August 30, 2006

Consumer Confidence Crashes (we'll have a blue, blue christmas without you)

More of tomorrow's headlines today at HP. In the end, perhaps it's a good thing that Americans are going to cut back on the consumer spending orgy, especially during the Holidays, which I've always found disgusting.

Full disclosure: I'm short retailers PSUN, HD, LOW, RTH, AMZN and CC (so far)

A sharp decline in sentiment may signal a grim holiday for retailers and trouble ahead for the economy

Retailers, prepare to get Scrooged this coming holiday season. Consumers are becoming increasingly pessimistic about the economy as they worry about jobs, the weakening housing market, and high oil prices.

Americans have already cut back on entertainment, eating out, and all sorts of discretionary spending. The report may signal trouble ahead for consumer spending—and perhaps for the overall economy.

Early reports of August retail sales show that shoppers of all stripes are already cutting back, from the lower-income shoppers at Dollar General (DG ) to the more affluent who buy their linens and dishes at Williams-Sonoma (WSM ).

P.F. Chang CEO Rick Federico says he hasn't seen anything like this for over 15 years. "There have been other ups and downs, but none where the industry is seeing discounts fall across the segment for a prolonged period of time," says Federico.

With all these worries weighing them down, it's hard to imagine consumers opening their wallets wide during the upcoming Christmas season. They may have to make due with other expressions of holiday cheer.

53 comments:

Anonymous said...

People are still eating out, last night I was driving around and all the local places to eat were full at 700pm. The one place that has slowed down is Home Depot, I love it walking around at night no shopping carts with crazed weekend warriors. Oh also I drive by auto lane and it seems really slow for car dealers.

Anonymous said...

"perhaps it's a good thing that Americans are going to cut back on the consumer spending orgy, especially during the Holidays, which I've always found disgusting."

wow Keith. You seem to be a really bitter person. Maybe you are a jew, and that is why you feel that way about the "holiday". If not, then you are just screwed up and need to get a grip. People can do whatever they want over the holidays.

Bake McBride said...

Consumer confidence reports that get released each month are at best a third tier economic indicator.

Look at what happened this summer with gas prices...If you read the consumer polls about gas prices you would think no one would be on the roads....but yet, they kept driving....to work, to vacation spots, to the store.....

Again, I think the economy will slow...and housing will get crushed...but no gloom & doom (Unless you put 0 down on a house and it corrects 15%)

Anonymous said...

What's the differance if you put 20% down and it corrects?

Anonymous said...

Declines in asset values have traditionally led to consumers pulling back their spending. When the decline is in housing values the pullback has been more dramatic than when the decline was in other asset classes (like stocks or gold or bonds) per an article I read on the Daily Reckoning. I guess we'll see if that bears out in this decline - get it "bears" ??? HA!

Anonymous said...

Just bought. I have bad credit(hurricanes and a fire) and had to live somewhere.

Wanted to protect the buying power of my dollars and wanted secondary 30 year fixed before the Banks tightened and I cound not get bought at all!

I also think interest is going to keep going up.

I put $50,000.00 down and financed $102,000 on a short sale (beautiful new) condo. Condo appraised at $180,000.00. My payment, Hoa, Taxes and Insurance combined are less than the going rent downtown.

I am soooo happy as I am never going to sell my postage stamp penthouse, no matter what.

Now I wait for the dollar to drop and my mortgage debt becomes lighter and lighter.

Thanks HP!

nero said...

all americans care about is looking healthy, and wealthy, and strong.

it's all a facade, and the rest of the world knows it.

this country is full of people who are fat, lazy, and stupid.... I can't wait until we try to draft an army to fight ww3 and see what we have to pick from!

hahahahahahahahaha

thanks madison ave., and wall st.!

Anonymous said...

maybe Americans will cut back on all the shopping and realize what Christmas was all about

Anonymous said...

"Look at what happened this summer with gas prices...If you read the consumer polls about gas prices you would think no one would be on the roads....but yet, they kept driving....to work, to vacation spots, to the store....."

That's because they are borrowing more on credit cards and HELOCS. I saw a graph on Piggington or elsewhere about the growth of consumer debt in the last 2 years and was shocked. It was far worse than I imagined. THERE WILL BE GLOOM AND DOOM! I don't see any way around it. That debt has to be paid off or you allow yourself to be financially wiped out via BK to avoid the payback : (

The Thinker said...

