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Archive for the ‘Consumer Confidence’ Category

It really is amazing to me as I look over the latest consumer confidence numbers.  The prior month’s reading showed a better than 50% surge in confidence. This last month reported a 34% higher than expected surge again in consumer confidence.   The reason for the optimism, reports the conference board, is the “recent jumps in the stock market, low mortgage rates and smaller job losses.” 

Following the report of the confidence numbers, we see that home values fell 18% last month as foreclosures surged.  This sure doesn’t inspire confidence.   My favorite part of that report is the optimism over “smaller job losses.”  Remember that the stock market had a very good day once the May unemployment numbers came out showing a much better than expected number.   The loss of jobs was nothing like everyone feared. Of course, the Government estimated that 226,000 jobs were created that month.  That goes a long way to make the end result “look” as if the unemployment numbers are turning around.

So, here we go once again.  Although the consumer is facing enormous debt problems, the country’s future has been a mortgage away, foreclosures are in crisis mode, real estate is nowhere near the bottom, unemployment is not getting any better, etc., the consumer is confident.  Once those numbers were released today the market took off.  Investors were simply giddy over the new found confidence.   I realize that some of you might wonder when I might get some confidence back in these numbers and the system.  It will be tough for me to get overly excited when the system is broken and the numbers are highly suspicious.  Do you really believe that there is that much confidence?  Well, the stock market is making a big bet that those numbers reflect reality. 

There is a huge confidence bubble being created.  I wouldn’t want to be heavily invested when that bubble bursts.

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Today offers us a good example of what happens when the illusion of confidence is broken.  Let’s start with the headlines this morning:

Stocks Sink as Retail Sales Slide

You mean to tell me that people aren’t buying things?  I am shocked!!  I thought that everything was recovering and OK.  

Then there was this headline –  U.S. Foreclosure Filings Hit Record for Second Straight Month

You mean that President Obama’s programs aren’t fixing the foreclosure problem?

Of course, as I write the stock market has a decline of -1.78% for the early morning.  Investors act surprised because of the creation of false hope that is propagated by Wall Street, the media, and the politicians.  This is also why I believe that we will continue to see this bear market for a longer timeframe than most expect.  This is a game of confidence.  The establishment wants everyone to think that there is no risk and we are on our way to recovery.  Call me skeptical – I just cannot imagine that a country that is still stuck in a financial crisis is all of the sudden recovering from problems that were created over decades. 

The real danger occurs when the establishment cannot even build false hope anymore. 

As far as price levels go, watch the S&P 500 today if we decline down to 875.  That will be a key price level for the stock market to stay above if there are any hopes of this current bear market rally staying alive.

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The market is getting all types of signs of confidence.   Everyone with a vested interest in this turning around (with the exception of President Obama who still doesn’t understand that the market matters) is doing everything possible to build confidence. 

First, you have Citigroup’s CEO, Vikram Pandit, sending out an “internal” memo stating that they were going to make a profit during the first few months of the year.  This would be the first time since 2007.  Of course, this doesn’t take into consideration all of the losses from the toxic mortgages that they have on the books.  Conveniently, he didn’t really know that number. 

Newsflash, I have $1,000,000 dollars in the bank account and I owe $1,200,000 to other people.  Just because I have $1,000,000 doesn’t make me a millionaire.

However, this made the market giddy and confident. Then my favorite confident booster from the week – General Motors said that they didn’t need anymore taxpayer money. Well, that is good to know that we dodged that bullet.  Maybe, just maybe, those billions of dollars are still keeping them in business and they don’t need anything “this” week.  After all, we know that they are not selling cars.  So, it is not like they have tons of money coming in from someone other than their creditors (taxpayers).  GM is saying, “please stop making our stock go down.  We don’t need your money until next week.”

No, last week’s rally was (in my opinion) nothing more than a technical occurrence that just happens when the stock market goes through these big declines. 

Nothing really differs from what I wrote last week about this stock market rally. I think that this is a bear market rally.  I have been looking for a pretty impressive bear market rally that could go as high as 30 to 40%.  However, I don’t think that this is the beginning of that rally.  It would not surprise me if we see the selling start up again.  If the market continues to go up this week and reach some of the price levels I wrote about last week, we might be in for “the” bear market rally and I would clearly be wrong.

Then there was all of my favorite quotes:

The legend in investments, Warren Buffett, said the economy has “fallen off a cliff”  (much like the stock from his Berkshire Hathaway company).  I guess he needs to justify his losses (although I do agree with him).  Now that we see he can lose money like the rest of normal Wall Street people, do you think it is time that CNBC stops immortalizing the guy?

Fed Chairman Ben Bernanke said that he believes we can be out of the recession by the end of 2009 if we solve the problems.  OK, he came up with some very eloquent reason why he should be right.  Cutting through everything he said, the interpretation would be  – “we will be OK if we solve the problems.” 

If Tony Romo leads the NFL in quarterback ratings, we have the top defense in the NFL, and our running back tandem is the best, we will probably win the Superbowl.  These are the kinds of things that are intended to build confidence.

The problem is that there is very little to be confident about as the Government continues to address every other problem except the one that is bankrupting America.  The cancer is setting in and no one is administrating chemo.

For this week, the key will be for the S&P 500 to stay above 741 and to possibly close the week over 800.  If that were to happen, there is something to like about this stock market rally.

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