1/27/17


Friday Jan 27th, Doom or Boom?


Fiscal optimism continued to ooze from trader's pores early Wednesday as the Dow pushed past the 20,000 mark for the first time ever while the fabled doomsday clock advanced toward 2 minutes 30 second before the stroke of midnight. On both accounts, your authors remain steadfast in disbelief which prepares us to better examine underlying market conditions and fiscal probabilities for metals from an objective and somewhat contrarian viewpoint.


 We continue to believe the high Dow volumes are perpetuated by the near-decade of rampant financial engineering (fairly mainstream), newly-minted misplaced optimism (again, not so contrarian), and the resultant increasing cash velocity which will surface as a derogatory for bonds, derivatives, and corporate debit deeper into the economic cycle (a bit contrarian). Do not miss-read our intentions, we are definitely excited by the prospects of revitalized governance. However, we believe some of the volume at present is perpetuated by money chasing money meaning the real winners already placed their bets, made a profit, and moved on to new ventures late in the era of financial engineering. Presently we are witnessing the me-too set jumping into investing combined with those skilled in profiting on volatility. The new titans are awash with hubris, ripe with un-invested cash (as millennials gain fiscal strength and enter the markets), and uneducated in long-term market mechanics which yields choppy trading cycles predicated by volatility. Pluto believes the resultant volatility will remain the cornerstone of opportunity for metals and skilled fiscal traders through the coming year. Based on what we see politically and financially (and in our own market trading) I concur with his opinion.


 In the unfolding period of economic flux, metals will establish themselves as following the greater economic trends as opposed to leading trends in and of themselves. Fiscal moves will pre-date metals demand moves and the necessary subsequent pricing adjustments. Pay attention to leading figures such as consumer spending, market confidence, government intervention (ala trade action of the day), international trade/exchange rates, and ten year treasury interest rates. Individual metals families will require additional inputs to comprehend effectively such as mill operating rates, market stocking positions, and demand or anticipated demand from upcoming new sources such as government projects. As we alluded to in previous editions, now is not the time to add substantial inventory. However, now is the correct time to begin monitoring and anticipating the future as market drivers are presently hitting a rest button of sorts.  When we speak of hitting buttons, also remember the pundits, laureates, and intellects who predicted falling markets and skyrocketing gold prices set the time on our aforementioned clock which could explain why we see more boom than doom.

   

When you're ready, contact the professional teams at Bear Market Intelligence and DLC Manufacturing and Fabrication, Inc. to develop a complimentary parts and materials strategy designed to broaden your bottom line while limiting your upfront fiscal outlay. Enjoy the volatility!


Regards,



~A    






1/24/17


RE: Reset Button Friday


All,


 Last Friday, as #45 took the podium our nation hit a rest button in numerous respects. First, on the political side, we anticipate a reset in existing national policy. Our anticipation leans toward an emergent favorable business-friendly environment to develop across the coming months further driving metals demand. Pricing may also find sustained support in the extended-term based on low inventories, low production rates, and increased trade policy enforcement. However, the conclusion of our election process will likely foster a temporary half-time reset effect as markets anticipate the next move from Washington and an unpredictable President. Essentially, while policy is set and market fundamentals react in real time we will be living an emergent story where speculation and conjecture must slow and shift toward reflection of the developing political landscape to remain relevant. The results will induce a short period with minimal emergent market drivers. The period we anticipate will showcase sideways movements and perhaps an opportunity for those who failed to lock pricing last year to get in below the escalation toward potential higher future costs as demand and economic forces (via inflation and interest rates) converge. Friday's Wall Street Journal noted inflation in Q4 2016 was beginning to support further Fed rate hikes (someplace in Q1 17). We discussed these hikes in past editions as coupled to changes in the velocity of cash in the economy at large. After the rest occurs, trends may be different than those existing today.

 

As political conjecture and dread change to realty, our national pass time also moves toward hitting the rest button as playoff games drift to a close ushering in conference championships leading to the Super event scheduled for Sunday, Feb 5th. All good things so long as your team is still in the running (go Pack:(. Those banking on metals thus far into 2017 definitely feel their team is set and ready to perform like a champion. The true test will come when bond issues catch up with debit strapped producers a few years out (think US Steel). However, the proverbial million-dollar question remains how long half-time reset festivities will last? If political measures pass quickly yielding true shovel-ready projects in short order metals pricing could come on strong in the second half of 2017 fueled by surging demand, less foreign competition, and reduced mill operating rates. Time will tell, but for today look forward to a few weeks of slow news while keeping your reset buttons handy. As for metals, trust in Bear Market Intelligence at www.bearmktintel.com and Donner Companies at www.donnercompanies.com to bring you value in materials and fabricated goods.


Regards,


~A






1/13/17


RE:  Aluminum


Aluminum appears to be this week's buzz word as rumors pointing toward the emergence of a US-lead WTO complaint against China began to circulate. Scott Patterson and William Mauldin reported expectations of action in the 1/12 edition of The Wall Street Journal Online. Today's edition of the American Metal Market news confirms Patterson and Mauldin's approximations while getting into further detail on the nature and extent of impending actions. However, trade action is no surprise to our readers as Bear Market Intelligence placed aluminum in a risk category for pricing action since mid-last-year. Numerous factors in the marketplace were slowly shifting about like dominoes aligning themselves for a knock-down performance once a financial catalyst emerged. Remember trade actions commenced early last spring, then dissolved a few months later without any incident as provisions were overly-broad and ill-conceived. Year-end 2016 witnessed large amounts of imported Chinese material stored in Mexico abruptly begin pulling up roots and shipping to Vietnam as referenced in both the Wall Street Journal and the AMM.   Aluminum action could be the start of interesting times given the large political focus on metals over the past year and within the new administration. Trade legislation combined with broadening demand and lower service center inventories could maintain positive pressures on the marketplace. However, overall positive trends may be subject to temporary settling and limited downward fluctuation likely somewhere in Q2.

 

 The current economic environment continues to be supportive of the metals complex in the near-term. We anticipate bumps ahead somewhere as referenced earlier. However, in general 2017 continues to afford support for moderate growth in metal based on expanding business opportunities and repeal of restrictive anti-business legislation such as certain EPA provisions and Dodd-Frank. Pickups may also be realized if health care legislation is re-structured effectively enabling free-market competition which we anticipate will drive down costs for employers while yielding better product offerings for consumers. Again, extra savings may drive consumer and industrial spending increasing metals demand.

  

 However, we continue to maintain an eye on monitoring the longer-term picture for risks associated with the unbridled optimism and increasing cash velocity present in our financial markets. Bonds continue to represent substantial risk, especially for those corporations who may be strapped with repaying the interest debit at higher rates than budget strategists suggested during financial engineering sessions over the past decade. Pluto Dave is contemplating our bond and derivatives situation as a potential powder keg awaiting a catalyst to spurn disaster. Any metals strategist must weigh the necessary risk elements into their planning as commodity demand will certainly falter on the heels of eroding fiscal success and discouraging corporate reporting that could result a few years out.

 

As we said previously, if you failed to buy early enough last year, it's too late for large-scale moves now. Exercise caution and prudence by contacting Bear Market Intelligence along with DLC Manufacturing and Fabrication, to develop a winning parts and materials strategy for your company today!


Regards,


~A





1/6/17


Re: The 20k Friday?


All,

 As Pluto and I prepare your update, the US stock market continues flirting with attainment of a psychological milestone. Today's achievement of trade volumes at 19,999.63 prior to retreat (shortly thereafter) is noted on CNN Money, Yahoo Finance, and CNBC among numerous others. It appears investors anticipate our robust market growth to continue based on potential for favorable economic programming combined with community investment developments under the new administration. However, as market guru types, your authors must be remain vigilant to ensure clients do not get washed away by a tide of misplaced optimism.


We agree general economic conditions appear to be improving, meaning short to mid-term risk of recession is likely fading.  Materials pricing in the short-term seems to support sustained increases. However, substantial black swan risks may emerge Q2 through the coming 2-years as our social and geo-political environments are becoming increasingly more complex and volatile to both gains and losses (in terms of price). Certain investors and investment vehicles will revel in the volatility enjoying the opportunity to take short-term positions at favorable margin. However, users of physical industrial commodity-grade materials will likely monitor the Black Swan potential we discussed last week to offset their optimism while developing inventory strategies to absorb market developments and balance carrying cost concerns.

 

AMM writer Milicent Dent published a piece today examining an opinion from Barclay's Bank, PLC centering on the likelihood of various incidents exerting their fallout on global commodity prices. Certainty, some of these items may occur.  The Bear Market team will maintain a vigilant watch on leading economic indicators and rumors to alert you as early as possible to ensure appropriate strategies are in place for our clients.

 

Along these lines, we should note several recent articles appearing on CNBC.com and Marketwatch.com mention the arrival of the restaurant recession we discussed last summer. Numerous factors seem to be driving the slow down…. May be a lurking indicator of other conditions in the economy at large, or a commentary on an overly-saturated matured marketplace cycle.  


 Today's jobs report presented a mixed bag playing well in the general marketplace. CNN Money.Com Author Patrick Gillespie notes the 156,000 new jobs added was "slightly disappointing." However, it does continue to constitute growth, and remains continued growth after a December 2016 Fed Rate increase, which makes the lower number infinitely more palatable. Combine the overarching circumstances surrounding the report with a solid 2.9% wage increase noted by Gillespie and things look favorable enough to keep market optimism pushing toward a 20K Friday.

With so much movement, the Bear Market million dollar question becomes what about the metals?


 Our answer… Maintain limited exposure with the markets if you are not already locked.  If you were a client, you would have locked in Oct 2016 ahead of the increases.  Interested in becoming a client and reducing your materials and fabricated parts cost exposure? Visit us online at External link opens in new tab or windowwww.bearmktintel.com to address material needs, and External link opens in new tab or windowwww.donnercompanies.com to address fabricated parts and laser optimization needs.



Regards,


~A




12/30/16


Re:  Annual Review, a Compilation of People, Pricing, and Social Events in 2016


David Bowie sang of great heights

'Till the start of 2016.

Then our world lost a legend-

Silenced his ground control team.

 

Up high amongst Eagles

Glen Frey's words once flew-

With another legend gone

January 2016 takes two.

 

Steel pricing held firm

Without pockets to swell-

Demand wasn't there

Perhaps next month will have a

better story to tell.

 

Then February wore on

like elements of

Earth, Wind, and Fire

Forcing the voice of Maurice White

To retire.

Further events Jilted justice

toward a left leaning tide-

Bringing Justice Anton Scalia

to Depart for his home-bound ride.

 

Not long thereafter,

As our Nation mourned

March 6th 2016-

The day

Our Good Lord called

Dear Nancy Regan home.

 

As the Midwest bristled

With April's purple-flowered pride

A Princely elevator

would lift music

onto an unfortunate ride.

 

Social and Economic losses

Bringing the lackluster spring onto

a close

Could we afford to see what the next season would impose?

 

Summer Pricing was

for a while,

While we knew

it wasn’t for sure..

An interesting market,

for traders and buyers to endure.

 

As duties and curtailments strong-arm

strict political cures with no reprieve in sight

A beer-drenched commercial tv folk hero,

Might be just the cure for our plight.

A most interesting man-

Departing for Mars

to narrowly escape

Earth's soon to be

surging populist masses

loitering about the same boring old bars.

 

No surprise then,

The Brexit

on June 23rd.

A shifting of values

 

The people's will

 

will be heard.

 

The EU it reeled

The media it rocked

The leaks started dropping

Like a Podesta dirty sock.

A current was stirring

and boiling the pot

the people were brewing

a new movement's stock.

 

Economists and Pundits

accounted in wait,

Eager to point out our world's

next fiscal mistake.

 

They waited

and counted,

pointing out as they do,

but totally missed

as Turkey embarked

on a failed Mid-July Coup.

 

Pricing it continued

to trade in a band

in August

As Michael Phelps hoisted

23 golds up upon his hand.

 

As Summer gave way

to the rumblings of Fall

The Nobel Commission knew

Bob Dylan had it all-

as "Times they are a changin"

and the season need voice-

Since our media kept focus on

creepy clowns,

politics,

and healthcare choice.

Leaving metal buyers

out to wonder

"how low"

will this range take to be found?

 

Then Bears gave way

to Bulls with a TNT November

Boom-

 

Trump markets combined with

steel pricing turkeys

giving promise of

economic order

With Jobs,

a new US boone.

 

Lincoln to stay home

Save Pluto Dave's newfound domestic-manufactured joy...

Relishing the luxury of

his US-made

high tech automotive toy.

 

Carrier's back home in Indiana to

Mike Pence's delight

Iowa now has Trans-lux

Some say this movement might.

 

IBM might be staying,

Now Sprint went all in too-

Adding 5,000

more employees

To the domestic workman's win.

 

As times keep on a-changin

the way they always do,

Keep your eyes wide open

the Black Swan could visit too.

 

Stocks they keep on bubbling,

while bonds trend running up,

with all the interest mounting

long-term corporate debit

may be poised to get stuck.

 

Steel says demand is coming

increases tell us so

Fifty more on plate just a week ago

 

Infrastructure projects

Repeal of over-reach

and FCC control

Arise might be in near-term

but a dip could follow not too far below…

 

So as we're looking forward,

they wise keep looking back

Knowing history repeats

and sometimes sneaks up with a

SMACK!

