Adding Credence to the ISM Post

On September 2nd 2010 I posted "Analyzing the ISM" where I point out that the ISM headline number was reported to be 56.3, which was a positive number for the markets (caused a rally).  When you peel back the numbers though you found disturbing trends.  I pointed out how new orders were down (so were new export orders) and that inventory was building up.  I expressed concern in this area as this was a bad sign, which the main media reported as good news (the increasing inventory that is).  Also observed was a rise in prices for manufacturers for materials, was another bad sign.  Apparently, I was on to something, as ZeroHedge posted "Here is why the ISM will drop below 50 in the coming months" today.  The post presents a report from Goldman Sachs, that seems to be in alignment with my assessment, but introduces something I missed or lacked the data to form (the changes in inventory-to-shipment or I/S ratio).  This ratio compares the amount of inventory divided by the inventory shipping.  This data shows a stronger buildup of inventories and a weaker outlook on growth going forward.  [ Read more ... ]