Consumer sentiment measures the DOW not the economy - Eric Janszen

[occdude]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Freedom without responsibility is Tombestone ie.anarchy. Thats why socialism doesn't work, It doesn't allow people to act and react.

[jk]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

responsibility without freedom: e.g. taxpayers paying bankers for the bankers' mistakes.

[ax]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Another case in point today, or perhaps it worked in inverse order:

http://www.marketwatch.com/story/con...er-jobs-outloo

"A reading on U.S. consumer confidence surged to 54.9 in May from an upwardly revised 40.8 in April as expectations for jobs improved, the Conference Board reported Tuesday. The gain is the fourth-largest in the 32-year history of the survey..."

Jobs? Didn't those numbers, along with housing, just get worse?

[rjwjr]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Remember the thread (the initial post of which I have copied below) that noted that Goldman's activity was likely steering the direction of the market? If true, wouldn't this mean that very few of us sheeple have a horse in the DOW race any longer? And if very few sheeple have a horse in the race (stock ownership), then why would the sheeples' sentiment be so tied to the variations of the DOW?

04-23-09, 01:58 PM

johnny531 iTulip Select Premium Member Join Date: Mar 2009 Posts: 3

The Goldman Sachs Stock Exchange? Zero Hedge points out that, for the month of April, Goldman Sachs accounted for over 50% of NYSE member principal transactions. If I'm reading this right, they accounted for about 25% of all shares traded this last week. I'm thinking that, with their direct line to the treasury, this rally will only crash when they let it. http://zerohedge.blogspot.com/2009/0...ctions_23.html

[ThePythonicCow]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

I'm thinking that, with their direct line to the treasury, this rally will only crash when they let it.

Agreed. Some of the short term technicians that I follow are seeing, in their various special ways, this same thing. Someone is driving this thing, and it's not the usual investors at large.

There is nothing wrong with your television set. Do not attempt to adjust the picture. We are controlling transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We will control the horizontal. We will control the vertical. We can roll the image, make it flutter. We can change the focus to a soft blur or sharpen it to crystal clarity. For the next hour, sit quietly and we will control all that you see and hear. We repeat: there is nothing wrong with your television set. You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to... The Outer Limits.
— Opening narration – The Control Voice – 1960s

[CanuckinTX]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Not sure I would discount the contribution of the little people to this rally.

Today I had my quarterly visit from the local Edward Jones rep who has been calling on me for well over a year now (these are the neighbourhood financial advisors that go door to door and I made the mistake once of asking for some info on a Muni bond which is what he was pushing again today).

Anyway when I asked how he's doing he said it's his best month ever and when I said the rally probably isn't hurting he laughed and said that has something to do with it.

So this all kind of fits for now - the market is up, sentiment is up, which begets more of a rally, etc etc. Meanwhile my sister in law's house estimate in Brea, CA just fell another $150k on zillow in the past 30 days. It's all fun and games just like housing was until reality creeps back in.

[metalman]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

consumer sentiment measures stocks and stocks measure consumer sentiment...

Stocks Jump After Consumer Confidence Level Surges

everyone's afraid they are missing 'the big rally'... so far is only 500 pts higher than ej predicted back in nov. 2008.

gosh... do i have the sack to short it?

[ax]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

consumer sentiment measures stocks and stocks measure consumer sentiment...

Stocks Jump After Consumer Confidence Level Surges

everyone's afraid they are missing 'the big rally'... so far is only 500 pts higher than ej predicted back in nov. 2008.

gosh... do i have the sack to short it?

Have no fear Metal, if you're wrong just means you have to work another year or two, assuming there are still jobs in the future

[bart]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

responsibility without freedom: e.g. taxpayers paying bankers for the bankers' mistakes.

As long as we're already off topic and no one else has posted it - it's also not unlike taxation without representation.

[stockman]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Green Shoots or Smoking Weed?

"But that is not the point I want to make. In December 2006, only a few
months after the peak of the housing bull market, the total value of US
residential property stood at $21.9 trillion. Prices have dropped by 31%
since the end of 2006, so the estimated value today is about $15
trillion; however, the mortgage debt remains more or less unchanged
and stands at $10.6 trillion. In other words, whereas debt-to-equity in
the US housing market was 48% as recently as in December 2006, it is
now 70% and will rise to 80% once house prices have mean-reverted.

Wealth is extremely skewed

Although painful, a rise in debt-to-equity of that magnitude would

actually be manageable if it weren’t for the fact that income and wealth

in the US is extremely skewed. The top 1% of income earners in the US

account for a whopping 23% of national income while the median

household has seen no improvement in income for the past ten years

(see chart 1). Wealth is even more unevenly distributed. Almost 34% of

all wealth in the US is held by the wealthiest 1% of the US population.