 

So long to 2016

 

it's time to bid adieu,

 

Set sights on 2017

 

Welcome all things new!  HAPPY NEW YEAR


Regards,


~A






12/22/16


Re: I'll Take the Coal


All,

 

An article published in yesterday's 12/22 Wall street Journal entitled "Troubled Clean-Coal Plant Could Get New Lifeline" by Rebecca Smith noted potential Trump administration backing for tax breaks and subsidies to continue support of coal-based technology.  While the article only addresses one particular instance, the implications provide hope to manufacturers looking to revive their operations to support these initiatives.  Renewed focus on clean-coal technology will require changes to current EPA regulation…  However, recent administration appointments suggest support may be arriving in short-order.  Your authors believe suppressed demand within the power gen industries (and others suppressed by EPA over-reach) will fuel the need for capital goods purchases and fabricators to build them once the present restrictions meet common sense restructuring…  While we continue to speculate at this point, a renewal of clean-coal will make the holidays merry for many of us around metals, manufacturing, and capital goods financing this holiday season.

 

Along with garnering renewed support for coal-based securities and businesses, your authors also continue to support our mid-term bullish stance on metals for 2017.  Metal continues to usher in holiday cheer with a new round of ferrous price hikes looming on the heels of an upwardly buoyant scrap market.   Additional looming increases across the metals complex and a highly-supportive political environment in Washington will aid the domestic metals industries for some time to come.  Presently, things look good…   However, achieving balance between revelry and cautious-optimism remains essential to fiscal success for corporate buyers.  Metals polish may tarnish a bit in our eyes sometime in Q2 2017 unless deeper fundamental support emerges (demand)…  Time will tell if we just need to polish the image at that point, or if a deeper fundamental buffing job will be required balance market pricing and support.  Watch proposed infrastructure spending packages carefully including implementations dates.  Timing will be essential to establishing pricing peaks and troughs in 2017, especially when combining forces with pricing impact from geopolitical events.  The financial situation in Italy/EU will continue to ramp up the economic heat factor, and a recent political assassination in Turkey may threaten stability in neighboring countries where metals are typically consumed…  As events unfold, we will provide our opinions and recommendations to clients for mitigating cost impact.

 

We will refrain from publishing number projections this week as previously discussed trends remain in force with the addition of several price increases we will discuss next week.  In the meantime, crack open a holiday beverage, indulge in fatty foods, concentrate on loading up with carbs galore, and enjoy the fun, family, and togetherness that occur at this time of year. 

 

Happy Holidays to all our Friends and Readers!   

 

 

Regards,


~A






12/16/16


Re: This Bear is Bullish...


At least in the short term, as markets demonstrate newfound momentum via raw materials pricing, trade legislation, and potential for increased demand it's easy to latch onto the aura of fiscal optimism. However, educated market speculators need to poise themselves to ask how long will our collective exuberance may continue to reign unchecked? Presently, we see several clues pointing toward the how and where present circumstances may unfurl next resulting in an upcoming lull for materials pricing.


 Our first emergent catalyst hinges on the fed's recent actions concerning interest rate increases. Traditionally, economists and investors anticipate the fed to lead market trends. However, nontraditional finance mechanics employed over the past decade eroded the fed's ability to lead markets due to fear of liquidity loss with insufficient QE volume. QE deemed necessary to keep our minimal momentum afloat damaged financial markets and weakened consumer cash streams, the opposite of its intended purposes. Results of the QE program flourish in our overly-inflated, financially-engineered, DJIA numbers we discussed in previous editions. Pluto Dave pointed out earlier this week the growing situation with bound yields firmly establishes the fed as a follower in this instance. Several further fed increases will be warranted to catch rates up with already established market mechanics via the trending bound rates. The growing velocity of money demands further moves to keep market prices in check which is critical to support business growth while stimulating main street consumer spending. As rates move, dollars will naturally expel themselves from the stock market jumping over to the newfound false safety of bonds which could spell trouble a few years out for originators of debit such as large corporations. While we agree the stock market appears over-valued, timing for purchases of materials and securities will be critical and remains highly open to the influence of multiple global, domestic, and geopolitical forces.


 A good friend of ours in the financial industries presented a well-founded argument for continued existence of high DJIA trade volumes post market valuation adjustments suggesting our momentum sustains in the short-to mid-term for stocks as wider social influences play themselves out in the national theater. Our contact's premise bases itself on the high percentage of stocks held by boomers and elderly citizens, which he argues will eventually need to transition toward younger inventors over the next several years. In his model, this investor suggests we are faced with a situation in which younger investors enter the markets influencing trades which may become choppy, erratic, and occur in higher volumes as elderly investors take profits and the somewhat savvy youngsters pick up the pieces entering the financial trades for the first time. An interesting take, and it may hold merit, but for how long?


 We also need to consider moves with foreign currency and the dollar and how they will impact trade and exports. Again, the Euro continues to flounder hovering around $1.04 for the past several days. Add to these trends the slowing real estate markets in November (and possibly moving forward with higher rates on the horizon)referenced in the wall street journal combined somewhat subdued retail in November (which may point toward pre-election jitters) and we may be witnessing the next set of challenges to step forward and try Trump our dawning exuberance. However, we must also consider the potential growth in US manufacturing with several major corporations recently committing to retain positions in the domestic marketplace…  Playing materials is all about balance… Right now, our balance point looks strong for first and some of second quarter…


From there, keep an eye on the news and the markets, while monitoring Bear Market Intelligence and DLC Manufacturing and Fabrication, Inc. to meet market challenges while implementing winning parts and materials solutions.


Regards,


~A





12/9/16


RE: Euro not Gonna Like This...


All,

A moderately publicized vote in Italy last Sunday night may be setting the stage for our collective upcoming global economic future. As shocking voter outcomes spread like wildfire on a Santa Anna wind via incidents including, Brexit, Trump's rise to power, and now Italy's recent referendum one must begin questioning the staying power of our present global financial arrangements.  Europe and the EU should be of paramount concern since many of the present nations share a historically volatile backstory as warring factions. Back in 2012 Michael Pettis from the Business Insider wrote an article entitled, "History Tells Us The Euro Will Not Survive, Greece Will Get Worse, And There Will Be A Trade Shock." We propose Pettis correctly called at least two of our current events in his title passage alone. As we witness the Euro head closer to parity with the dollar (presently trading $1.054 at 2:01 PM 12/9 on CNN Money.com) through each passing day potential trade implications and sovereign debt issues begin to compound and that's just the beginning…


Europe (and the globe) must now contend with a growing wave of nationalism and populism brought about as an equal and opposite reaction to the force of ill-fated economic policy (globalism) across the past decade. As insolvency springs up like flowing artesian wells across the Euro Zone nations begin to wonder who will bear the burden of carrying the growing number of ill-fated economies. As Italy now heads down a path potentially leading toward their own Brexit initiatives, we must begin to study and determine if others will see similar actions as restorative to their national solvency.  Our present watch list includes Greece, Spain, and Germany (as a means of limiting GDP losses supporting faltering economies).


 As the changes continue to unfurl we are certain to see impact across multiple channels and nations in terms of GDP growth, sovereign debit, and allowable trade. The implications for metals remain tremendous helping in part to drive the present pricing rally currently unfurling here in the States as cash velocities increase, demand firms, and imports are limited. The upcoming months will challenge even the most-versed economic professionals as they contend with fallout from non-traditional QE programming, negative rates, and new trade barriers emerging from currency shifts and national policy changes across the EU. Again, the short to mid-term implication seems to be price inflation in purchased goods. However, as these items begin to sort themselves out, implications may be deeper and further reaching.



Regards,


~A




12/8/16


RE:  Wisdom at One Year


Bear Market Intelligence celebrated the first year anniversary of our consulting enterprise this past November.  As industrial growth continues driving demand for our service, look for our opinions across multiple trade publications and industry events in 2017.   


We greatly appreciate the recent nod to our published blog as referenced in the Nov 2016 issue of The Fabricator Magazine appearing below:

External link opens in new tab or windowhttp://www.thefabricator.com/blog/metal-fabrication-and-the-metals-markets-prepare-for-a-trump-presidency


We extend a sincere thanks to our wonderful customers and excellent staff for an extraordinary launch year.  Bear Market Intelligence looks forward to bringing our clients profit-building materials opinions and options for years to come.


Regards,


Alan Bear                                                                                                                      

CEO Bear Market Intelligence




12/2/16


Re: Economic Hangover


All,


Our domestic economic engine is indeed alive, stumbling, fumbling, and entering the beginning stages of recovery from its multi-year hangover. The Wall Street Journal reported in today's (12/1) edition unemployment fell to 4.6% for November, the lowest level recorded in nearly nine years. Other articles across a wide variety of sources reviewed earlier this week concur domestic manufacturing is posting improved results in the early 4th quarter. On the surface, these data points appear as good news exerting a sort of economic coffee effect on our collective hangover. However, considering favorable payroll report detail combined with surging stock trade volumes means we see a high potential for a US base rate increase later this month. Unfortunately, the combination of factors also means we appear primed for the unintended consequences of economic hangover recovery dwelling just out of reach down the financial path. What exactly is the unintended consequence of recovery we speak of? Simply stated, it is most likely price inflation.


 For years, economists and pundits alike debated the potential of inflation based on the sheer volume of fiat currency the US (and many other nations) produced as an answer to the financial crisis. However, inflation never emerged as restrained cash velocity combined with low bank rates keept the situation restrained while most QE dollars entered the financial markets as opposed to main street businesses. However, now as our economic hangover is prepared to subside under the medicine of a new leadership regime unintended consequences many emerge from the combination of higher rates and improved cash velocity as funds begin to flow into consumer and small business sectors impacting main street spending. Bond markets may also experience stress as the situation described above unfolds bursting the proverbial bubble for certain investors.


 For ferrous metals, we stand on the doorstep of 4 consecutive price increases within thirty days moving the market upward by nearly .07/lb. Most view the pricing scenario as simply based on necessity as markets contend with reduced inventories, restocking, constituent cost escalations etc. However, inflation may represent the unaccounted element in these pricing escalations as industry awakens with increased cash velocities. Time will tell for certain, but you can already see buying power dropping across numerous metals complexes meaning our higher numbers may find substantial staying power in the markets at large and might be the new normal for some time to come.   Contact us to determine the best protective measures for your business in this new environment.


Cheers,


~A

 













11/23/16


 

Individuals who follow the sport of professional bowling appreciate the feat of achieving three consecutive strikes, considered a "turkey" by insiders. As we head into the annual season of holiday celebration, steel executives must be feeling upbeat by the literary irony behind their well-executed pricing strategy unleashed on the marketplace through the last month ahead of the thanksgiving turkey-day holiday. We anticipate support for price increases to abound heading through year-end and into Q1 2017.


Numerous factors existing in both raw materials channels and demand/monetary policy should serve to further solidify the markets through the coming weeks. We would not be surprised to see an additional round of ferrous material hikes prior to year-end as scrap prices escalating in step with the colder weather/snows and mill demand should ramp up based on orders and the startup process requirements at Big River Steel.  Additional support will originate from trade actions and the potential for our new political administration's early day infrastructure development planning.


While ferrous materials and alloying elements bask in the lime light we must not forget our friends in the white metals world. We anticipate higher pricing across the various families of product within the white metals complex as discussed in previous weeks. Support remains favorable in the markets from a growing usage perspective, and financial instrument demand should also be increasing which will lead to an extended period of marketplace firming.


 We are not including any of our usual market detail for contract customers in today's edition as all trends discussed last week remain in play. Only notable change is domestic steel mills are pressing toward the 5-week mark which means pricing control tends to favor producers in today's market… If you did not lock materials yet, you were lacking the necessary market insight, intelligence, and partnership to anticipate making a profit from market moves. Contact us immediately to learn how our team of experienced industrial consultants and fabricators will better align your manufacturing operations for improved efficiency and profitability.

 

Happy Holidays!



~A





11/18/16


A Pre-Holiday Bull Run



All,



image courtesy of clipartkid.com


A domestic ferrous metals bull market return is well underway gaining support on three weeks of firm upward pricing pressures as numerous mills come forward with increase letters on sheet and plate product. Resolution of election politics, promise of new infrastructure spending, trade case support, higher coking coal numbers, higher alloying element numbers, upwardly mobile scrap numbers, and the onset of heavy snows across the upper Midwest limiting scrap flow lend themselves to suggesting higher numbers will be prevalent through the near-term cycle (2-3 months) and may extend longer.  However, overall longevity of our new found run will remain heavily dependent on emergent support as items mentioned above flourish into materials-dependent projects in the marketplace. Developments such as power generation upgrades, natural resource utilization, and consumer goods production line upgrades would all drive increased demand while lengthening the period of support for higher prices.


We must also consider consumer behavior in the equation as buying and sideline sitting periods will change the shape and duration of market curves. At present, we stand firm on our suggested purchase durations for contract clients. However, the next few weeks will determine if additional hedge layers may be necessary to provide an extended duration of pricing support to remain intelligently ahead of market highs. Currency valuation will also be imperative to trade and inbound materials pricing as the Euro continues to move toward parity with the US Greenback.