Hey Anonymous, you don't have insult Keith for thinking Christmas consumerism is disgusting, because he is right. You don’t have to be bitter to realize that it is silly to spend every penny you have and then go into debt to buy everyone you know some stupid chachkie that will hit the garbage bin the second you turn your back. And another thing, you seem to be implying that Jews are somehow against Christians celebrating Christmas. You are wrong again. Jews also get carried away with the consumerist Christmas season.

I have never heard a religious Christian complaining that there should be more buying and spending for Christmas, in fact, if anything, I have heard them say that the consumerism interferes with the religious message.

The Thinker said...

Keith, when are you going to produce your first Housing Panic Podcast?

Anonymous said...

One of my worries about the "housing bubble" is that people won't have money left over for fun. Even if folks can pay off their mortgage, it practically takes all their money.

Bake McBride said...

**Even if folks can pay off their mortgage, it practically takes all their money.***

People with adjustable mortgages will soon be in agreement with you.

Anonymous said...

prediction: as this asset bubble (housing and real estate) unravels and the consumer reacts to same, the two to three year boom in oil will turn back toward a more normal state (at minimum) or become an absolute bust (at maximum) ala 1981.

devestment said...

Cost of goods for my antique shop are coming down due to increased supply while cost of goods for my newly manufactured house wares business are going up. As for sales, big ticket items are soft and inexpensive small items are moving briskly.

borkafatty said...

especially during the Holidays, which I've always found disgusting

I friggin here you waste of time money and resourses..it is christmas in my house every weekend..(not latly tho)time to cut back.

100% agree Keith, and i hope and pray the retailers loose their shirts..enough is enough

dvo said...

"People can do whatever they want over the holidays."

That's right -- including finding the American consumer spending orgy during the Holidays disgusting.

Why, people are also free to speculate whether someone else is Jewish. Why, they're even free to dress it up real pejorative-like ('a jew') if they are into that sort of thing.

Screwed up indeed. Get a grip indeed.

Bitter person indeed!
Merry Xmas! Mazel Tov!

grim_reaper said...

it's over, folks, except for the blaming, shouting, gnashing of teeth, and shedding of tears and blood.

at some point things will get bad enough that americans will "select" a series of american hitlers (caesars) of which perhaps boy bush is the first one, albeit operating under the direction of the real fascist, "president cheney".

many political pundits are anticipating the dems sweeping the house and senate, but i don't expect it. the dems are virtually impotent, even with boy bush's approval rate about as low as it ever gets.

instead, i expect rove and his nazi operatives to steal the election again, resulting in securing once and for all a one-party fascist corporate-state, giving the green light to the fascist militarists to expand the war in the middle east and beyond.

at some point china and russia will have to push back, resulting in deteriorating relations between the US-UK and China. then the fit really hits the shan, and we are all fooked.

but it was a hell of a bloody party while it lasted, eh, mates?

cheers!

gary_shilling said...

A. Gary Shilling: End of Bubble Bailouts

Happy for you said...

Good to hear that screwed bubble sitter got a roof back over her head.

Don't count on it said...

"the two to three year boom in oil will turn back toward a more normal state (at minimum) or become an absolute bust (at maximum) ala 1981."

Nope. The price may decline short term as speculators unwind and chase the next hot thing. But in the big picture the world supply of oil is declining and demand is rising. Peak oil is real.

the_grinch said...

xmas hasn't been a christian holiday in 50+ years. americans' religion, btw, is not christianity; it's crass hyper-consumerism and hedonism.

therefore, a borrowing and spending and gluttonous orgy during the turkey day and xmas season is perfectly reflective of what americans deeply believe and enjoy.

i hate xmas so much that i leave the lower 48 each year and head to hawaii, mexico, the caribbean, or costa rica! but, you see, i'm still spending lots of money and being a hedonist. :-D

Anonymous said...

The slowdown is not limited to consumer goods. My business sells to aerospace and defense contractors who are doing R&D. Last year we had record sales as it seemed every company was going crazy with R&D spending. The first quarter of this year was good too but we hit a brick wall in Q2, and now we are a big drop off in "feelers" for orders in Q4 when the new federal budget money comes in.

Anonymous said...

Is the ground crumbling beneath aggregate demand, keith?

Anonymous said...

from:
http://www.financialsense.com/fsu/editorials/laird/2006/0830.html


The big gold story right now is the impending economic recession or depression coming right now upon the US, and the end of the post WW2 prosperity boom in the West.

