August 29, 2006

FLASH: American consumers pulling back: Consumer confidence index plunges (yet again), number even worse than expected


Isn't it interesting to hear housing inventory is "higher than expected", sales are "lower than expected" and now consumer confidence falls "more than expected". Note to MSM: Call HousingPanic - we'll tell you exactly what to expect - none of this bad news is coming as any surprise to HP'ers, is it?

By the way, the Republicans are about to be completely swept out of power in November. As much as I cringe to think it, get ready for "Speaker Pelosi".

Also get ready for one heck of a market meltdown pre-election. The entire US economy is 70% based on consumer spending and they're in full hunker-down-for-the-winter mode and getting worse daily.

Worries about the job market caused consumers' confidence in the U.S. economy to tumble more than expected in August to its lowest level in nine months.

The Conference Board, a New York-based research group, said Tuesday its confidence index fell to a reading of 99.6, down from 107.0 in July. The index was lower than analysts' expectation of 102.5.

"You've got a deterioration in business conditions coupled with lackluster job growth," Franco said.

Americans' sentiment about the labor market worsened in August, with consumers saying jobs are "plentiful" decreasing to 24.4 percent in August from 28.6 percent in July, and those saying jobs are "hard to get" increasing to 21.1 percent from 19.6 percent.

53 comments:

Anonymous said...

Oct 28, 1929

Oct 19, 1987

Oct ?, 2006

Think about it, the reality of the magnitude of this credit bubble and its impact on the global economy will be realised on wall street by Oct.

Anonymous said...

Keith-

Which publicly traded company will be the 1st to go bankrupt because of the housing bubble?

Anonymous said...

Speaker Pelosi, scary thought! But it has got to be better than Dennis "rubber stamp" Hastert.

Mark in San Diego said...

My favorite book - "The Big Enchalada" by LA Morse (out of print) . . .has a wonderful quote, "anyone who is suprised by SUPRISING DEVELOPMENTS is a congenital idiot."

other said...

The U of Mich. survey is the better one to watch, as it is designed to measure the sentiment of the "management class" or households in the top 20% by wealth/income. This survey correlates closely to stock prices (as the top 20% own 93% of all US financial wealth) and tends to lead the Conf. Board survey, which captures a broader socioeconomic cross section of US households and thus reflects "working class" sentiment, which in turn is dependent upon the sentiment and behavior of the top 20%.

The "confidence" (chart not yet updated to show the Conf. Board survey's decline) of the top 20% has been flirting with historic recession levels since late '05, implying that the economy's foundation is more fragile than the media pundits would have one think.

The Economic Cycle Research Institute's WLI has been negative now for 3-4 weeks running, suggesting that the economy will continue slowing at a minimum into Q1 '07, with the increasing risk of recession.

Mark in San Diego said...

BTW - is it time for the Hindenberg Clip yet?? . . .you know, the one that says "oh, the horror, the horror!"

keith said...

SOLD, CFC, HD, LOW and WM are in my sights. I still think FNM or FRE can bring the economy down.

GM and F will also believe it or not keep getting killed by the bubble. How? No more housing ATM loot to buy trucks with. And disposable income will plummet with the increasing ARM payments, at the same time credit contracts

You'll see a company soon announce something shocking - like H&R Block's huge write-off for bad loans already! Or KB Homes insider stock issues. Just like the dot-com, there's lots of dirty little secrets to be found

Joey said...

Collectively, it may be bad for the economy, but great for the individual consumer.

They've been living on credit they never deserved in the first place. Maybe they are wising up and deciding they DON'T need that ugly Hummer, or big screen TV.

This is great news.

Anonymous said...

"By the way, the Republicans are about to be completely swept out of power in November. As much as I cringe to think it, get ready for "Speaker Pelosi".

You can dream - but it ain't going to happen. And if it does, the markets will crash as the socalists take power.

Joey said...

Hey Anonymous 6:27:58 PM,

Let's see....

No bid contracts handed to political cronies
Massive wartime spending
Huge increase in federal budget
Increase in the police state

And you're not saying the past several years under Republican Executive, Legislative, and Judicial control have not been socialistic?

What have you been smoking? Do you know the local public service announcement says you should not be smoking that?

brokersleaveyoubroke said...

