Posted on 06/21/2009 3:30:10 PM PDT by BenLurkin
Americans may have poured money back into stocks, but market watchers worry that they aren't spending enough on other things -- like clothes, cars and computers.
This week, the average U.S. consumer returns to the spotlight. The Commerce Department reports on May personal spending and incomes on Friday, the same day that the University of Michigan reports on June consumer sentiment.
Recent data has shown that Americans' confidence is climbing but their spending is still lagging. Personal spending has fallen for eight of the past 10 months. Consumers are the primary driver of U.S. economic growth, and if their spending doesn't rebound, the market can't, either.
"If you take a quick snapshot here, the consumer is still looking to pay down debt, increase their savings, and curtail their consumption," said Joseph V. Battipaglia, a market strategist at Stifel Nicolaus & Co.
The stock market has been waffling since the beginning of June after going gangbusters for nearly three months as reports indicated that the financial industry is stabilizing and the economy's slide is slowing. The Dow Jones industrial average remains up 30.4 percent from the 12-year low it hit on March 9, but it is now down 3 percent from a week ago, when it reached a five-month high of 8,799.
"Investors are fairly comfortable with the notion that the Federal Reserve has accomplished what it set out to do last fall: That it's stabilized the financial system," Battipaglia said. "However, what you're left with is the aftermath of it all."
The consequences of the government's massive stimulus programs and bailouts so far appear to be a weak dollar, rising interest rates and climbing commodity prices. Crude oil and 30-year home loan rates retreated modestly last week, but only after hitting their highest levels of the year a week earlier.
(Excerpt) Read more at finance.yahoo.com ...
All of which makes me say: “No, really?! Duuuuuuh.”
Consumer spending used to account for 70% of the GDP. Consumers are now seeing their wages, home equity and stock-based retirement plans fall at the same time that consumer credit reduced or withdrawn.
Hence my assertion that there is no sustainable turn-around in the economy until we see at least *some* of these factors turn around. None of them are as of yet.
I have an exciting NEW idea! What if we encourage Americans to borrow lots of money at attractive rates — maybe taking overpriced real estate as collateral — and allow them to lie about their ability to pay it back?
That should reinflate that ol’ bubble pretty well. Ya think?
No sh!t Sherlock!
Again I say, Jimma' Carter on steroids Obama is.
IF so, they better be prepared to lose it.
This “consumer” isn’t buying anything other than basic, bare necessities as long as the Obamanation occupies the White House.
The consumer is never going to borrow so much again, just to consume. Better get used to it.
Sorry, we need jobs first. Outsourcing and “free” trade has consequences.
There’s screaming deals on everything due to working off the over-leverageing.
I’ve bought a (beautiful used) house and (almost new) car at prices I wouldn’t have dreamed of 2 yrs ago.
$45,000 car with 16,000 miles for $15,000.
No wonder nobody is buying new stuff. Until this inventory is worked off, you won’t see the inflationary spiral that will inevitably follow due to the money printing.
Quite so. And as we begin to see the modus of this administration as being bringing the evil, greedy wealthy down to the level of the poor and downtrodden out of populist (and that’s really the wrong word, it’s “get whitey”) spite, the result will surely be a lowered standard of living for everyone other than a few priveleged elite. Of course, that will be the snide counter from the left, that it was the GOP who fostered the priveleged elite, rich bastards that they are. Or were. It’s remarkable and will be telling to see it play out. With so much demand “pulled forward” via very low interest rates and super easy credit during the last bubble, it’s very hard to see how a robust recovery can occur, now that credit is tougher and business conditions have turned prohibitive. Think: Car sales down from 17 MM to 11-12 MM.
The consequences of the government's massive stimulus programs and bailouts so far appear to be a weak dollar, rising interest rates and climbing commodity prices
That's what I call a "stable financial system." Right.
Barney is that you? Maxine?
I’m thinking more like 10mm sustainable rate. I’m not pulling this number out from ‘twixt my buttocks — this is a number that Toyota’s management thinks is sustainable in the US going forward.
This was one of my major problems with the “recovery plans” promulgated by GM/Chrysler last autumn — they kept babbling about a) the US auto market returning to 16mm units per year, and b) increasing their share of this market!
Talk about drinking one’s own bong water. These guys were out to lunch.
“These guys were out to lunch.”
And still are of course. I’m naturally pessimistic, but it’s hard to see a way out of this economic funk. I don’t know whether it will be the simple passage of time; a change in sentiment; a reset of stock market expectations so that anything not implying imminent collapse is big-time bullish. (We’re already at “no bad news matters”) But just using those car numbers, for an economy 70% consumer-based to make a smooth transition to 10 MM/16 MM; eg, to lose 3/8ths of its ooomph, all the while shouldering the tremendous debtload and fighting an administration possibly the most anti-business in history; is smoking the strongest of hopium. It’s a damn big, muddy cesspool of a hole to dig out of.
And I’m the flip side — I’m optimistic and really don’t perform well in short-side markets. In this market, I’ve made some money on the short side, but it is difficult because I’m not disposed towards shorting - even in the dot-bomb melt-down, where I had firm, unequivocal knowledge that many of the dot-bomb companies were run by idiots, I didn’t short them; I just moved to cash.
This time tho, I see very little in the fundamentals that makes me want to go long. Very little. And these “green shoots” idiots... I keep looking at the exact same data they’re looking at and I think that most registered investment advisors, CFA’s and others should simply be fired and prohibited from ever opening their mouths again. The divergence between their “analysis” and the reality down deeper in the stats is so far apart, there can be no other explanations other than a) they’re utterly incompetent or b) they’re liars and frauds. Either way, they should lose their licenses.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.