protect their machines from malware which could allow hackers to steal financial data, access banks accounts and withdraw savers funds.

British investigators have been working with the FBI to trace the hackers behind an attack, which they expect to take place in the next fortnight.

Between 500,000 and one million machines have so far been infected worldwide, according to court documents.

U.S. officials have accused a Russian hacker of masterminding the scam – and prosecutors say those involved have already raked in more than $100 million (£60 million).


The National Crime Agency (NCA) is now warning of a “powerful computer attack”. It is urging people to back up important files and make sure their security software and operating system are up to date.


Two pieces of malware software known as GOZeuS and CryptoLocker are responsible for the alert.

They typically infect a computer via attachments or links in emails. If a user clicks on GOZeuS, it silently monitors activity and tries to capture information such as bank details.

“(The links or attachments) may look like they have been sent by genuine contacts and may purport to carry invoices, voicemail messages, or any file made to look innocuous,” the NCA warned.

“These emails are generated by other victims’ computers, who do not realise they are infected, and are used to send mass emails creating more victims.”


The Cryptolocker malware is activated if the first attack is not profitable enough. It locks a user from their files and threatens to delete them unless a “ransom” of several hundred pounds is paid.

Some 234,000 machines were hit by Cryptolocker – bringing in $27m (£16m) in payments – in its first two months, the US Justice Department said. More than 15,500 computers in the UK are infected and “many more” are at risk, according to the NCA.


Stewart Garrick, a senior investigator with the NCA, told Sky News the threat was mainly against individuals or businesses running Windows-based computers.

We have long warned of the vulnerability of having all your investments and savings in electronic format. The nature of our modern financial and banking system exposes investors and savers to new risks that were not there a generation ago.

Prudent diversification today, involves owning some actual physical gold and silver coins and bars in your possession or in allocated, segregated accounts that can be taken delivery of with a phone call.




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US Factory Order Beat Thanks To Defense Orders; Decline Ex-Defense

Factory Orders beast expectations with a 0.7% rise (against expectations of a 0.5% rise) but this marks the 2nd month in a row after the February spike bounce back that growth has slowed and in fact shows the post-weather-slump recovery is anything but being sustained. Ex-defense, new orders for April actually fell 0.1% (after rising 1.1% in March)… simply put, the entire beat was driven by defense (does that sound sustainable? or like organic growth?) Non-defense factory orders were the weakest since January (in the middle of the catastrophic weather)

 

Where did the “beat” come from? Defense orders. Manufacturer orders ex-defense declined 0.1% from the April print. Here are the worst factory orders (ex-defense) since January

 

And the monthly and annual change:

Chart: Bloomberg




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