 

 Meanwhile, white metals such as aluminum and stainless (nickel) appear to be well-prepared to join in with the ferrous pricing festivities. Aluminum numbers firmed some in recent weeks as suppliers retracted discounts in attempt to drive market premium numbers higher as reported by AMM on 11/17. Recent LME movements across several weeks also functioned to firm up the situation.  A pricing report obtained from Kaiser Aluminum on 11/16 shows ingot numbers moving up about .06/lb. since Oct 2015. We anticipate additional upward momentum could emerge if enough project-based demand surfaces heading into Q1 17. Similarly, stainless should see higher prices through the coming months as demand pressure begins to reemerge in tandem with economic pressures placed by an increase of positions leveraged in financial markets.


 When the bulls come out to play, it is important to remain informed and intelligent. Bear Market Intelligence, External link opens in new tab or windowwww.bearmktintel.com  and DLC Manufacturing and Fabrication, Inc. External link opens in new tab or windowwww.donnercompanies.com  are prepared to help you beat increased costs on parts and materials. Contact us today and find out just how easily finical success and increased quality may be obtained for your manufacturing firm.

 

Regards,

 

~A  




11/10/16


RE: America; Now Under New Management


All,


America voted earlier this week, effectively selecting a new management vision of what our future economic prospects should resemble. Fallout from the recent elections will impact every aspect of our existence as both manufacturers and followers of the metal markets. At present, the fields of industry and finance seem to be embracing the new leader’s proposed vision of emboldened domestic manufacture. We anticipate a prosperous year ahead for metals and metals businesses if emergent conditions hold long enough to establish momentum.


Bond markets firmed earlier this week for the first time in several years as talk of ending low central bank rates domestically may actually hold clout under the inbound regime. As of close today, the Dow set a record high concluding business at 18,847.66 as viewed on CNN Money.com 11/10/146.  The benchmark 10-year-yield US bond closed at 2.12% reflecting the potential for support of higher rates in the near future as viewed on CNN Money.com viewed on 11/10/16 at close of trading. As rates climb interest in metals as investment vehicles will further develop lending support to red and white metals complexes.


Emergent industrial demand and infrastructure project announcements in the first half of 2017 should lend further support to demand driven increases as new market fundamentals driven by usage and demand begin to establish themselves. We are already seeing emergent stages of a shift in fundamentals for scrap as markets jumped 30/ton in the Midwest earlier this week. Emergent mill demand, weather, and exports should keep things interesting through the upcoming months.

Steel and nickel alloys may also see a renaissance period as demand ramps up in response to settlement of EPA Legislation over-reach in reference to cross state pollution control which impacts coal, scrubbers, and numerous other power gen equipment markets.


In short, if you did not lock, be prepared to pay higher numbers for some time to come.


Regards,


~A




11/4/16


Age of the Turkey



All,



 

Image by Aloysius Patrimonio

 

On October 27, the Ap Online reported a flock of wild turkeys ravaging residents in a small California town know as Davis City.   Davis City residents requested via ordinance to refrain from further fattening (i.e. feeding) the birds.  However, the article does not address if residents might be allowed to feed on the succulent wild turkeys this holiday season.  As we look forward to year end, the majestic and graceful turkey might be the best creature to describe carbon materials market performance.  While things might not necessarily fly effectively, they sure will begin to run amuck through the coming weeks much like our beloved Davis City dinner guests.

 

Indeed, markets are entering the "age of the turkey" (a common description of teenage years in my wife's native Chile).  When the turkey comes to roost, logic and reason flee out the window leaving a set of mechanics often seeming to occur without reason.  However, upon closer examination we find order among bird-brained chaos occurring in the carbon materials marketplace.  We anticipate pricing will bump about through the coming weeks achieving marginally higher elevations.  Support for higher numbers will first emerge in scrap.  As temperatures drop and snows begin to fall, we should see a limiting of free and easy movement of the scrap materials supporting additional price expansion in later weeks.  Further support will emerge through the "turkey factor" as a myriad of global contributors in the form of US election outcomes, production capacity utilization abroad and domestically, demand, imports, coking coal, and micro alloying element price increases combine with trade actions to continue exerting pull on the flock creating order amid chaos. 

 

Specialized materials such as aluminum and stainless will continue to respond to numerous forces outside demand as we discussed in previous weeks.  To stay informed, you must become a subscriber to External link opens in new tab or windowwww.bearmktintel.com To save money on parts production you must do business with DLC Manufacturing and Fabrication, Inc. at External link opens in new tab or windowwww.donnercompanies.com  Contact us to learn just how profitable and effective your company can be with us as a partner!

 

Regards,

 

~A            





10/28/16


A Nobel Prize Worthy Report:




Recent Nobel Prize winning singer/song writer/poet Bob Dylan once said, "for the times they are a-changin'" and his words certainly hold merit in reference to the dynamics of our metals marketplace.  Over the past few weeks, Friday discussions centered around the probability of an emergent steel/galvanized increase occurring in close conjunction to the elections.  It appears mills have yet to disappoint, with AMM reports beginning to surface on Monday 10/24 concerning a $30/ton (1.5 cent/lb.) HR material base increase.  While some buyers remain skeptical, we suggest the increase may hold merit and could potentially be followed by other pricing actions.  However, readers should be careful not to get, "Tangled Up In Blue" as Bob would sing by cautiously evaluating needs and duration of purchases.

 

Our position on previous pricing discussions for both aluminum and stainless steel remains unchanged as market catalysts continue to emerge in these sectors in the form of trade case legislation, political rhetoric, and surcharge methodology modification.  AMM reported today on the surcharge changes we discussed over the past two weeks taking hold at domestic stainless suppliers with the exception of AK Steel who recently posted a reduction in the Nov surcharge numbers. With competitors seeing increased revenues off the new calculation methodology it will be interesting to see if industry surcharge models will become more flexible to capture the movement in expensive micro-alloying elements?

 

Meanwhile, dirty politics continue to dominate the social sphere in the US making business and citizens edgy in regard to future prognostification.  However, economist Mohamed El-Erian notes on Linked In that 3rd quarter GDP is coming in at an annualized 2.9 percent for the quarter (1.5-2% for the year) which will most likely be used in support of a Fed rate increase (probability at 75%) in late Q4.  We believe a rate increase could instill an immediate cooling effect on economic activity although it may be short lived.  Rates are of interest to those holding inventory of metals as credit which impacts overall cost of material and must be considered to model an accurate inventory calculation…  As always, remember this update is "written from me to you" as Bob would say to ensure you know how to reach out and get in touch with us at Bear market Intelligence and DLC Manufacturing and Fabrication Inc.  


Regards,



~A



10/21/16


RE: Middle School Dance


In recent weeks, our markets further slowed their pace becoming more and more like a middle school slow dance, bumbling through a few slides, a step back, and a few steps sideways followed by little if any meaningful action.


 Indeed, as the US election cycle barrels toward completion with all the grace of a 747 careening across ice under full throttle, many buyers continue to report apprehension choosing to remain on the sidelines tentative on placing large purchases for fear of holding inventory that may become subject to potential year-end write down.  However, if outside conditions remain stable geopolitically markets could begin to correct in the next 3-5 weeks. Scrap pricing will most likely serve as a leader for future moves on finished steel product. Jobs reports, consumer confidence, and mill production numbers will also play a role. At present, mill lead times are short and deals are available for those willing to negotiate.


 As in previous weeks…. Specialty products remain subject to a more complex set of market forces and may move counter to popular public intuition due to underlying fiscal influencers.  Contact www.bearmktintel.com immediately to implement a winning materials strategy for your organization.  If you need manufactured components, contact www.donnercompanies.com to reduce costs on your outsourced fabricated goods.  Remember, our subscribers see detailed market information enabling them to remain ahead of developing trends. 

Regards,


~A



10/17/16


Re: A Bull What?


All,

Standing trends continue to remain in play this week as we wait patiently to see if election outcomes breathe new life into an apprehensive economic climate. We continue to believe certain industries await direction concerning EPA regs (coal fired gen plants, i.e. Ken Bone types for those paying attention) prior to pent up demand releasing a sizable workload in the domestic markets.  A Wall Street Journal Report published earlier today cited a slight (.3%) rise in producer prices during the month of September which is most likely on the backslide given changes in raw materials (ferrous metals) pricing on the back of imports in the near term.


While we continue to hear rhetoric of looming rate increases, probabilities suggest if these materialize, they will occur late in the year (most likely so as not to create pre-election concerns with stock market values plummeting in response to the rate hike). The journal also reported a further slide in September's consumer sentiment among the middle and lower classes which we discussed a few weeks back as already standing on questionable economic ground given trends in employment and personal caution.


Steel production over the past week as referenced in AMM Online dated 10/12/16 slid to 66.8% capacity utilization speaking poorly of demand in our present cycle which is partially fueled by consumers, combined with reduced corporate need to keep facilities operating with new capital equipment. While certain metals are primed for price expansion, we continue to see additional downward movement in the ferrous markets until scrap, currency, and iron ore find bottom and a measure of stability or upward momentum. An uptick in consumer sentiment would also help firm conditions.  Although, we anticipate the beginning stages of firming will occur sooner rather than later.  However, a measure of time continues to be available to those with a tolerance for risk and reward.


If your organization is ready to be in the know, you're ready to work with Bear Market Intelligence External link opens in new tab or windowwww.bearmktintel.com and DLC Manufacturing & Fabrication, Inc. External link opens in new tab or windowwww.donnercompaneis.com to establish profitable materials and parts procurement strategies. Contacts us to determine just how profitable your next purchase of materials or outsourced parts might become.

Regards,

~A        






10/7/16



Re: Business As Usual



image courtesy of www.freepik.com


As we conclude our first full week of October, a high volume of creepy clown sighting news continues to roll in from across America. However, the lurking laugh hoarder sightings should come as no surprise. After all, it's business as usual during election season which means high time for unsavory characters (not to mention trick or seekers) to be prowling about town for a period. As for the metal markets, we continue to see more of the same as in previous weeks. Acting trends remain viable and questions continue to abound about concerning overall economic prowess which surfaces in our world as capacity utilization and demand numbers.


September Fed employment numbers surfaced today as referenced in a Wall Street Journal article by Justin LaHart entitled, "The Job Market: Any Which Way But Tight."  In the article, LaHart essentially highlights numerous facts and figures reinforcing the acting trends in our marketplace. Essentially, markets remain apprehensive which is inhibiting growth, and corporate spending. Trends as-is will continue until fundamental forces shift changing the existing market dynamics. A rate increase or changes in central bank monetary policy may serve as a catalyst if they emerge. Key take away points form LaHart's article are as follows:


1. Economy added 156,000 jobs in Sept, but missed target of 170,000 that economists wanted to see

2. We remain under the pre-recession labor participation rate of 66%, with Sept at 62.9% and a previous 38-year low of 62.4% (not a very aggressive improvement form the low)

3. Fed rate increases will come gradually on a wait-and-see basis


As such, continue to monitor your material requirements while maintaining vigilance on overall economic conditions. Contact Bear Market Intelligence at www.bearmktintel.com when you are ready to move ahead of the markets and implement a winning materials strategy.  Remember, our contracted clients see specific content in this area directing them how to stay ahead of emergent trends by capitalizing on the profit-generating potential of intelligent purchases.



Regards,


~A




9/29/16





Market Update


All,


 Two noteworthy metals developments in the past 48 hours:


1. We have been discussing the potential for an aluminum trade case to materialize prior to year end which will influence prices going forward… It appears to be taking baby steps toward fruition as of recently. AMM reported today the WTO has been approached by members of the US Aluminum industry to petition against China. We believe aluminum has been under-valued for some time based on global over supply… May be wise to lock in supply soon for the next year… Even based on psychological effect, numbers should not be this low once trade case actions move ahead formally.

 

2. AMM announced yesterday the potential for non-ferrous materials to rise in 2017. Nickel is specifically called out as an area of concern. Again, we have been discussing the potential in this product segment for many months… Time to consider locking in supply options if you use this material as we believe the present is an advantageous time to buy relative to future upside potential.

 Contact me at www.bearmktintel.com to establish a winning strategy as your organization prepares for uncertainty in the year ahead. If you need manufactured parts combined with our market prowess, contact DLC Manufacturing & Fabrication, Inc. at www.donnercompanies.com

 

Regards,


~A





9/23/16


No Hibernating Bears Yet




courtesy of clipartkid.com


All,


As children, we were taught bears hibernate as weather cools. However, in the world of metals finance, the bears seem to be stretching their legs for a pre-election run prior to the annual year-end nap time. General economic conditions continued a softening trend this past week as the Fed tabled yet another interest hike decision for later this year. Financial markets rejoiced as the DJIA picked up several hundred points within a day on the heels of continued easy money. However, as several renowned economists noted (including our favorite Mohamad A El-Erian) the continued proliferation of low rates fuels a growing potential for later financial strife. In today's edition of the Wall Street Journal we begin to see hints of the instability El-Erian has discussed so many times this year.   Josh Mitchell writes in his article, "Existing Home Sales Fall For Second Straight Month" of continued declines in home sales which nodded off .9% in the month of August for a total volume of 5.33 million units. However, many economists surveyed earlier by the Wall Street Journal suggested August would see around 5.46 million which means not only did we decline from July, but the markets also missed an important projection. Considering this data in conjunction with our discussions of consumer confidence and auto sales from weeks past, we definitely see undercurrents of weakness impacting manufacturers which will play into availability of materials, ultimately cooling prices on certain commodities.


