The latest SEMI data are out for October and the ratio of bookings to billings has contracted for the first time in 4 months. In the past during other b2b contractions we have not made a big deal about it because bookings were rising and the contraction in the ratio was due to strong billings.
This time we have a declining ratio and both bookings and billings down. In other words, we have a tentatively negative economic signal. The most recent major economic signal we had was the much celebrated Payrolls report that we noted had simply gotten back on its sideways trend thanks to the bloated services sectors (i.e. the ‘back end’ of the economy) taking advantage of the strong USD used by US consumers.
What was our bullish economic Canary in a coal mine in January 2013? It was the Semiconductor Equipment ramp up with a side of an up-triggering Palladium-Gold ratio. Now both canaries are chirping a different tune in November of 2015. The SEMI signal is tentative, but the PALL-Gold signal is mature.
As you know, I am not going to dogmatically tout a preferred case but I am going to tell you what I see. What I see is 1 bird singing a bearish song and the other just joining him in October. There are obviously many other things to watch for going forward as well.
Our biggest picture plan revolves around economic weakness and confidence in the Fed eventually falling away as people come to see them for what they are; (IMO) hacks with few real tools for economic management other than inflation by various means.
Back on message, here is the full report from SEMI and a quote:
“Both bookings and billings weakened for the second consecutive month; however, year-to-date bookings and billings levels remain above last year’s levels,” said Denny McGuirk, president and CEO of SEMI. “SEMI will update its 2016 equipment outlook during SEMICON Japan next month.”
