Editor’s Note: Chuck Butler says the US is already in a recession. He sees the recent contraction of the manufacturing sector as a clear indicator that the economy is in decline. Chuck, presumably, wasn’t aware of today’s ISM factory index update, which registered growth for the first time since January.

But the forthcoming closure of a Chrysler plant in Chuck’s home town underscores his belief in the benefits of diversification…

Profit Taking Dominates the Day

By Chuck Butler

Eli Broad, the Billionaire investor, says that the “U.S. economy is in the worst period of his adult life and that a housing market recovery remains several years away.”

I agree… The 70’s were pretty rotten in my memory, except for the music, (pre-disco), even the clothes were pretty bad… But at least as a country we were still a creditor nation, and we as individuals were “savers”… The money & credit creation machines hadn’t even been thought of yet! We were fighting a war… Same as now… Inflation was everywhere… Same as now… There are lots of similarities to that rotten decade, with the Deficit problem and credit problem sticking out like sore thumb as differences.

Yesterday, the Chicago PMI (manufacturing index) surprised on the upside, but was offset by a weaker Milwaukee performance. Today, we’ll see the ISM, national pulse of manufacturing, which should remain below the line in the sand, 50 number. Below 50 indicates contraction… And that’s where manufacturing has been for months now, which is what initially led me to believe we were in a recession, even though most economists still don’t consider this to be a recession… I still say that when the dust settles and all the cards have been played, the National Board of Economic Research (NBER), the people that decide when we WERE in a recession, will confirm my claims… That’s the sad part of the deal though… The NBER tells us about recessions after we’ve experienced them! Great! That’s sort of like having someone tell you that you have a hatchet in your forehead… No duh!
And more bad news for the U.S. economy. Yesterday, Chrysler announced that they were going to shut down the mini-van plant in my little river town… That’s a ton of jobs that will be gone… Speaking of my little river town… Years ago, I was an elected official of that town… And I fought for diversification of our revenues, which at the time was dominated by the Chrysler plant… My town is now ready for this loss of revenue, not that it will like it! But diversification! See… It’s the key not only in your investment portfolio, but with city revenues!

Source: Profit Taking Dominates The Day