Economists were surprised. The translation of that statement is: The data was so bad that economists couldn't think of any way to put a positive spin on it.

Bake McBride said...

Consumer confidence is more closely tied to gas prices and the middle east, then housing market right now.

That said, the economy will slow going forward...but not at the gloom & doom pace some are predicting.

Anonymous said...

bake - you have a lot of data to back that up I see

Not.

1stMillionAt33 said...

Keith,
For a housing bubble blog, I'm amazed that you have really good insights into short side of stocks. I'm really interested in how your personal portfolio performs.

It appears to be good indeed. I would suggest that you can either put up your own portfolio, or a watch list of stocks to be shorted. It will be quite interesting I think for your readers.

If the readers can't do trade or short much on the housing markets, they may be interested in the related stocks for trading.

Regards,

Anonymous said...

The irrational emotions that drove up stock prices and housing prices and beanie baby prices can just as easily turn downward and drive those prices down into the ground. Keep building suburbia Mr. Joe Homebuilder! In two years I want to be able to buy a house for 60% of what it costs today.
Otto Young

Anonymous said...

Joey said...
Hey Anonymous 6:27:58 PM,

Let's see....

No bid contracts handed to political cronies
Massive wartime spending
Huge increase in federal budget
Increase in the police state

And you're not saying the past several years under Republican Executive, Legislative, and Judicial control have not been socialistic?

What have you been smoking? Do you know the local public service announcement says you should not be smoking that?

Tuesday, August 29, 2006 6:33:37 PM

HEY JOEY, YOU ARE 111111000000%%% CORRECT. F THE DEMS AND REPS.

WE NEED A 3RD PARTY. IT IS THE ONLY SALVATION FOR THE USA OR SAY GOODBYE TO OUR CUNTRY IN 20YRS.

Anonymous said...

At one point, I was sure I wasted my vote on Ross Perot but now I'm not so sure.

illegally yours in PHX said...

You know more and more people are predicting doom and gloom. And all the signs are there. Why is it so hard to believe?

Reminds me of the dot.com boom when people kept saying, it can't go down! Then they said ok it'll og down a little ad then come back. They dismissed the doom and gloomers, when all they had to do was prepare. Just like back then people lost their pension so too will people now lose big.

Prepare for the worst and you'll be okay. Keep saying that it won't be that bad and your going to get burned. Doesn't matter whether I agree with Keith or not.

I'm preparing for the worst. Everyone else should be too.

Anonymous said...

"WE NEED A 3RD PARTY. IT IS THE ONLY SALVATION FOR THE USA OR SAY GOODBYE TO OUR CUNTRY IN 20YRS."

The radical and extreme Neoconservatives have hijacked the Republican Party. The Republicans just need to rid temselves of the crazy Neoconservatives and they'll be back in business as a functioning alternative.

devestment said...

Personal experience…
My small household decorative goods company’s sales are off 65% this quarter from last year.

borkafatty said...

OT: NIZE NOTES

China's Small Step Against the Dollar:


Over the last few years, China's economic policies have been marked by slow cautious steps. And while the moves have been small, the direction of the various policy changes has generally been clear. WSJ is reporting that China's central bank has made a small policy move against the dollar.

According to WSJ, the central bank will raise the foreign-currency deposit reserve ratio for both domestic and foreign commercial banks to 4% from 3%, effective Sept. 15.

The People's Bank of China said it rasied the ratio "to take a step forward in implementing prudent monetary policy and strengthening the macro control of foreign-currency lending,"

Chinese financial institutions' foreign currency deposits totaled $161 billion at the end of June, meaning the increase would take about $1.6 billion worth of liquidity out of the system.

Total foreign-currency lending, which makes up a small portion of total lending in China, reached a total of $157.7 billion at the end of June. In the first six months of the year, banks made $7.5 billion in new foreign-currency loans. China last raised the foreign-currency deposit reserve ratio in October 2004 to 3% from 2%.

There are two important implications from this relatively minor policy move.

First, it is an indication that China isn't yet done with its tightening policy. Less than two weeks ago, the central bank raised the benchmark one-year lending and deposit rates by 27 basis points, citing continued excessive credit and investment growth and a large trade surplus. In total this year, the central bank has so far increased interest rates twice and raised the commercial banks' yuan reserve ratio twice.