The same picture emerges when you look at home ownership. Almost

one-third of all US households have no mortgage. If you adjust for that,

the 70-80% debt-to-equity ratio suddenly becomes a major challenge

because it means that the two-thirds who do have a mortgage already

face a debt-to-equity ratio in excess of 100%. Even worse, once the
mean reversion has run its course, two-thirds of US households will be
facing a debt-to-equity ratio of 120-125% on average.

US consumers are broke

That is a shocking number and it blows a huge hole through the heart

of the green shoots campaign so valiantly promoted by most of the

mainstream media in recent weeks. The poorest two-thirds of US

households are effectively broke, whether they realise it or not."

Absolute Return Partners 053009.pdf

[Slimprofits]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

Barry R. covered this subject on May 29th and he cites an article from marketwatch.com that is suspicious to say the least. Also, another good chart:

http://www.ritholtz.com/blog/2009/05/confidence-game/



Chart via Bianco Research, May 2006

[metalman]

Re: Consumer sentiment measures the DOW not the economy - Eric Janszen

interesting from 2 yrs ago...

A quick tour through the DOW and consumer confidence numbers going back to the pre-bubble crash starting July 1998 reveals a peculiar disconnect that we discuss later. Our graph includes a relative unemployment rate to show the correlation between expected unemployment, as indicated by consumer confidence, and actual unemployment.

A) Fall 1999: The stock market bubble is over for the DOW.

B) Winter 2000: Consumers don't catch on right away that the previous few years of were not a "New Era" but were in fact the result of a stock market bubble. Consumer confidence peaks a couple of months after the DOW, then dips a couple of months after the beginning of the bear market. (April 5, 2000 iTulip notes: "A bear market is born." [http://www.itulip.com/urgentmessage.htm#Bear]. Consumer confidence lags the DOW in both directions.

C) Fall 2000: After about nine months in denial, after portfolios have been marked to market, gradually reality sinks in: it was a bubble and it's really over. Mass layoffs (not shown) rise, increasing the prospect of rising unemployment. Consumer confidence gets hammered.

D) Winter 2001: Unemployment indeed begins to rise, in line with the previous decline in consumer confidence.

E) Spring 2001: Consumer confidence levels off as consumers believe the worst is over. The DOW declines as the U.S. economy enters a brief recession. Contrary to popular belief, market declines are coincident not leading indicators of recession.

F) Summer 2001: DOW bear market leads a decline in consumer confidence.

G) Fall 2001: 9/11 attacks. Markets and consumer confidence plummet. (FYI: I was just about to close a round of venture funding for a company I was running when 9/11 occurred. That was at the end of a nine month process. Needless to say, the funding was withdrawn and I had to start over. Many start-ups failed due to lack of funding in this period.)

H) Fall 2001: DOW bottoms along with commodity prices (not shown) and CPI inflation is negative in one month and near zero for the quarter(not shown). Fed talks openly about the threat of deflation. Printing presses running full steam. (iTulip explains that the gold price appears to have bottomed [http://www.itulip.com/gold.htm].)

I) Fall 2001: Consumer confidence bottoms, lagging the start of a DOW recovery by several months.

J) Winter 2002: DOW hits a bear market rally peak.

K) Spring 2002: Consumer confidence peaks after rising as the impact on economy of 9/11 is not as bad as expected. Decline in consumer confidence lags the start of another DOW decline, as usual, by a couple of months.

L) Summer 2002: DOW makes its first bottom.

M) Spring 2003: U.S. launches world's first "pre-emptive war." Markets and consumer confidence plummet together. Consumer confidence bottoms for the economic cycle. (FYI: I'd just closed my 3rd round of funding for the company. We have our first flat quarter as sales activity stops. Orders are not cancelled, so the next quarter revenues increase 85% versus 40% as per the previous eight quarters.)

N) Summer 2003: Unemployment peaks for the economic cycle. Note that just as consumer confidence declines before unemployment begins to rise, consumer confidence rises before unemployment begins to fall.

O) Winter 2005: Consumer confidence remains range-bound until Oct. 2005.

P) Fall 2005: Hurricanes Katrina and Rita hammer consumer confidence but have little impact the markets.

Q) Spring 2007: DOW peaks over 14,000 after rising 15% for a year.

R) Summer 2007: Consumer confidence has changed only gradually over the period. The divergence of the DOW and consumer confidence over such an extended period is unusual.

Conclusions

1) The factors that have been driving the DOW up for the past year have not been reflected in consumer confidence because the rise has been driven by factors

DOW Dissonance