I don’t feel that it is a large jump for me to say the US is just about to enter a depression. Not a recession but a depression. Whether the rest of the world follows is another issue. To give you an idea of what a depression is, look at the recession of the early ‘90s. That was quite severe, but in no way a real depression. Or look at the micro recession post 911 - severe and deep world wide but short. The depression I foresee for the US, commencing about Jan 2007, is a long deep contraction that will ultimately be called the greatest US downturn since the 1930’s. It might even exceed that in severity.

Anonymous said...

Poor George Bailey. This time around the FDIC takes over the New Bedford Building & Loan Assoc.

Metroplexual said...

Small tidbit of trivia. In NJ there is a town called Pottersville. By ordinance they officially change the name to Bedford Falls every Christmas Day.

Anonymous said...

Agree that there will be a deep recession a la 1980-1982, maybe worse. More troubling for america, we may see the end of the majority middle class society, not many good paying jobs beign created for barely literate bubbas in factories anymore, just look at Michigan. The question I have is will there be an "event" to signal the start of it like a good old fashion stocj market crash or currency collapse, or will we just slide into it and not be able to get out?

Anonymous said...

don't count on it

Go take a look at heavy sour crude reserves (not the light sweet stuff that gets all the press - this is her ugly sister), capacity to refine, Valero Energy investments made two to three years ago in refineries with the specific capabilities for refining such oil, etc. then maybe rethink your position.

Joe Homebuilder Six Pack is running out of money quick and so are all the folks who have been riding on his back for the past five years (or so). No cash equals no sales. Debt up the whazoo from an orgy of credit driven spending has a financial reckoning day even if the credit was extended at low rates (historically speaking).

Anonymous said...

US depression = worldwide depression

Who do you think buys all that crap from China and outsources to India?

When America sneezes, the world catches a cold

Anonymous said...

how about reigning in the jew-baiting, there, Mel Gibson?

This is a lapsed catholic speaking.

Anonymous said...

Playing soon at a bank near you

RTC II
This time, it's personal!!!!!

From Wikipedia, the free encyclopedia
Jump to: navigation, search
The Resolution Trust Corporation was a US government owned asset management company mandated to liquidate assets (primarily real estate-related assets, including mortgage loans) that had been assets of savings and loan associations ("S&Ls") declared insolvent by the Office of Thrift Supervision. It also took over the insurance functions of the former Federal Home Loan Bank Board. It was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), adopted in 1989. In 1995, its duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.

According to Joseph E. Stiglitz in his book, Towards a New Paradigm in Monetary Economics, page 243, the real reason behind the need of this company was to allow the United States government to subsidize the banking sector in a way that wasn't very transparent and therefore avoid the possible resistance. This is supported by the fact that the banks had better information related to the loans than the RTC.

For an in-depth discussion of the RTC's development, its unique structure and personnel practices, and the impact its structure had on its performance see Mark Cassell's book, "How Governments Privatize: the Politics of Divestment in the United States and Germany" (Georgetown University Press, 2002)

Anonymous said...

By Jeff Neal, Optionetics.com
8/30/2006 10:00 AM EST


Many leading U.S. economists are looking at the recent dismal housing figures and consequently are starting to warn about a very hard landing and possibly even a recession. In fact, some economists like Nouriel Roubini, president of Roubini Global Economics, feel that America is headed for a recession much worse than the one experienced in 2001. He went on to say that a serious decline in housing, which includes a fall in existing home sales and rising inventories, will bring down the rest of the economy.

These housing declines are expected to impact virtually every household in the United States, especially in terms of consumption and a serious decrease in overall household wealth. Some economists are even stating that this recession has the potential of being worse than the tech crash in 2001 in terms of residential investment, wealth, consumption and the employment picture.

This scenario is based on the fact real estate has been responsible for approximately 30 percent of employment growth during the economic expansion, which included jobs in retail and in manufacturing producing consumer goods. For instance, in 2005, consumers doled out more than $200 billion of the funds they extracted from their home equity. For 2006, the economy is already experiencing a slow down in sales of consumer durables like automobiles and home furnishings.

In addition, households are confronted with big jumps in energy prices, higher interest rates, slow wage growth and negative debt and savings levels. As this trend continues, many predict the results will be devastating for the American consumer. These same effects also will impact many of the European nations, leading to further economic damage.