However, caution must be exercised in determining which markets will bear sound returns on risk investment. Study carefully, and consider the value of metals not only in production of consumer goods, and industrial products, but also as hedge instruments in and of themselves. In this manner, we suggest while more common metals will be cooling for a period, other more specialized materials may be priming themselves for a run up in a couple months. Hints are beginning to emerge in many popular metals tracking periodicals including AMM, and SMU. If you are ready to take on the markets, and begin planning your businesses future, you need to speak with Bear Market Intelligence at External link opens in new tab or windowwww.bearmktintel.com and DLC Manufacturing & Fabrication, Inc. at External link opens in new tab or windowwww.donnercompanies.com to establish long-term arrangements protecting your prices, materials quality, and marketplace position/advantage. We look forward to working with you soon.


Regards,



~A



9/16/16


Indications of Blah!


As we attempt to power through the concluding days of 3rd quarter 2016, key economic indicators suggest our economy remains challenged on numerous fronts which are contributing to the current lagging of prices in the metals sector among others. Several articles appearing in today's edition of the Wall Street Journal touch on visible symptoms of the larger ill awaiting a viable cure which must come through modification to present central bank policy on a global basis while retraining market investors to look toward the classic fundamentals as opposed to moving on pavlovian cash infusions which subsequently fuel corporate financial engineering.  Unfortunately, the unprecedented movement of dollars eventually surfaces as cost post push inflation in the financial markets creating false value.


Josh Zumbrun contributed an article in today's Wall Street Journal entitled, "US Household Wealth Rises to Record" which speaks positively of America's newfound false wealth via the higher newfound stock valuations. Unfortunately, on further analysis Zumbruns article is merely examining a symptom of a real potential problem. Mainly, our newfound economic prosperity is resulting from highly engineered global markets which mean continued slow growth, low rates, corporate caution, and unpredictable valuation swings. The reality behind the situation appears in two Sister articles also appearing in today's Wall Street Journal. The First, entitled "US Consumer Sentiment Unchanged in September" by Jeffrey Sparshott notes sentiment did not rise as economists anticipated. It goes on to note US Retail Sales declined in August. With consumers being the driving force in the domestic market, and with Auto sales anticipated to decline as we discussed a few months back, we believe the stage is set for a measure of near-term settling in carbon steel.  A third article by Eric Morath entitled "Optimism Fades for Economic Boost By Year-End" notes both retail sales and manufacturing output are slowing which could spell trouble for some in the mid-term months.


Alas, we recently learned of 3 established metals service centers around the US shuttering operations this week: Charleston Aluminum, Acorn Steel, and Longhorn Steel. All the suppliers mentioned are said to be no longer accepting new orders via communications provided to their customers and shared with Bear Market Intelligence.  Given the present climate in manufacturing, the news does not surprise us. While some of the consumer restraint may be attributed to pre-election jitters, we believe a deeper-running fundamental currents exist just beneath the surface in our markets as referenced earlier.  Ultimately, metals consumption/demand will depend on the resolution of these underlying issues in order to move forward and spur manufacturing and consumer growth. In this moment, inventory is being held close to the vest, demand is shaky at best, and mills have ramped capacity utilization down into the upper end of the 60% range… Not indicates of robust economic growth in our book.  


Best,


~A






9/9/16


All,

 

 


Today witnessed stocks dropping like the impending leaves; plotting to disrupt Saturday afternoon activities across America through the coming weeks. Indeed, the Dow is primed to settle near 400 pts lower today as investors grapple with detail suggesting easy government money along with its feats of financial engineering used by corporate types to stimulate higher share valuation may be drawing to a close, just like the days of summer.  Indeed, the Wall Street Journal reported earlier today central banks may be moving away from the application of low rates and easy money policy. Several of our mid-summer editions highlighted the debate surrounding low interest rates and their subsequent negative economic fallout. Thu far, what we know in the world of metals is demand remains aligned with prevailing economic forces.

 

Simply stated, for carbon steel and galvanized materials things look steadily tepid… Not poor, not great, just there at the moment awaiting the next catalyst. Perhaps an election, or a central bank inspired fundamental shift based on evolving policy.

As the metals economy gracefully dances around numerous obstacles, keep a keen eye on scrap prices, carbon steel pricing, stainless pricing, and the connection between these and election probabilities.  If you need additional detail we are here to help. Remember, customers with accounts with us see the specific market detail that accompanies this communication enabling them to make intelligent materials decisions.


Cheers,


~A  







9/2/16


Dog Days Continue



image courtesy of wallpaperhi.com


All,

 

 The metals trends discussed in our most recent editions remain in play leading up to the extended holiday weekend.  It seems the dog days of summer continue to hold on a bit longer than usual this year.  No doubt pre-election jitters and slowing demand for products is presently rippling through the markets.  However, the jobs report arrived today with numbers essentially matching consensus expectations showing the US added a few less jobs in August than previous months (151,000 added to be exact) with unemployment holding steady at 4.9% as reported by the Wall Street Journal on 9/2/16.  The debate on when and how to raise rates is likely to continue for some time especially since rates have been low for such an extended period of time.  The question is, will QE-dependent financial markets falter if the US raises as others move to introduce more stimulus actions (think EU and Japan) via bond purchase initiatives?  As for metals in the US…  Metals trends remain in play relatively unchanged as of today.   Enjoy your weekend and the light read today.  More details to follow next week as things get moving again after vacation season.

 

Regards,


~A



8/26/16


Season of the Fall


All,

As we look toward the approaching Labor Day holiday weekend, it appears the days of the fall are upon us.  Children prepare apprehensively for their inevitable return to school, crisp morning air kisses a growing array of silvery dew drops while the nights chill briskly, and of course the leaves begin to drop like Sir Richard Branson as referenced for his recent bicycle trauma (i.e. fall) in the BBC News online dated 8/26/16. 


Fortunately, our brave hero Branson survived his speed-bump-provoked ordeal with a few cuts and bruises, our children will endure another round of scholastic aptitude enhancement, and metals will continue to follow prevailing economic headwinds like Lassie bounding a few steps beyond Timmy's heels.  Let's hope not too many Branson sized-speed bumps impede our upcoming economic path into the deep third quarter with an election looming just beyond the corner…


The recent US Federal Reserve meeting in Jackson Hole, WY appears to support consensus sentiment within the financial communities.  Thus, the drive to raise rates in September is back on the table unless next week's jobs report falters.  However, most anticipate continued hiring growth to support the move toward higher rates.  Meanwhile, metals pricing is poised for a breather and moderate redirection depending on the commodity discussed.  Again, speculation is risky and we must be wise students of trends, data, and prevailing conditions.  Like Sir Richard Branson, we must anticipate a few bumps and falls along our ride to metals prosperity.  Fortunately, we are ready to partner with your operation and show you have easy it is to produce positive financial results.  Contact me for details!


~A






8/19/16


The Rack is Back, Demand Not so Much!


All,


An AP report surfaced earlier today (8/19/16) chronicling a conclusion to the 52-year adventure Earnest Hemingway's Elk Horns formerly stolen by author Hunter S Johnson endured.  It seems the young Johnson while on a 1964 assignment to the Hemingway Idaho abode grappled the quaint reminder of his literary influence's adventure and outdoor prowess.  As of recently, many metals executives find themselves yearning for a life of adventure similar to that enjoyed by the prized Hemingway Rack.  Unfortunately, in the carbon steel world summer doldrums and tepid demand fail to support our cognitive need for financial adventure and business prosperity.  Add in the complication of an ugly election process in the US, global political turmoil, strained global finances, central bank follies, and a general distrust for the journalistic integrity of US Olympian Ryan Lochte and we find ourselves at our present historical metals juncture.  In all, we anticipate carbon and galvanized materials to preform consistent with our earlier predictions and time lines.  AMM supported our position this week with an August 16th article entitled "Centers See More Than Just Dog Days Weakness."


While ferrous materials languish, and some while metals continue to flounder, others seem prepared to shine a bit brighter than their contemporaries.  Keep an eye on stainless numbers if your product calls for substantial volumes of material.  Also, remember developing a partnership with businesses like Bear Market Intelligence, External link opens in new tab or windowwww.bearmktintel.com and DLC Manufacturing & Fabrication External link opens in new tab or windowwww.donnercompanies.com will ensure your success across numerous fiscal and geometric challenges.  Contact us today to determine how to profit on variations in market cycle.  


 Regards,


~A








 8/12/16


 Gold, Phelps, & Metals in General


All,


 As Michael Phelps secured his 22nd Olympic Gold last night, debate continues within the metals industry as to which commodities will shine with the luster of Phelps' latest haul.  Given present economic conditions, materials buyers remain skeptical of holding power across numerous commodity metal markets (in spite recent of trade cases). Indeed, one must carefully study the active influences behind each metals grouping to begin charting prospects of future price performance.  The key, as they say, is to buy low and sell high.  However, executing the age-old advice will prove challenging as buy points become a moving target and potentially occur differently in the pricing cycle than what we witnessed through recent years.  For those tasked with managing a materials budget, focus on understanding points of pricing pressure.  Aspects of domestic consumption need compared to mill utilization and present supplier stocking inventory position are well-worth investigating.  Also, investor interest must be considered on certain metals groupings as it's potential pricing pressures may outweigh demand and consumption dynamics.  While economic performance certainly drives materials price potential, also consider that it may possibly drive numbers in ways you have yet to anticipate.


Recent news remains pessimistic regarding global (and domestic) fiscal performance.  On Tuesday 8/9/16 Ben Leubsdorf and Josh Mitchell published their article titled, "U.S. Productivity Fell For The Third Straight Quarter" which highlights slowing productivity numbers in the US Workforce (a downward indicator).  Also, PPI fell slightly in July hinting at elements of industrial contraction which coincides with our discussion of previous weeks.  The Financial Times published a relevant piece on the same date 8/9/16 looking at Jerome Powell of the Federal Reserve Board of Governors and his views of US Economic performance.  In the article by Sam Fleming and Joe Rennison titled "Fed's Powell Warns of Being Trapped in Low Growth,"  Powell is quoted as saying, "I am more worried about it [slow prolonged growth] than I was… The probability of an era of weaker growth, lower potential growth, for a longer period of time---that worries me more then it used to."  Powell also notes "-risks to the US from the global economy are to the downside."  Add to the situation the recently reported negative US bond rates to foreign purchasers (most notably EU and Japan) as discussed by the Wall Street Journal earlier in the week and we begin to see a very complex picture for metals pricing performance beginning to emerge.  Perhaps Phelps has the best strategy at present; train hard, learn your competitors, learn the environment, and with the right touch you can yield Gold…  Lucky for you, DLC Manufacturing and Fabrication, Inc. External link opens in new tab or windowwww.donnercompanies.com along with Bear Market Intelligence External link opens in new tab or windowwww.bearmktintel.com are available to reduce your training curve and get you business to the winner's podium faster.

 Regards,

 

~A


8/5/16

Economic Vacations & Numeric Manipulations

As I write today's edition, a multitude of economic forces seem to be continuing preparations for an extended holiday.  US Jobs Report numbers as highlighted in the Wall Street Journal on 8/5/16 looked favorable with non-farm payrolls increasing by a seasonally adjusted 255,000.  Meanwhile, wages rose by 2.6% and unemployment (at least those actively claiming) remained flat at 4.9%


However, other tangible economic tidbits continue to confound the positives sending mixed signals while failing to ease concerns that might lead to an uptick in both consumer and industrial spending.  In fact, Myles Udland of the Business Insider declared on 8/2 that "You are the only thing not yet in recession."   The "You" of which Udland's article speaks is US Consumers.  However, even his economic approximation presents a slippery slope as we ponder prevailing conditions.  You see, many US consumers are employed by businesses involved in some manner of industrial production.  In the case of producers, if demand for their product slips, consumers become unemployed and in turn GDP heads off for a vacation dipping into the cool waters of contraction.  Joe LaVorgna, the Chief Economist at Deutsche Bank referenced in Udland's article notes, "Growth outside consumers is down .2% over the last four quarters."  Ag business leader John Deer is feeling the burn as they enacted additional layoffs at their Moline, Il plant as noted in AMM last week.

 

 The story in our Domestic auto industry also seems to suggest consumer demand for vehicles may be cooling.  An 8/2 article in the New York Times titled "Why Monthly Auto Sales Numbers May Not Be What They Seem" by Bill Vlasic and Neal E. Boudette quoted Ford CFO Bob Shanks saying, "We see the second half being softer than the first half of this year… Looking into 2017, we will see further softness". The authors also touch on our last week's topic of sales number manipulation at Fiat Chrysler noting they are presently under investigation by the SEC for sales reporting practices, and revised numbers suggest growth there stopped nearly 3-1/2 years ago.  Furthering our position on 8/2, Anne Steele at the Wall Street Journal reported in her article, "Ford and GM Sales Fell in July", that Ford sales have declined 3%, GM is down 1.9% and that includes an extra weekend for sales in the month of July meaning conditions may be subtly more sour than the numbers (or a glass of summertime lemonade) suggest.


So what's exactly in number manipulation and how important is it to our economy?  It depends who you ask…  Economist Mohamed A El-Erain writing for Bloomberg in an article on 8/1/16 entitled "Reconciling the Contradictions of US GDP Data" establishes a compelling argument explaining our current economic quandaries.  In previous issues we spoke of easy money encouraging corporate stock buybacks and artificially inflating stock market volumes, in effect creating cost push inflation in stocks.  El-Erain picks up on our idea stating " Instead of directing enough of these earnings back into economic activity and higher future potential, companies are sitting idle on bank deposits or using the cash for financial engineering, share repurchases, and higher dividend payments…  This is also one of the reasons the US stock market has been doing so well, reaching historical records this month."