Second, the increase in the foreign-currency reserve ratio further signals the recognition by China that foreign reserves are contributing to the over-heating of the Chinese economy. It is another small step that suggests further increases in the yuan against the dollar are ahead.

borkafatty said...

That said, the economy will slow going forward...but not at the gloom & doom pace some are predicting.

I beg to differ, I live strictly on my income which is a good living, and work 2 jobs..and things are tight, I dont use credit cards, no debt..and things are tight..

if it gets any slower we will be going in reverse.

Anonymous said...

These numbers are being manufactured by the govt and wall st. The worse, the better.....

It is their way of influenceing the fed throught political pressure.

wall st beelieve there will be a rate cut in a month or two.

they think the greenspan magic is forthcoming.

Mammoth said...

Sometimes things happen that are funnier than anything a person can make up. Yesterday I saw something that HP-ers could appreciate the humor in:

Every day, on the way to work I walk past a condo building that has had a for sale sign in front of it for the past 3½ months. The flyers had listed the unit at $460k. About 2 weeks ago, the realtor repriced the condo, and pasted a sticker reading $410K over the original price.

Yesterday afternoon, while on the way home I saw two workmen in front of the building, and one was tapping a rusty old nail, lying on its side, on a concrete block, with a hammer, trying to straighten it so that he could reuse it. Yep - a rusty old nail is good enough for a condo that is priced over $400k!

Maybe this guy sees the writing on the wall, and is trying to save money so that after he is laid off he will still be able to make the payments on his shiny new Dodge pickup - you know, the one that he bought to haul his tools and other implements of construction - like boxes of nails.

-Mammoth

Anonymous said...

I think it's important to realize that what the U.S. Consumer says, and what he does, are often two different things. He'll profess concern for the economy in general, as he researches the best HDTV for his family room. In other words, seems to me that regardless of what he says, he'll keep on spending until he just can't.

Anonymous said...

Sock away them nuts, people!

Anonymous said...

brilliant picture! i love this blog :^)

Anonymous said...

"By the way, the Republicans are about to be completely swept out of power in November. As much as I cringe to think it, get ready for "Speaker Pelosi".

It could happen. They brought in on themselves. Remember their Contract with America in 1994? In it was a promise of term limits. Face it - the only promise Republicans keep is to not raise taxes, even if that means ignoring problems and allowing the country to rot and go bankrupt. Democrats, on the other hand, never met a tax they didn't like. So long as tax money is collected, they don't care whether it is wasted. Ever see a Democrat pull the plug on a failed experimental boondoggle, and admit it just didn't work? Me, either. Remember the War on Poverty, FORTY YEARS and a few trillion dollars ago?

If you are a Republican, you are part of the problem. Have the Wars on drugs and terror eliminated drugs and terror? If you are a Democrat, you are the rest of the problem. Has the War on Poverty eliminated poverty? How could such a disaster have happened to us? It's true that people get the government they deserve.

Anonymous said...

Anon 9:04;22,

"I think it's important to realize that what the U.S. Consumer says, and what he does are often two different things."

You're absolutely right about it. It is the culture of impatience, that palys a major role on the consumer's attitude.

Because credit can be readily and easily obtained, they would rather spend it, especially on non-revenue or non-profit producing goods and worry about paying it later, instead of investing in in business, grow the business and spend the profit moderately.

It is the notion of wanting to get rich overnight, without realizing that they are not rich in a sense of having a positive net worth. Instead, they are overwhelmed with debts that they are required to pay. It is the attitude that wants to have the biggest item, even if it no longer serve the purpose (i.e. driving an 4x4 SUV on a flat 2 mile road trip, buying a 52 inch plasma for a 10'x10' room, living in a 6 bedroom house with only 2 kids, etc.)

Then, we shout to the whole world - we are the best.

David in JAX said...

I'm not a Republican or a Democrat, but it doesn't look like Republicans are going to lose the house or the senate. The general polls when they ask people "who do you favor in the next election" show the Democrats sweeping the election. When they go district by district, things are very different.

http://www.electionprojection.com/

With this said, my personal oppinion is that the Republicans lose 2 senate seats and 5 house seats. I personally will be voting third party.

