Consumer Confidence (or the lack thereof!)

This morning Consumer Confidence data for August was released. Before I tell you what it was, you probably can guess what it was. First, July's data. It was revised from 59.5 to 59.2. Expectations for August were for it to come in at 52.0, a significant drop from July. But what was not expected was just how bad it would really be. Are you ready for it? Well it came in at 44.5! That is a huge drop.

In spite of all the hype in the stock market these past week or two that these are the time to be buying, Consumers are telling us exactly how they think this economy is doing. The Conference Board conducts a monthly survey of 5000 households to ascertain the level of consumer confidence. The report can occasionally be helpful in predicting sudden shifts in consumption patterns, though most small changes in the index are just noise. Only index changes of at least five points should be considered significant.

Below is a chart from WallStreetCheatSheets which shows this data from 1985 to May of 2011. You can see where this month's data would be on this chart as I have placed a red X on where it came in. There is also a Table which shows averages over a number of years to put this data in context.


Let's face it, anything less than 50 means that the data is measuring Consumer's Lack of Confidence. That is running at 100-44.5=55.5! Now I have some stocks I want to sell ya, as they are cheap right now, right!?

Durable Goods Orders for June 2011

Data released at 5:30am PST for Durable Goods Orders for June came in at -2.1% reading. This compares to a reading of +1.9% for May. See the chart below of Durable Goods Orders by Month going back to 2008 Monthly, from Financial Sense web site. The Monthly data on the chart is in grey bars on the chart and I have included today's reading with a red X. You will notice the yearly trend is going down, not up, as you would expect with an economy recovering from a recession.


UPDATE: 8:06am PST
Haver Analytics has posted a chart of Durable Goods orders which go back further in time, which I have posted below. Notice that we have only gone below the zero point one other time since the 2008-2009 recession.

GDP: Are we in decline and, if so, who's to blame?

I have wondered, as many of my readers have, about the apparent decline of our economy in recent years. Many, especially the far right in the Republican Party, have blamed President Obama for this and many on the left have blamed George Bush for this. Are these points of view true? Let's look at the facts over time. The fact is that our economy has been in decline now for many years. The first chart below shows GDP for the period of 1960 to 2011. I have drawn red lines at the top GDP levels after eliminating the highest value for each line segment. So for the period of 1960 to 1979, I did not draw the line at the one highest point of 15%, but rather of the several lower ones at 10%. Imagine that, a several quarters of 10% GDP or greater. back then we were just like China today!

You can see from the 3 red lines that we have steadily dropped in GDP and that the years from 2000 to 2011 are the lowest GDP periods in the past 50 years. In fact the lower GDP period has mostly been for all of the years of the Presidency of George W. Bush and the years with President Obama. The facts are still unknown whether President Obama will be any better or worse than President George Bush was. Right now they look the same to me, but there isn't enough data to be conclusive. Let's look a little closer at the years from 2000 to 2011 and see more closely where we are. The next chart below shows this period. I'll let you interpret what you are observing here. But before you look, be aware that your point of view will determine what you see! Be honest with yourself here, as it is a great learning point.

What have you learned? Can you be honest with yourself and be an objective observer or are you biased to your original point of view. I say this to both Republicans and Democrats. Dare to make a comment on your learning? I invite you to make a comment below. But let us know if you are a Republican or Democrat in those comments. It makes the comment so much richer and interesting.

One last chart. below, I just had to post and this one is of GDP since 1947. It is similar to the chart from 1960. Charts constructed from data fromTradingEconomics.com.

Thanks! And while you are at it, take my Mini poll on the right margin.

Market and political comments for July 7th, 2011

Weekly Initial Jobless Claims data came in at 418K compared to last week's data of 428K and an expectation of 425K. This was better than an expected number of 425K and clearly better. The big question is can we get down below 400K again? The answer to that is not if, but when.

According to CNN Money today, " ADP numbers showed a gain in Manufacturing jobs in the Private sector for June of 157,000 new jobs. This is 4 times the number of jobs gained in May. Smaller businesses led the charge in June. Small businesses, defined as those with fewer than 50 workers, added 88,000 jobs in June. Medium-size businesses, defined as those with between 50 and 499 workers, gained 59,000.

Larger businesses, with 500 or more workers, added 10,000 jobs last month."

All US market Futures are up this morning in premarket. It looks like we are making a final push to the previous high of 12,800 before we correct. Clearly a "W" pattern, or Head and Shoulder pattern is forming and may be the last necessary ingredient before the market has its correction. But I have been waiting for that for far too long and I know it.

It looks like the President Obama is blinking by setting a precedent and putting both Social Security and Medicare changes on the table to negotiate with Republicans. This was not a good move at this time as it sets up future hostage situations when the debt ceiling must be raised, as inevitably it will. I am very disappointed in this man on some things and this is one of them. He doesn't seem to have any backbone in him. Very upsetting for Progressives in the Democratic Party. He doesn't have to negotiate on this, when almost 80% of Americans favor leaving both programs alone and untouched. That type of tinkering is best left until after the 2012 election.

To use a biblical reference, he is willing to cut the baby in half. He seems more interested in negotiating that in principles. I hope to God we never are in a situation with this President when we are looking at a military situation where surrender is an option the other side puts on the table.

Summary of yearend 2010 and looking at 2011 in the stock market indexes

One thing from 2010 to report on the last day of Trading. In the first 1/2 hour to 1 1/2 hour, the Put to Call ratio was extreme at 1.33 to 1.37 as reposted by the CBOE. That was actually a buy signal in the morning and that followed through as the Put to Call ratio closed at about 0.99 for 2010 in the final minutes. The last time it was that high was Nov. 29th. The Dow closed at 11,557 for 2010, the S&P500 closed at 1257, while the Nasdaq Comp. closed at 2652. Watch the markets rise again in the morning.

The 52 week high for the Dow was 11,625.
The 52 week for the S&P 500 was 1262.
and the 52 week high of the Nasdaq was 2675.

As you can see from the 52 week highs, we closed near the highs on all 3 Indexes. The best way to see where the market is headed is to keep track of the 9 day Moving averages. For example, as you can see from the chart below, the Dow & S&P 500 have managed to stay above the 9 day MA for the entire month of Dec. Any cracks in trend will show up here first. The Nasdaq was the only index during December, of the 3 Indexes, to go below the 9 day MA and that happened only on Friday. The markets will keep breaking below more Moving Averages if we are headed down. But if we break below them and manage to rise back above in a day or two, we won't be going down yet.



Let the Games begin for 2011. Good luck to all.