 El-Erain's argument establishes the point where everything comes into focus on metal.  How do we have an environment where stocks soar while mills fight to eke out price increases even when capacity utilization is low? It comes down to successful financial engineering.  Stocks look good due to crafty maneuvers with excess liquidity present in the markets…  The markets no longer reflect supply and demand economics driven by bustling industrial production which in turn drives demand and higher prices.  Quite the contrary, carbon steel pricing is decent because we are running with capacity utilization at 71.9%, meaning less mills are producing this year (remember closures, consolidations, and maintenance), meaning total tonnage in the marketplace is reduced this year compared to last year.  Then, add trade cases into our equation, we create a system politically and fiscally supporting higher price performance without underlying demand fundamentals… Difficult to support long term.  The Wall Street Journal reported 8/2 that Cummins cut revenue forecast based on a weak market outlook.  However, multiple other firms have been cutting forecasts, and then exceeding their revised expectations as is illustrated by a more recent article.  An 8/4 Wall Street Journal Article entitled "Companies Routinely Steer Analysts to Deliver Earnings Surprises" looks at the practice of polishing corporate economic results.  A graphic on the article shows around 1200 corporate reports or nearly 5% falling within the 1sd range for careful polishing, er, presentation of data.


 Meanwhile, both Yahoo.com/finance and the Wall Street Journal noted on 8/1 that China PMI dropped down to 49.9 signaling slight contraction.  UK PMI also fell in our post-Brexit world settling to 48.2 from 52.4 in early June as referenced by yahoo.com/finance on 8/1/16.  Finally, Australia cut rates to a record low 1.5% signaling slowing growth and desperation to turn the ship around as it heads toward the same channel others have been navigating for multiple fiscal periods…

So, back to metals…  Decisions are critical to navigate this environment effectively.  Luckily, you have willing partners available to help.  Contact Bear Market Intelligence at External link opens in new tab or windowwww.bearmktintel.com or DLC Manufacturing and Fabrication atExternal link opens in new tab or windowwww.donnercompanies.com for information on how we can improve your cost structure and customer satisfaction through a strategic partnership designed to beat the markets.



7/29/16
Late Summer:  Hot Eats, Cooling Steel market

All,

The summer backslide extended its reign this week as additional sources of unsettling economic data chipped away at carbon steel pricing.  We need to remember things remain OK for our market in general terms.  Steel (mill) capacity utilization remains in the low 70% range and consumers continue to buy at/or slightly below this level helping to support production through product utilization.  However, the system is beginning to show early signs of strain as we trend deeper into the year.  Last week the Wall Street Journal reported Chrysler/Fiat would change sales reporting methodology amongst inquiry from the Federal Government concerning false/misleading sales number reporting that grossly inflated sold unit figures.  Interestingly, revised numbers are now lower and suggest the expansion of Chrysler Groups market share gain actually dropped off near three years ago.  That’s concerning in terms of metal use, but maybe not that much as as the vehicles were still at dealers, just not sold yet meaning demand may be cooling but how much remains to be seen.  Auto news continued to dampen on Thursday of this week based on a CNN Money article by Matt Egan entitled, “Ford’s Darkest Day in 5 Yearsâ€�  Egan asserts auto sales may have peaked as rising pressure from a massive list of global fiscal predicaments continues to mount.  Ford’s CEO Mark Fields told analysts on a conference call that “We are seeing signs of a maturing US recoveryâ€� as is noted in Egan’s article…   The article comes as potentially sour news for anticipated longevity for pricing in the galvanized material markets.

 Our next source of potentially negative news comes from the food service industry which traditionally serves as a harbinger (not hamburger) of economic change.  The national Restaurant Association notes annual US restaurant sales of approximately $782.7 billion dollars, with near 10% of the US Workforce employed directly in food services.  Perhaps this makes the US News July 27th article by Andrew Soergel a bit more important.  The article, entitled “Restaurant Recession Could Signal Tough Times for US Economyâ€� suggests consumer demand for dining out is beginning to weaken driven by a variety of factors both global and domestic in nature.  While sales at eateries are up over 5% year over year according to the article, they are now solidly into slump category with declines showing in 3 of the last 6 months leading industry analyst Paul Westra as referenced by Soergel to suggest data now “reflects the start of a U.S. restaurant recession.â€�  We suggest the slowdown is impacting more than just restaurants as recent GDP figures seem to be trending downward.

 An article on External link opens in new tab or windowwww.cnbc.com by Jeff Cox published earlier today notes GDP growth is only at 1.2% for the second quarter, a smidgen off from the 2.6% fed forecast.  While consumer numbers are up, and jobless claims are down, corporations remain conservative in fiscal expenditures and that is filtering its way through the economy.  Corporate caution will remain in effect until we see political concerns reach resolution.  As such, we see slowing corporate investment cycles through the 3rd quarter of 2016, driving lower production numbers, and a slight slackening in metals demand in the near term on carbon product.  If you need to plan your next move in this economy, you need the expert prowess of Bear Market Intelligence, and DLC Manufacturing & Fabrication.  Our expert partnership will show you are to profit on market moves, while improving parts quality.  Find out how, visit, External link opens in new tab or windowwww.donnercompanies.com orExternal link opens in new tab or windowwww.bearmktintel.com today.

 

Best,

 

~A


7/22/16
A Digital Coup D'Etat
All,

The biggest news in metal of the past week resides entirely in the geopolitical realm.  Toward the end of a business as usual week on Friday 6/15 (here in the US), I was conversing with a fellow metals executive as news feeds on both of our monitors began to flicker with real-time images of strife, instability, and insurrection.   

As the digital age provided detail, rumor, and speculation, we watched together with shock and heightened interest a news began reporting Turkey would be served well-done at the hands of a successful coup d'état.  However, as time and government loyalists played out their roles, we would see president Recep Tayyip Erdoğan remain in power while several thousand conspirators were apprehended and subsequently confined to the national sports facility awaiting an unknown fate.  We anticipate the mood in Turkey will remain raw as the saying goes, "revenge is a dish best served cold."   Especially, when it comes to asserting the power of a somewhat autocratic presidency.  The implication of these moves will shake the foundation of the US (and global) scrap markets for several months to come as a CBS News online video reported on Wednesday July 20th, that the president declared a 3-month state of emergency, essentially enacting marshal law-like conditions to prevail during rebuilding and fact-finding.  Certainly, we speculate the adverse conditions to deal a blow to Turkish economic productivity and potentially to trade alliances.

 Emergent Metals news continued to remain in the political realm for the balance of the week as Tom Fairless published an article in the Wall Street Journal entitled, "What to Look for In Thursday's EBC meeting".  In his article, Fairless asserts; "European bank stocks are under pressure, particularly in Italy" which supports our views discussed a few weeks prior concerning the state of Italy's economy, and alliances to the EU, all while monitoring valuation of the Euro post Brexit (which coincidentally gained a few points back, whereas the Euro tripped slightly this week).  Further supporting our prior week's argument, Fairless' article continues, "…The EBC is already doing a huge amount, Interest rates are below zero and the central bank is buying E80 billing a month of public and private debit, taking its balance sheet to a record E3.25 trillion last week"  Our favorite economist Mohamed A El-Erian chimed in publishing an opinion piece for the Project Syndicate Online dated 7/18/16 entitled "Unburdening the Facebook Generation" further explaining his view of the situation in stating, "Specifically, we simply exchanged private factories of credit and leverage for public ones.  We swapped an overly-leveraged banking system for experimental liquidity injections by hyperactive monetary authorities.  in the process, we overburdened central banks, risking their credibility and political autonomy, as well as future financial stability."  Given these concerns, looks like headwinds form a strong dollar may remain for some time which will impact metals and other industrial goods in a variety of ways…  Although, trade cases as previously discussed will help bolster our raw materials complex domestically by limiting a slight downturn.  In a timely offering, AMM reported on Thursday July 21st the US Commerce Department issued steep final duty margins for cold-rolled coil products from Brazil, India, Russia, and the United Kingdom.  In addition, recently released MSCI numbers continue to show declining service center stocks while mill production capacity usage remains off-pace from levels attained last year.  Makes for an interesting climate as directors, managers, and other executives try to conduct business as usual.  Time for some Bear Market Intelligence to help solidify materials strategies as we move ahead into this year's challenges… Subscribers have access to the additional detail you do not see here supporting their interaction with suppliers.  Perhaps it's time you visit External link opens in new tab or windowwww.donnercompanies.com or External link opens in new tab or windowwww.bearmktintel.com to see what options for success are available to your organization through our winning, nationally-published team.

 

Regards,

~A


7/15/16
Slump N' Bump... A Market Dance

All,


We believe the carbon steel market is entering a period of slight downward correction.  With summer slump season in full swing, market pricing on hot rolled product already shed about .01/lb. through the past month.  We anticipate additional downward movement of up to around two-and-a-half cents per pound as the trend cycles through our marketplace.  Ultimately, downward pressures on domestic steel markets will experience a floor supported by industry trade cases, and a ceiling limiting future price run-up based on inbound Euro imports slated to arrive in mid-September.  Elections will also lend themselves to stimulating social uncertainty leading to reduced (demand on) and production for capital expenditure items which in turn should ease steel demand slightly helping stimulate cost-easing sentiment (scrap declines will also help here) and note trend of discrete plate pricing slipping below coiled sheet for first time in over a decade.  It seems mills already sense the slight cooling as production capacity utilization numbers as reported by AMM on 7/12/16 are now dipping to around 73.2%, down around 1.4% from the previous week. However, we need to be cautious when monitoring markets as timing on the next round of price volatility will be critical.  We believe service center inventories remain reduced hovering somewhere in the 2.5-2.8 month range.  Dwindling inventory combined with mill production discipline and buyer market speculation will serve to create a period of cyclical demand bump later this year post-import arrival.  The resultant stimulation bump will occur as replenishment orders begin to emerge.  Timing  should be somewhere just post-election.

 Meanwhile, stainless steel is testing buoyancy and beginning to set sail into what may emerge as a perfect-storm pricing scenario.  Extended mill lead times and production delays permeated the domestic marketplace through spring and into our early summer months.  On the heels of the limited material availability issues plaguing US Service Centers, the Department of Commerce set preliminary anti-dumping duties for stainless sheet and plate products on 7/11/16.  The duties will be retroactive for 90 days on Chinese imports.  Duties of between 57.3% to 193.12% depending on the mill source will prime the marketplace for rapid price escalation through the upcoming months according to AMM.  In addition, global geopolitical moves will be placing additional pressures on nickel price as a hedge against negative bond yields meaning further momentum for stainless prices via surcharge escalation.  AMM noted today emergent pressure on domestic nickel pricing based on the tightness of scrap availability…   We see stainless numbers remaining fluid and upwardly mobile for the next 3-4 months as numerous factors influence prices to transcend their multi-year lows attained earlier in the pricing cycle.  Also noteworthy to propose; we consider trade case movement may be predicated politically.  China island disputes, allegations of trade secret theft from US Steel, and most recently, evidence of hacking into FDIC computers reported via CNN money.com on 7/13/16 will keep the pricing pot stirred for considerable time into the future.

Recent discussion of potential application of helicopter money in Japan to stave off deflation will keep things interesting for some time on the financial side of things.  Even copper scrap is feeling a slight upward pressure today as fiscal policy markers prepare to make it rain through suggested Japanese bond funding programs!  What a time to be tasked with sourcing raw materials and finished parts!  Contact me atExternal link opens in new tab or windowwww.donnercompanies.com or External link opens in new tab or windowwww.bearmktintel.com to discuss developing a winning strategy for your organization.


Regards,


~A


7/8/16


Uncertain Summer Slimming


All,


Generally, when the news media picks up a story about summer slimming buff beach bodies and Baywatch reruns frolic gleefully about the screen without worry or apprehension.  Unfortunately, the media failed to deliver this summer.  Presently, the only thing we find slimming is US yield curves while social unease and worry mount accordingly.  On 7/5 Ben Eisen with the Wall Street Journal noted curves comparing 3-month to 10-year treasury yields are already inverted.  In addition, Deutsche Bank is forecasting 60% recession probability as we head deeper into the year.  Certainly, the unstable political climate in the States is functioning to exert negative pull in terms of the upcoming election which is already illustrated in the recent run of stories showing CEO's delaying capital equipment purchases.

 Central banks further complicate the equation as Maxwell Murphy with the Wall Street Journal noted in his 7/7 article "The Morning Ledger: Central Banks Hog Soverign Debit, Fuel Yield Plunge."  In effect, his writing proposes the volume of individuals and entities seeking government debit securities are driving lower yields which many economists equate with potential recession risk.  However, economist Mohamed El-Erian reminded us via a linked in posting on 7/6 that declining yield curves in this case may not signal the traditional downturn for the US.  El-Erian reasons:   The negative yields speak more to problems in Europe and Japan in this instance as investors move abroad for safety.  He also notes the beneficial impact of low yields will potentially be offset by other fundamental problems within in the respective economies seeking safer investments (again not a US Issue).  Finally,  low yields will function to further challenge federal policy markers who are already impacted by excessive policy burdens (this is US)… Perhaps, the challenge will shift us away from the prolonged stimulate and wait methodology that has created market overvaluation and limited instances of what our friend Dave identifies in securities as cost push inflation.