Even Chicago Federal Reserve President Michael Moskow shared the dismal outlook, pointing out that the steep fall in housing, which accounted for over half of the growth during the past three years, would be a risk to the economy. Of course, this may indicate that the Fed may be finished with tightening for a while. Economist Carl Riccadonna of Deutshe Bank Securities feels the same way, saying that weakness in the housing market will be a hindrance on consumer spending over the mid-term, thereby permitting the Federal Reserve to remain on hold.

However, it appears that even if the Federal Reserve does stop raising rates going forward, the major declines in the housing sector have already begun and dire consequences for the American consumer could result. This will certainly be a hot topic in the upcoming elections taking place in November.

Anonymous said...

Hi everyone. I just tried to log into thehousingbubble2.blogspot.com and was kicked off when I tried to go into 'comments'. Can some of you try and see if it's been hacked! I hope not?

Anonymous said...

Oh Goodie..One more Xmas fruitcake Brick from my little sister and I'll be able to BUILD the house !

Anonymous said...

I don't know about you. But I can already almost feel the cozyness of a slow, low-consumer-confidence christmas season. I personally will have a great time.

Jip said...

Been there, done that. After my family got spread out around the country, we made a deal with each other to buy cards or all. Besides the fact we all have what we need and/or want, shipping costs can be a real PITA.

Jip said...

I mean send cards or make phone calls to each other....

Anonymous said...

OH well -I'll just buy some put options->Lumber bargains right now

Anonymous said...

For christmas that is LOL-Santa Shorts the market-Uses massive tax free profits to automate-Kicks Elves,and Rudolph to the curb

Anonymous said...

"Oh Goodie..One more Xmas fruitcake Brick from my little sister and I'll be able to BUILD the house!"

ROTFLMAO! Thanks for the laugh. I needed that....

Anonymous said...

My first blog message ever! And I put it HERE! Congrats everyone.

An economic recession, maybe depression, is coming. But can it be over quickly? Yes. But only if we humbly admit that the Earth itself is reaching a carrying capacity to support mankind's consumption. It is simply scientifically impossible to sustain the economies of the world as we do things now (Oil for cars, deforestation for chopsticks and McMansions, etc). As long as we admit this as a new reality, some new ways of doing things (like photovoltaic solar power required to get a housing permit in AZ) can boost the economy back up more quickly. If we don't admit this reality, we will economically suffer much much longer.

Real Estate as a bursting asset bubble is merely one more piece of reality that the Earth is going to force our economy to change (seen homeowners insurance rates in FL now?) in ways we've barely began to imagine.

Thanks for the opportunity to comment. You can reply to me as Picea (the genus for Spruce).

Anonymous said...

I love Mel Gibson, and I do not think he said anything that bad. What would happen in Ira Goldstein (a movie producer perhaps) asked a cop if he was Catholic, and then said "Christians are the cause of all the wars in the world". I do not think the press would care at all. Amazing. I would love to go boozing with Mel. That guy has brass balls, and made crazy dough because all the Jews in hollywood and those who fear them would not back The Passion. LOL all the way to the bank biatch. Merry Christmas bitches, I am off to Bloomingdales to go spend alot and piss Keith off while he travels around Europe complaining about $14 toast with tea. What a loser he is.

Anonymous said...

>perhaps it's a good thing that Americans are going to cut back on the consumer spending orgy...

it is an especially good thing for the environment, anytime

Anonymous said...

Don't you folks fret now. The top 10%, the only people who matter, have PLENTY of spending money. Just like in South America, an economy can run perfectly well when only 10% control all the wealth and the other 90% fight over scraps while serving the whims and endless wants of the top 10%.

The high end restaurant sector is seeing no softening. Doing quite well actually.

Of course, most of you voted for this kind of culture back when Reagan convinced you that the poor were your enemy and that worshipping the wealthy was the way to go. You bnought it then and have continued to give republican plutocrats more power so don't bitch when it bites you in the ass.

SUCKERS.

Anonymous said...

A good person would rather the government take all his money and redistribute it to the needy who sit at home and watch Oprah all day. If you want to keep the money you worked for then you must be an evil Repug

Anonymous said...

You cretins are all losers. you hate Christmas, you hate happy people, you have anything and everything. Why don't you cretins move to Congo where people are poor and miserable and don't have houses or cars? It's one thing to want housing to go back to reasonable levels, but many of the retarded losers here are hoping for a depression, thinking they will be immune from the effects.

Anonymous said...

Hey Mr. 10% is the only bunch that matters...

Go read up on the French Revolution, assclown.

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