Bake McBride said...

***borkafatty said...

I beg to differ, I live strictly on my income which is a good living, and work 2 jobs..and things are tight, I dont use credit cards, no debt..and things are tight..

if it gets any slower we will be going in reverse. ***

You might be right, but I work in technology recruitment (not as a recruiter) and the clients I work with (Most major tech firms) are looking to bring more people on in 07...The hiring budgets are increasing for 07. In an industry that has a 2% unemployment rate right now. How well the tech field is doing is one of the more underreported stories about this economy....Also don't expect a dip in the healthcare sector...

Housing is one of the sectors that will just get crushed...but there are areas that will feel only a minor pullback. On balance, the economy will slip, but not as bad as some predict.

In the next 6-8 months we'll know the whole story.

Anonymous said...

If you don't like the sound of "Speaker Pelosi", how about President Pelosi? If the democrats win enough seats and take both houses in November, they will impeach Bush and Cheney. Throw in a big terrorist incident or financial crisis in early '08 and I can see them postponing the elections for the "good of the country". After all, it wouldn't be fair if Pelosi, our first woman President, didn't get to serve a full first term...

Anonymous said...

"The hiring budgets are increasing for 07. In an industry that has a 2% unemployment rate right now."

I also work in IT and what I'd noticed was that the layoffs during '01, '02, and '03 were so deep that essentially, the whole industry was shortstaffed and had expected Indian outsourcing to pick up all the slack which of course, due to both management and headcount problems in India, itself, failed to deliver.

So, I don't really believe it's a tech recovery, just a return to normalcy which was sorely lacking during the first half of the decade.

Anonymous said...

"You can dream - but it ain't going to happen. And if it does, the markets will crash as the socalists take power."

I went to the "Twins Stadium" vote today in Henepin County in Minnesota and they voted for a new stadium!

The main reason I want Bush out of office is because he blatantly supports "corporate socialism," like publically financed baseball stadiums.

As much as I hated the deal, I keep seeing Bush pump money into the military and how can the rest of the economy compete unless, they too, get ridiculous amounts of money from the government (and borrowed) too.

Hopefully, if the Dems are in office, "corporate socialism/welfare" will continue but the resulting output will actually benefit people and be an investment that lasts.

dvo said...

"Remember the War on Poverty, FORTY YEARS and a few trillion dollars ago?"

Oh, yeah. I DO remember. To wit:

In the decade following the 1964 introduction of the war on poverty, poverty rates in the US dropped to 11.1% and has remained between 11 and 15% ever since. Since 1973 poverty has remained well below the historical US averages in the range of 20-25%...Poverty has significantly fallen among Americans under 18 years old from 23% in 1964 to 16.3% today. The most dramatic decrease in poverty was among Americans over 65, which fell from 28.5% in 1966 to 10.1% today."

Wow, what a LAME PROGRAM. Good thing the 'conservatives' are in the process of DISMANTLING it...

Anonymous said...

Why is a Speaker Pelosi scary? Do you "real men" need authoritarian figures in positions of power to feel good?

The tough guys in charge have screwed us up BAD. Perhaps it's time to hand the reins to some women.

Anonymous said...

As far as poverty spending not "curing" poverty- we've spent gazillions on defense only to have a few guys with boxcutters penetrate the defenses so far as to hit the very heart of it, the Pentagon.

Should we stop spending on defense since it failed?

Anti-poverty programs alleviated much suffering. That's good enough for me. If you want to eradicate poverty let's talk balls-to-the-wall socialism.

borkafatty said...

NIZE NOTES:

Fed Confusion Leads to 'Close Call'


Minutes for the last Federal Reserve FOMC meeting are out. They show a Federal Reserve confused about how to deal with an environment of a slowing economy and simultaneous climbing inflation. The minutes show that the decison to pause for the time being from further interest rate hikes was a "close call". Translation, The Fed believes it can fight inflation or a slowing economy but doesn't have a clue how to deal with both at the same time--This time they leaned toward fighting the economic slowdown.