 So considering these factors and looking forward it's time to watch Europe with a closer eye.  We believe Italy may pose the next set of problems for the global economy to surmount.  Ivana Kottasova agrees with her recent CNN Money article appearing on 7/6 entitled "Italy: Europe's Next Domino to Fall?" Things to watch according to Kottasova as Italy grapples with banking issues include:  Their economy has grown a minimal amount since adopting the Euro in 2002.  GDP rose just .3% in the fist quarter of this year (1/2 the general Euro zone rate), and retail sales again slumped to levels last seen in November 2013.  While the US jobs report looks a bit better today, things continue to plod along globally.  A fundamental shift in philosophy is necessary in order for real fundamentals to surface and begin to work these economic issues toward resolution.  In the meantime, watch the following to play out in metals…

 US steel pricing will ease some as traditional slowdown time is upon us with moderate to tepid demand…. However, the band of pricing movement will be limited on both ends due to shifting trade actions, Brexit, and pending 337 case moves.  Nickel, Copper, Silver, and Gold will look a bit brighter as investors seek safety while traditional instruments look less appealing due to investor competition for available items and low to negative yields.  Aluminum will continue to be slow unless industrial demand perks up or additional trade cases emerge.

 As always, specific detailed information is available to our clients and DLC customers.  To learn more contact us at External link opens in new tab or windowwww.donnercompanies.com or External link opens in new tab or windowwww.bearmktintel.com


 Regards,


~A


7/1/16


July 4th,  Burgers, Boats, Booms, and Market Bust!


All,


As those of us here in the states prepare to embark upon a bacon-wrapped All-American weekend of beer, burgers, boating, and all things that go boom, our territory Puerto Rico just experienced the pop-fizzle of dud-like faltering finances.  Puerto Rican debit stands around 70-billion dollars as reported by CNN.com online 7/1/16.  The situation will be interesting in fiscal policy terms as multiple nations, cities, and individuals across the globe toil with challenging economic headwinds (the main driver in recent gold and silver moves).  Our friends in the UK should be feeling a bit better today as their own fiscal fireworks subside post-brexit and markets begin to absorb and rebound under central bank stimulation in the form of extended low rates and potential additional capital infusions.  Matt Egan of the Global Investor noted on 6/27 that the brexit vote would further lower odds of a US federal rate increase this summer, in effect, leaving easy money on the table to stimulate market performance.  The US markets seem to agree with volumes and prices rebounding substantially as of today.  Mohamed El-Erian the Chief Economic Advisor for Allianz noted on his Linked In account today that the FTSE is on track for it's best weekly gain since 2011. Who says easy money does not advance investment in overvalued prospects?

Mohamed's claim is supported by your author and Mr. Egan as a 6/30 The Wall Street Journal article noted Italian banks are considering a 44-billion euro infusion to counter bad loans, poor profitability, and high costs amid record low rates…  It's no wonder a 6/26 article titled "The single Currency: eur-on your own" appeared in the Financial Times.  The authors concluded, the pound is now subject to its own internal risks, whereas the euro (a more traded currency) continues to be subjected to multiple risk sources and infusion attempts meaning we should be focusing more post-brexit concerns on the larger European currency... We concur, and it appears we have good company.

We are already seeing European steel prices reaching parity with US domestic base numbers less freight and fees…  We propose the brexit will be small in comparison to the economic and political actions its ripples stimulate across Europe.

One such ripple emerged last weekend as Spanish elections resulted in a hung parliament for the second time in a six-month period as reported on 6/27 by Julien Toyer and Sonya Dowsett of Reuters.  Spain's inability to agree on a single governing party may reference some of the issues glanced over in a more positive piece appearing on Vox 6/30/16 by Timothy B Lee.  However, regardless the spin, we must remember as Mr Lee admits, Spain is currently dealing with 21% unemployment, multiple waves of immigration, and legislative gridlock.  In addition, tight monetary policies hit the Spanish economy hard since 2008… The grouping of factors above suggests potential for volatility in Spain going forward…  Coupling volatility with a fresh round of euro zone capital infusions, precious metals look good.  

Indeed, a volatile environment means investment-grade metals should continue to see a stimulating rebound for the near to mid-term future.  The question remains, what lies in store for other industrial commodity materials as the world rank and order shifts?

Contact us to find out and gain assistance in sourcing cost-effective complex parts and materials.    

Find us online at External link opens in new tab or windowwww.donnercompanies.com and External link opens in new tab or windowwww.bearmktintel.com


~A


6/24/16


A Shocking Brexit


All--


The tweet below, courtesy of Christopher Hope an English Political Correspondent appeared on the Telegraph UK Online edition at 3:55 AM UK time---

'Biggest uprising since Peasants Revolt in 1381'Our chief political correspondent Christopher Hope puts the referendum into historical context.The 2016 EU referendum is set to the biggest uprising against the people who run the UK since the Peasants Revolt in 1381.Britain's bosses, politicians, church leaders, sports stars, bankers, economists and celebrities told the people to vote to Remain in the UK.And (by the look of it now) the people sent back a massive V sign. Democracy indeed.

 

With voter turnout nearing 72% as reported by The Economist online edition 6/24/16 the UK's bulldogs chose to Brexit the EU and forge ahead into uncharted territory feeling it enables them to direct a fruitful and prosperous national future.  However, as investors around the globe awake today, the rally of 6/23 seems nothing more than a pounding fiscal hangover predicated on poor judgement as the masses followed foolhardy advise as opposed to focusing on proper risk fundamentals to protect their assets (or gamble a bit more and sell short) by betting on a falling market (your author's favorite position for yesterday).  The resultant emergent downward volatility across multiple national markets today should have been anticipated given the close poll numbers well within the margin of error.  Perhaps an indication that easy money in our markets has enabled too much speculative activity by poorly trained investors fueling increased appetite to hold securities with lackluster valuations driving us toward a fiscal market bubble.  However, Metals are now moving (although delayed) to correct some of yesterday's erroneous activity as investors seek safe haven assets to protect earnings amidst an uncertain future.  Silver and Gold presently seem hot posting sizable gains during session trading today.  We anticipate copper and nickel will also post gains through the coming days as institutional funds look to secure EU cash reserves against negative rates and continued market volatility.  Other industrial metals will also experience pricing anomalies as financial markets adjust to their new reality and changing market borders.  We see steel futures trending down and anticipate the trend will continue in the short terms as trade regulations need to be renegotiated in the EU and in the meantime the US continues to press anti-dumping, trade secret theft, and countervailing actions against numerous foreign suppliers.

 Essentially, we have a metals marketplace with divergent risks operating simultaneously in terms of metal pricing.  Certain items will go up, others will fall based on these risks.  The Wall Street Journal published an article on 6/23 by Josh Zumbrun entitled "Four Risks That Could Push The US Economy Into Recession".  The article identifies China, Business Investment, US Politics, and Stall Speed (Economic Growth Rate) as items to monitor.  Zumbrun's items hold particular merit for metal on a domestic and global scale.  The political front is especially challenging as a me-too chorus may emanate across Europe encouraging several of the large economies strapped with excessive regional debit to re-evaluate their sovereignty.  If, these developments occur trading borders for metals will challenge markets and force materials to find new locations for retail meaning the potential for more imports and subsequent dumping actions.  The next few months will be interesting, challenging, and possibly rewarding for those who study and move accordingly.  If your firm is ready to make the right moves, you need to move with The Donner Companies  External link opens in new tab or windowwww.donnercompanies.com and Bear Market Intelligence External link opens in new tab or windowwww.bearmktintel.com  Contact us and learn how our staff and the materials markets can work for you! .  

Note paying subscribers gain access to detailed information beyond this introduction...


~A


6/17/16


Brexit Anyone?


Poll results first appearing on the UK website Daily Mail.com as viewed on 6/17/16 suggest the population is moving quickly and efficiently towards the nearest Brexit.  While numbers vary across sources; current information agrees a majority of voters are now actively seeking Brexit row seats.  A 6/16 Bloomberg online article entitled, "Brexit Battle Gets Bitter with Polls Showing 'Leave' Holds Lead" written by Matthew Campbell, Emma Charlton, and Robert Hutton concurs placing odds around 53:47 in favor a Brexit.  Even the Wall Street Journal got in on the action recently with their article appearing 6/14 written by Saumya Vaishampayan and Riva Gold entitled "Global Stock Selloff Deepens as Investors Seek Safer Assets".  The Journal article examines fiscal fallout as Brexit (vote) time draws near.  Key points touched by the authors include US stocks dropping steadily, German bonds falling into negative yield territory as investors flock to safe haven assets, the euro dropping back into $1.12-$1.13 territory (Wall Street Journal 6/14 "Global Stock Selloff Deepens as Investors Seek Safer Assets"), and the pounding (no pun, really) of UK currency valuation as time ticks toward vote date.  A 6/14 CCN Money.com article entitled "Rising Brexit Risk Slams Stocks and Pound" written by Alanna Petroff examines currency volatility leading up to the June 23rd vote date.  As of 11:50 today, the pound was trading at 1.43 (as viewed on the Wall Street Journal Online) which is far depressed from its typical range territory in the 1.50's.  With such interesting dynamics, even book markers are jumping into the game.  An article on Newsweek.com appearing 6/16/16 notes Bookmaker Ladbrokes shortened it's Brexit odds to 9/4 from 11/4.  Such detail is worrisome to investors, and should merit likewise consideration within the metals community as trade implications mean more metal will need to find a home if the EU loses a market.  Meanwhile, a 6/15 Wall Street Journal article by Matt Egan entitled "Scared investors Flee to Cash at highest Levels Since 2001"  examines the outflows of money form financial markets and into cash stockpiles (the implication means not actively invested, not buying capital goods, not being spent in the consumer sectors which ultimately impact industrial production numbers adversely).  Noteworthy items contained within include US 10-year bond yield falling as low as 1.569%, German 10-year bonds going into negative territory, and the plummeting pound falling .5% against the USD in days preceding the articles publication…

 To broaden our picture, we Brexit stage left and begin looking at a few emergent trends at home. We discussed employment numbers several times across previous editions.  Our speculations suggest underemployment and non-participation were factors tilting previous employment numbers into a more positive territory.  A recently published article appearing 6/15 on Money.CNN.com entitled "Fewer Low-Income Men are Working" lends credence to our speculations.  Author Tami Luhby notes only 69% of low income men ages 25-54 are employed today, in comparison to 80% in 1980.  The lack of gainful employment hints at one contributing factor behind our slow economic recovery.  Perhaps that is why our unconventional fed chief Janet Yellen mentioned helicopter money in the article by Patrick Gillespie earlier this week.  If you're curious, helicopter money is just what it sounds like: in effect functioning akin to economic manna, or dollars of deliverance via federal rebates and/or packages of greenbacks from airborne federal officials dropped above areas in need of stimulation.  In the Article "Janet Yellen: Helicopter Money is an Option in Extreme Situations" Gillespie addresses the where and how of if such a scenario is possible to occur.  We suggest the fact that such actions were even mentioned by the Fed hints back at several of Mohamed El-Erian's recent writings concerning unconventional central bank involvement and the adverse economic effects therein.  All these boil down to one thing for this author, lack of faith in existing price structures going forward…  However, in our current scenario faulty fundamentals will likely be inhibited by political and trade actions intended to tame the abrupt falls we witnessed in previous economic cycles.  The how and were of our theory will be covered in detail for Bear Market Intelligence subscribing clients later today.  However, you should know DLC Manufacturing & Fabrication, Inc. uses Bear Market Intelligence to navigate the challenging business environment for your benefit…  Join a team with superior economic firepower and enter a winning partnership to see how quality, customer commitment, and market intelligence will further drive your bottom line…  Visit External link opens in new tab or windowwww.donnercompanies.com orExternal link opens in new tab or windowwww.bearmktintel.com to learn more.  


~A


6/10/16


A Time to Listen


All,


 Too often, we market-types express opinion without adding real value to the collective national rhetoric.  Knowing one's limits, and the limits of forecasting further developments is essential in keeping clients informed, intelligent, and well-positioned.  For that reason, we believe now is a time to listen as opposed to continuing to bombard you with pointless facts and detail stating previously released messages.  For our regular readers, you will find today's update short and repetitive with respect to mention of topics from last week.  Bottom line, scrap is poised to turn down, the political picture is worrisome both domestically and abroad, and the Fed has called off or postponed the June rate hike.  Existing metals trends as we described last week remain in effect and will carry for some time until an additional catalyst is added to the equation.

Four articles caught our eye this week that are worth reading if you wish.  We included the links below.  The listed publications support our positions stated last week and really offer no change in trend or market performance.

 The first article by Mohamed A El-Erain offers a look at changing politics in Latin America; relevant due to copper and iron ore supply implications

  External link opens in new tab or windowhttps://www.project-syndicate.org/commentary/latin-america-rightward-shift-by-mohamed-a--el-erian-2016-06

 The second article by Matt Egan appears on CCN Money and establishes links between election politics and business hiring practices… Interesting in terms of our previous discussions  

 External link opens in new tab or windowhttp://money.cnn.com/2016/06/08/news/economy/political-fear-spooking-companies-cfo/

 The third article by Paul R La Monica looks at the trend of layoffs at major national retailers…

  External link opens in new tab or windowhttp://money.cnn.com/2016/06/08/investing/retail-job-cuts-layoffs/

 The Fourth and final item for this week is a blog originating with Greg IP and the Wall Street Journal discussing the Fed's move to push out June's interest rate hike.  Again, a point of discussion given our previous exchanges

 External link opens in new tab or windowhttp://blogs.wsj.com/economics/2016/06/10/its-a-good-thing-the-fed-has-missed-its-chance-to-raise-rates-heres-why/

 

As we stated earlier, all of our previous trend discussions remain in play as of today.  Anticipate slowing conditions as we move forward.  We believe carbon steel is at its high point and will slowly begin to lose momentum.  If you are a contract customer, know Bear Market Intelligence is busy listening right now to ensure your path forward supports profits and prudent operational standards.  DLC Manufacturing is poised to use this detail to provide the best value in prevision parts and fabrication in the marketplace.  Enjoy your weekend!


~A


6/3/16


Downward Developments


All,


 It seems the time for a lesson on classic economics may be drawing near. The lesson to learn?  Value must develop organically without intervention and manipulation.  Real growth stems from sales, investment, production, trade expansion, and lack of fiscally manipulative government involvement.  In previous weeks, we discussed the need to assess market prices in terms of intrinsic value when determining true worth for goods, services, and securities.  A few weeks later we examined inflation, deflation, and the present roles served by the FED and Global Central Banks in creating false economic conditions within their respective economies due to the non -conventional methodologies employed.  Today, Mohamed El-Erian Chief Economist at Allianz hit the nail the head with a simple yet poignant statement to his Linked In followers regarding Janet's recent Fed rate increase discussions via a post concluding, "Bottom line: (US Jobs) Report puts the Federal Reserve in a tricky situation."    Indeed, no matter how much the Fed or various Central Banks wish to pump up rates and currency valuations, they eventually find themselves subservient to the forces of traditional economics.

 As we look toward the metals world this week, traditional economic views serve us well for interpreting the latest round of data shaping up to influence our pricing environment.  We suggest emergent domestic market data points show we are amidst a lengthy shift from supplier (mill) control to market control with respect to present consumption, raw materials pricing (including scrap) and industrial output numbers.  Remember, a few weeks back Michelle Applebaum noted supply side price push initiatives tend to be short-lived.  An article published today by the Wall Street Journal titled "Commodities: Too Fast, Too Furious" questions the abrupt and sharp rise in energy prices over the past several months (which is similar to the abrupt rise in metals).  Author Spencer Jakab notes commodities are outperforming stocks for the first time since 2007, and (with energy items in particular) it seems abrupt price spikes preceded three of the last 6 recessions, including the 2007-2008 meltdown.  May Federal Jobs Report hiring numbers published today in the Wall Street Journal show the slowest pace in adding new positions since 2010.  While unemployment fell, experts question if reduction is due to lack of market participation by unemployed or underemployed individuals as opposed to organic declines through market growth and stabilization.  In either case, less new workers equates to less output eventually translating into less steel consumption and more available materials in the marketplace.  However, metals markets presently feature an inherent wildcard in play at the moment which will slow declines in carbon steel pricing.  On May 30th AMM Online reported the ITC approved the 337 probe against China filed by US Steel.  The probe may further cripple imports, and could entirely cut off certain segments of supply which will support pricing levels against decline for a longer period of time than usual even as raw materials begin to fluctuate downward.  However, with recently released output numbers for China production, we know record production numbers of material will simply flow into another less vigilant economy which will in-turn ship their excess to US ports and start the process anew.  We also continue to await the June 23rd, Brexit vote and any new challenges it may present.  However, so long as global overcapacity exists, our markets will be effectively capped against long-term price expansion, and the reach of maximum numbers.  Although, this does not mean we can refrain from implementing stocking programs and tracking market performance.  Conversely, it requires greater skill in managing materials programs to ensure all variables are being accounted for to develop market interpretations.  DLC Manufacturing Inc., and Bear Market Intelligence are poised to help you navigate the waters to develop parts and materials programming designed to maximize profits in these turbulent times.  Contact us at External link opens in new tab or windowwww.donnerlaser.com or External link opens in new tab or windowwww.bearmktintel.com to learn about available options and opportunities.


Cheers,


~A


5/27/16
Liberty, Happiness, & Faltering Prices


All,


With an extended holiday weekend upon us, now is the time to reflect upon the sacrifices made by a select few so the multitudes may experience unencumbered lives with the freedom to pursue liberty and happiness.  For many in the metals industry, liberty and happiness begin with prices stabilizing at higher (and sustainable) levels.   However, recent history has proven joy tends to be elusive if you are a Metals Executive.  In the steel world, joy and happiness tend to arrive in short, fervent installments punctuated by disappointment, corporate consolidation, and supply challenges posed by imports.

 Mill executives are looking to garner a better Memorial Weekend’s rest as multiple actions initiated earlier in year temporarily address the crippling effect of dumped and subsidized materials within the US economy.  However, questions remain as to if these measures will carry enough weight to pull our industry forward against the fundamental currents of slowing global growth and faltering currency in the hands of multiple central banks operating in what Mohamad El-Erian often discusses as uncharted territory (with reference to rate manipulation and unconventional fiscal movements).

 The most recent call to arms lobbied by our domestic industry is presently in the form of a proposed 337 case.  Presently in front of the ITC, the 337 case seeks to assess and solidify the extent of damages wrought onto one domestic producer in the face of trade secret theft, collusion, and other unfair practices allegedly engaged by Chinese competitors.  Earlier trade measures helped bolster sheet and plate steel prices.  Trade case determinations against multiple nations aided our marketplace by implementing steep charges against inbound shipments.  The question now, is how long will these measures support higher pricing if consumption remains subdued, scrap prices slip, and the dollar gains strength as investors and markets ponder and price in Janet’s latest rumblings about a rate hike?  

If you are interested in lowering costs for the long term, you must investigate  the combination of  DLC  Manufacturing External link opens in new tab or windowwww.donnerlaser.com and Bear Market Intelligence External link opens in new tab or windowwww.bearmktintel.com to implement a lasting integrated supply chain strategy enabling manufacturers to source parts and materials ahead of market numbers with full financial analysis.  Interested, contact us today!


~A

5/20/16
Deflation, Inflation, & No Pool Toys In Sight

All,


On Monday, May 18 Wall Street Journal's Paul Hannon touched on the Eurozone's slide back into deflationary territory.  Unfortunately, he's not discussing our favorite summer pool toys.  Hannon's headline stands to ignite concern as faltering global economies generally compound issues surrounding international trade, eventually leading to claims of dumping, and issues with currency valuation, all while instigating a host of other push-button politically-charged issues.  Jack Ewing of the New York Times online further supports Hannon's approximations with his March 10th article "ECB's Bold Stimulus Takes Aim at Eurozone Economy" where he notes the European Central Bank is now paying commercial banks to borrow Central Bank funds...  

 Our present market seems to offer numerous viewpoints rustling about concurrently.  Supporting momentary data exists to pose arguments for muted growth or economic contraction depending  on what is best to service your immediate need for reporting and personal agenda…  Earlier this week, in the midst of several unfavorable news stories, the Wall Street Journal pointed out a glimmer of growth in manufacturing with the departure of winter weather.  However, we believe the key demographic to monitor at present is the trend of longer-term global markets, as opposed fleeting momentary policy reactions to the interesting fact of the day.  We begin to believe Mohamed El-Erian's recent discussions in Bloomberg warrant consideration with respect to his perspective on Central Bank and FED involvement around the globe leading to negative fiscal circumstances.  Many critics of the FED posed this same assessment earlier in the week when Janet suggested interest rates might be on the rise for the US in June and Wall Street needed to pay more attention to the Fed.  Based on the longer-term approach, we suggest reviewing a broad swath of data and making decisions based on trend probability combined with assessment of intrinsic value.

CNN Money.com posted an article earlier today featuring a glitzy cartoon with a headline entitled "An Unhappy Anniversary for the Bull Market" penned by Paul R La Monica.  La Monica notes stock market increases have begun to slowly and softly erode in many cases.  The author cites a host of factors including the potential Brexit, modestly disappointing US corporate earnings (see Target earnings article entitled "Target Misses the Mark" featured in CCN Money Online 5/18 also by Paul La Monica), and China slowdown coupled with overcapacity as forces contributing toward a pull on the market to lower standings.  We concur.

Several weeks ago, Bear Market Intelligence engaged our readers in discussions examining the intrinsic value of a purchase.  It seems our sentiment fits well with at least one fund manager.  On Tuesday 5/17 Crystal Kim of Barron's Online posted a Q&A piece with David Wallack of T Rowe Price Mid-Cap Value examining the valuation of potential investments.  Wallack's strategy essentially stresses a value we pose to all of our clients… Assess a potential purchase based on the detail behind its total cost of ownership and duration, not necessarily its present cost.   The considerations of value and long term potential are especially important for metals clients in today's volatile marketplace as numerous factors weigh in on overall value.

 On Tuesday 5/17 AMM published an article entitled "Distributor Steel Shipments Fall as Prices Pick up in April" which concludes (longer term) weakness may exist in the supply-side position of our current price increases (a position we have been professing for some time now).  Michelle Applebaum is quoted in the article as saying, "Supply-driven pricing strength is typically far less sustainable than demand driven strength…  So were likely to see the current strength (be) fairly short-lived."   We like Applebaum's assessment and agree with her approximations.  We know prices will continue to be strong in carbon for the near-term (1-2 months).  However, as scrap pushes sideways and global concerns mount we will see numbers begin to drift as summer wears on and the year pushes toward elections.  Key strategy is to monitor and insulate for near-term and mid-term volatility.  All bets are off after late summer.  Remember to look at your metals in terms of intrinsic value, that means assessing input costs, mill operating cost combined with legacy expenses, weight of potential import supply, and viability of trade cases.  All these factors combine with the larger economic picture to impact our business environment and establish a price range we should pay, in comparison to the price range offered.  

When you need parts at the RIGHT price with exceptional quality contact me atExternal link opens in new tab or windowwww.donnerlaser.com or if you need assistance with assessing the metals markets to tilt the equation in your favor I may always be reached at External link opens in new tab or windowwww.bearmktintel.com 


~A
5/13/16
A Sobering Friday

All,


 As a follow-up to our recent article chronicling the downfall of the "World's Most Interesting Man," bad news seems to be abounding for those interested in libations, celebrations, and good economic or political news in general.  CNN Money online reported earlier today sales of Alcohol fell for the first time in nearly 20 years with a .7% drop in total global good time chugging.  The article by Alanna Petroff suggests slumping economic climates may be forcing drinkers to curb their appetites for revelry and things containing Rum and/or Vodka (the year's worst performing spirits).   Apparently, our foul economic climate is dampening the once robust global drive to celebrate, or drown sorrows (depending on if you tend toward the optimistic side).  Such news is not surprising given the volume of data available to dampen our spirits and thin our collective beer budgets…

Wednesday's Wall Street Journal article "Just How Good (or Bad) Are All the Jobs Added to the Economy Since the Recession" by lam Thuy Vo and Josh Zumbrun examines some of the claims frequently floated about by politicians and (your author) regarding the quality of positions available in the US Economy.  Essentially the pair asserts, since 2007 much of the domestic job growth originated from low-wage service job sectors.  Supporting their initial claim, Thuy Vo and Zumbrun find substantial attrition in middle wage positions, specifically specialty trade contractors.  In addition, data shows more people work minimum wage or involuntary part time positions than prior to the recession.  However, in the have a drink on me side of things, employment prospects seem to be favorable for those with technical computer type aptitude.

However, the balance of us with less technical aptitude continue to monitor global politics, supply chain performance, and the potential for market forces to change our daily lives.  Currently, our favorite location to monitor is China as its sheer volume of production and consumption exerts considerable pressures on global dynamics.  An article titled "China Continues to Prop Up its Ailing Factories, Adding to Global Glut" published Monday 5/9 in the Wall Street Journal by Brian Spegele highlights concerns with China's economic footprint.  Spegele also makes a statement in his article echoing our earlier view aligning trade cases with political motivation by saying, " China's continuing aid for unneeded factories is triggering a sharp rise in trade disputes and protectionist sentiment, especially in the US, where trade has emerged as one of the pivotal issues in the US presidential election."  The article also investigates alleged IP theft from US Steel and Chinese government actions to save an unprofitable 500,000 ton per year aluminum smelter in Gansu through electrical bill rate reduction (i.e. government subsidy). So, the question now becomes how can prices increase in an oversupplied domestic marketplace?   The answer is trade cases, political motivation, and unstable currency… However, the current momentum will only carry domestic suppliers so far until new threats and competitors emerge.

As of today new increases continue to abound.  Monday AMM online reported a new round of steel increases in the realm of $4-5 per CTW would emerge in short order.  The same edition of AMM reported US Customs is enforcing more trade cases… Sound familiar?  As of today, Nucor increased sheet prices $40/ton (.02/lb.).  In addition, CRU is now showing numbers $121/ton above April pricing.  Where does it all stop?  We suggest scrap will give one clue.  We anticipate scrap will push this month while looking for further directional cues in early summer which will be dependent on currency valuation, global economy, and ore pricing.  Once scrap starts to slide, the basis of market increases will get shaky…  Now the million dollar question remains, who will get nervous and break rank on the pricing front?  It will take a few months to play out… And the ride in between will be interesting…  Know that Bear Market Intelligence is here to help you navigate the turmoil and make profitable decisions through it all.  So, relax.  it's Friday afternoon, time to crack your favorite beverage and know Bear market Intelligence clients see the balance of this article giving them a competitive advantage in the unstable markets, and Bear Market Intelligence works with DLC to supply superior parts and services from a superior team of professionals... Visit External link opens in new tab or windowwww.bearmktintel.com and External link opens in new tab or windowwww.donnerlaser.com for details.


~A
5/6/16
A Most interesting Update

All,


As the economy changes, we learned on Mach 9, 2016 via NPR Online that even The Most Interesting Man In The World is not immune.  While art museums may have allowed him to touch the masterpieces, and his beard could experience more than an entire lesser man, his employment prospects seem similar to many in the industrial sector, questionable at best. Johnathan Goldsmith, the actor behind Dos Equis popular series of commercials exited his present career as the world’s most interesting man via a one-way rocket to mars leaving many to question what's next for the brand and the famously-bearded actor, just like many presently question what's next for our economy?  In either case, definitive answers may prove to be elusive leaving us to read, watch, and interpret to obtain answers.

 Fortunately, we do not need to look far to begin our research and start formulating which direction things will take.  The past week witnessed numerous articles highlighting negative trends supporting our views from previous weeks.  On Monday, The Wall Street Journal Online reported US home ownership rates fell again. Present numbers hang within striking distance of previous 48-year lows.  The article went on to show in Q1 2016, 363,000 renter households emerged in comparison to the only 177,000 new home owner households reported in the same period…  Astute students of economics know home ownership ratios tend to reflect underlying faith in the economy, personal stability, and attachment to an area with a means of employment.  When these key figures fall the number of potentially mobile people without roots or stability increases.  As students of economics, we should start to ask questions.

 We should especially continue to question the proliferation of negative rates around the globe.  Warren Buffet gave one of the week's greatest quotes to CNBC on Saturday after the Berkshire Hathaway shareholders meeting in response to a negative rate question.  Buffet's quip to reporter Matthew J Belvedere is near priceless, "If currency in a bank is worth less than currency in your hands… that could produce something in the way of behavior, it’s a different world…  If you have a lot of money in Euros, as we do… You're better off putting it under your mattress than in a bank." It seems Buffet shares a similar view to your author on rates, and extending out the thought a bit leads us into a direction of examining further data points that surfaced this week and ultimately call the present stock and commodities price increase trends into question.

 As always, China is a relevant topic of discourse when entertaining spirited discussion about market dynamics.  Famed analyst Michelle Applebaum posted a 5/2 Wall Street Journal Article by Rhiannon Hoyle entitle "In China, The New Casino is Iron Ore" on here Linked in profile.  The article examines rampant speculation on commodities within Chinese markets creating fundamental shift in physical commodity pricing without true demand growth as-is necessary to sustain such gains.  An article in the Journal appearing 5/3 written by Ira Iosebashvili and Carolyn Cui entitled “Milk, Iron ore, and Australian Inflation All Sound Warnings on Chinaâ€� furthers and broadens the discussion Applebaum initiated on Monday.  Sophia Yan at CNN Money.com wrapped everything up in a nice bow on 5/4/16 with her article "Is China Fueling a New Commodities Bubble?" which examines a variety of data points in conjunction with rampant speculation and waning industrial demand. In totality, these articles combine to start painting a clearer picture of our present economy, and it's cause for concern as we watch materials pricing and the Dow escalate without the necessary fundamental support driven by supply side empowerment and easy cash.  Low rates, QE, and global downturn created false market mechanics that Mohamed El-Erian, the Chief Economic Advisor at Allianz has discussed at length in recent Bloomberg posts.  We believe he is very correct in his assessments.

 Considering all these items together, we must question the long-term viability of steel's recent rally.  US Steel raised $980 million dollars in a bond offering on Tuesday 5/3 as reported by Tom Zanki at Law360 on 5/6.  We need to ask questions concerning the viability of bonds for repayment of present debit tomorrow at a much higher interest rate when current DTI's do not look favorable to start.  Perhaps Moody's recent downgrade of US Steel to a B1 junk/speculative rating as reported by Zanik is relevant and telling of future prospects for a former industrial giant as we believe the present pricing run will taper off later this year….  Also, BHP and Vale ran into trouble late last year when a major tailings dam in Brazil failed in November causing damages and deaths across a wide swath of land and watershed.  Brazilian regulators just launched a 155 billion dollar suit as reported by Paul Kiernan of the Wall Street Journal on 5/5.  We should anticipate regulatory actions in Brazil may exert a slight impact in pricing, although not as large as the sway of speculative investing….

Time will tell how long the present system holds, and how long the bulls will run… The Bear will provide clients the necessary information to keep up with changes in trend and potential profitability risks as the situations develop….To learn more, and protect your profitability contact External link opens in new tab or windowwww.bearmktintel.com for industrial information andExternal link opens in new tab or windowwww.donnerlaser.com for quality fabricated component solutions.


~A


4/29/16


Flirt'in With Disaster


All,


In the late 70's American Southern Rock band Molly Hatchet penned their signature hit entitled "Flirt'in With Disaster".  As we survey the economic landscape today, one can't help to wonder if their hit song held prophetic views of our financial and commodities systems which increasingly appear primed for a round of moderate turmoil.

Indeed, with the Dow hovering at volumes touching on 18,xxx while steel pricing surges ahead the markets appear to be exhibiting a condition of overvaluation which may not hold long-term.  The prime question for those charged with managing corporate resources today is how to establish viable balance points while mitigating risk?  We know the answer should be; through the control of costs by examining future probability and balancing against uncertain economic performance.  However, the answer is easier said than accomplished given today's unique circumstances.

 One of the key factors any economist or corporate commodity manager must consider when looking to control cost is concerned with the where and how of establishing intrinsic value.  Think of intrinsic value as a system of natural order.   Essentially, intrinsic value mirrors the law of supply and demand as goods gain value based on the need of a consumer body.  However, the situation becomes more complex as in the markets, pricing may disconnect form intrinsic value and instead follow a path forged by "current market value" which is influenced by numerous factors, and may be artificially influenced by a variety of things including the buyer’s own psychology…

 Let's examine steel in the terms above… Steel is necessary for a variety of industry, but how much physical demand actually exists?  What is the valuation of steel's raw inputs?  How about cost adders for production and transportation?  Where does the factor of mill capacity usage figure into the equation?  How about the price of scrap? How about the volume of imports and exports? Cost of mill operations including labor and legacy expenses?  And, let's not forget the value of currency which will influence the inflow of imports and exports, and trade case duty assessments… Get the picture?  In short, steel is moving above where your author believes it's intrinsic value should be established due to market forces pushing current value above the threshold of supply and demand economics, (in effect, intrinsic value) …. In this model, we believe pricing will carry for some time as the forces of market, buyer psychology, and intrinsic value sort themselves out.  An eventual correction will occur… So how do we balance?  The answer depends on organizational strategy, fiscal goals, and management views concerning the items we just discussed.  They answers exist, we can help you find them…

 To continue our Friday thought, let's give the stock market a moment of consideration.  We mentioned earlier, trade volumes trending into 18,xxx territory recently.  Years back, we discussed the potential of inflation on the back of US domestic stimulus programs.  However, the inflation we anticipated to impact industrial and consumer goods never surfaced.  Instead, we encountered numerous other nations around the globe enacting similar QE programs to help buoy their faltering systems effectively bringing parity back into the currency markets at (slightly) devalued levels.  However, one of my cohorts recently proposed an interesting theory examining market valuation inflation as a result of these QE actions, in effect an inflationary mechanism occurring in the financial markets.  Essentially, we suggest market trade volumes (and underlying stock values) may be artificially inflated beyond realistic values based on the volume of QE dollars flooding the markets.  In short, market equity may be due for an adjustment (probably post US election).  In the meantime, my cohort Dave L suggests we could be encountering a measure of cost push inflation in the markets. Dave also references the movement of silver (inflationary metal) as of recently as opposed to the relative static (limited band trading) in gold (considered an economic fear metal).  Interesting times to say the least, potentially flirtin' with disaster, as the song goes…

 So, remember Bear Market Intelligence customers have access to the economic and metals data necessary to construct correct decisions for the path forward to ensure they don’t get trampled by the running bulls and current values while attempting to discern metals intrinsic value...  Find us online, External link opens in new tab or windowwww.bearmktintel.com orExternal link opens in new tab or windowwww.donnerlaser.com 



~A
4/22/16
Friday Thoughts
Today, we celebrate Earth Day while reminding ourselves steel is one of the most effectively recycled commodities on earth.  As we ponder our new luxury cars at the end of a productive corporate week; it’s difficult to imagine our gleaming steel and chrome tributes to horsepower and status are simply a compilation of re-melted Yugos, Gremlins, Pintos, and antiquated farm equipment classified by a variety of crazy names like “Zorbaâ€� while traded across global boundaries.  As our thoughts shift toward additional global concerns, our energies and awareness today shy from work and drift toward the freedom each weekend entails.  However, today’s free-thinking for many tastes bitter as businessmen, children, women, and those eternally youthful-at-heart cope with the purple-blue sadness echoing off Earth’s major-city skylines as public building lights dim from their normal stark bright white contrast beginning to glow melancholy purple in remembrance of the lost icon in our collective culture, Prince.  Unfortunately, today’s bitterness of loss also takes on a financial character on as many buyers awoke to another round of metal prince hikes beginning to establish itself as reality. Recent pricing moves over the past week have seen CIS open and close their July order books within a few days as reported by AMM, see today’s edition for further detail on this one.  LME pricing for aluminum jumped yesterday AM, most likely in reaction to USW 201 case filings combined with potential actions by the Aluminum Association which may result in further supply-side implications.  Nucor also launched an additional hike for plate products rounding out what is shaping up to be an expensive week for businesses who failed to prepare appropriately by investing in market intelligence or internal analysis of prevailing trends.  As always, Bear Market Intelligence is happy to keep our paid subscribers updated and informed on the intimate details as the bulls begin to run into the spring and summer months.  If you need quality metal parts produced checkExternal link opens in new tab or windowwww.donnerlaser.com, for market intelligence see External link opens in new tab or windowwww.bearmktintel.com Enjoy your weekend, as the purple rains bring forth impressive blooms in our world and markets.~A4/15/16


4/15/16
Market Warming Trend
All,

Markets continue to firm just as the temperatures here in the Midwest finally decided to join the rally and initiate Minnesota's annual great defrost cycle.  In the markets, we anticipate the warm up to cover a broad range of materials beyond steel as commodities awaken from their slumber with what may shake out to be an emergent bull market.  The question as of today, is how long the bull will thrive before becoming relegated to ground beef status?  In our previous week's issue, we discussed potential for a pop and drop scenario.  Given present dynamics, we may have to wait on applying labels and see what other interesting factors emerge to support pricing.  Scrap continues to gain strength based on new export sales.  We continue to question the scrap price run up as supply side driven.  However, a Midwest scrap executive contacted us and advised on Tuesday scrap is looking for at least $15/ton up for April into May… His sentiment was reiterated by AMM on 4/14 with their article titled "US Ferrous Export Prices Drive Higher," which is worth a quick browse in relation to the other emerging market trends.  If ferrous scrap continues to climb steel prices will follow so long as mill production rates remain stable and do not increase beyond the domestic demand threshold which is fairly steady at present.  

Another factor to consider into our pricing models now through late October is politics and actions to gain voter sympathy.  Remember the metals run up predicating the last election cycle?  In a what have you done for me lately world, politicians looking to retain power will display great sympathy for American manufacturing (steel) in particular as it represents an opportunity to highlight support for jobs, laborers, and the US Economy at large.  Note the trade cases already implemented with favorable results for our steel producers.  Now, we are hearing rumblings of a section 232 investigation emerging yet this year.  Interesting…  The April 15th AMM article titled "Steel Industry Sights Land on Section 232" follows several other articles in the publication over the previous several months hinting these actions may emerge to firm the hand already dealt through trade cases.  If implemented, section 232 will serve to further firm our marketplace and limit foreign imports further.  Our previously discussed pop and drop scenario may become pop and linger if more factors enter the equation lending (extraordinary) fundamental support such as further political/trade actions.  Keep monitoring Aluminum for trade actions in addition to those in the steel market…. Also note Alcoa is now going to keep a smelter open that was slated for closure.. This action may hint at profitability expectations for future months given a reduction in power cost and possible anticipation of future sell prices with so much domestic capacity already removed.  Note as reported in Reuters online article titled, "Alcoa in Power Deal that May Keep Intalco Aluminum Plant Open" appearing on 4/13/16 that US aluminum production is now at a 65-year low.  Also remember aluminum scrap sales are steady and supply is getting a bit tighter.  

Economic factors such as interest rates and banking may also be functioning to inspire spring rejuvenation in nonferrous metals.  Nickel continues its slow climb back from lowly stature.  Prices are anticipated to escalate slightly this month and next month.  If proliferation of negative rates continues, nickel could potentially rebound quicker.  Negative rates have been receiving substantial press lately with 2 articles this week alone in the Wall Street Journal.  Larry Fink also had an interview published by Ellie Ismailidou on marketwatch.com as of 4/15/16 in which he called negative rates the "biggest crisis" in the world.  If rate games continue, look to copper, nickel, and gold to regain a bit more luster in the limelight and industrial stainless steel prices to escalate.  If you need more in-dept information to help your company with metals decisions contact External link opens in new tab or windowwww.bearmktintel.com or for parts production External link opens in new tab or windowwww.donnerlaser.com


~A