Here,from the Fed minutes,are the inflation concerns:

Headline inflation continued to move up, on balance, in recent months, and consumer prices increased at a faster pace in the second quarter than over the previous twelve months. Consumer energy prices, while declining slightly in June, surged during the second quarter, on net. Core consumer prices also continued to rise, boosted by an acceleration in shelter costs, particularly those for owner-occupied residences, and some pass-through of energy cost increases. Higher oil prices showed through in producer prices for a variety of energy-intensive intermediate goods. Rising import prices, higher domestic rates of capacity utilization, and strong global demand for materials were factors underlying an acceleration in core prices for intermediate materials. The price of crude oil increased further over the intermeeting period, and strong weather-related demand caused the price of natural gas to rise considerably. The employment cost index rose somewhat faster in the second quarter than over the preceding three months, but the twelve-month change was less than that of a year ago. Survey measures of households’ inflation expectations in June and July reversed their increases in April and May.


The concerns about the economy, no surprise to Nize Note readers, centered on the housing sector:

In their discussion of the major sectors of the economy, participants noted that residential construction activity had continued to recede over the past few months and cited the housing sector as a downside risk to the outlook for growth. The rate of new home sale cancellations, which was identified as an important leading indicator by some contacts in the construction industry, had spiked higher. Single-family housing starts and permits continued to fall, and inventories of unsold housing appeared to have risen significantly, pointing to continued slowing in this sector. Some participants observed that the slowing seemed to be orderly thus far, but it was also noted that in some areas of the country housing construction had experienced a relatively sharp fall. In general, participants expressed considerable uncertainty regarding prospects for the housing sector.


And here is the clue from the Minutes that Fed members are operating in a Keynesian cloud of confusion where you can't have inflation and recession at the same time:

In the Committee’s discussion of monetary policy for the intermeeting period, nearly all members favored keeping the target federal funds rate at 5-1/4 percent at this meeting. In view of the elevated readings on costs and prices, many members thought that the decision to keep policy unchanged at this meeting was a close call and noted that additional firming could well be needed. But with economic growth having moderated some, most members anticipated that inflation pressures quite possibly would ease gradually over coming quarters and the current stance of policy could well prove to be consistent with satisfactory economic performance.


"...with economic growth having moderated some, most anticipated that inflation pressures quite possibly would ease..." Oh yeah. Just ignore the late 1990's, a period of inflation and recession, as though it can't happen. Note to Bernanke and boys: It can happen and is happening as your Fed minutes, and your 'close call' comments, so clearly indicate.

David in JAX said...

In response to anon 12:53
I would be all for a female speaker or president, just not Pelosi. I believe most people find Pelosi scary because of what she wants to do, not because she's a female. She's from the old school liberal wing of the democrat party with the same tired ideas which failed for 40 years. Most Americans are past the tax the evil rich for more social programs era of government. If she wants to help her country (which I don't think she does) she needs to come up with some new ideas that can get us out of our current mess and not keep touting old failed ideas that helped get us into this mess.

Anonymous said...

LOL! There are actually some posters who think the Decocrat party in 2006 still cares for the average Joe. If we'll only put them back in charge they will be moral, sensitive, PC, and spend money on programs that benefit people, not corporations. LOL!!

I guess they forgot why Americans kicked their collective asses to da curb in '94: House Bank scandal, House Post Office scandal. Rostenkowski scandal, etc. etc.

Yeah, I can't wait for that crowd to hold the gavel again...

Anonymous said...

"At one point, I was sure I wasted my vote on Ross Perot but now I'm not so sure."

No, it wasn't wasted. It was a vote for Bill Clinton. I made the same mistake.

Anonymous said...

I've never seen someone get out of poverty by being on welfare. Didn't you idiots see the people of New Orleans after Katrina? They were zombies waiting for the government to come take them away because they had spent a lifetime on welfare. They were unable to think or act for themselves. Programs like Financial Aid, job training, and Stafford Loans are useful in teaching people a skill needed to earn a living for themselves.

Give a man a fish and feed him for a day. Teach a man how to fish and feed him for a lifetime.

Bake McBride said...

***So, I don't really believe it's a tech recovery, just a return to normalcy which was sorely lacking during the first half of the decade.***
Well a return to normalcy is what I'm talking about. Tech employment has been growing the last 3 years at a steady pace...and from the budgets I've seen recently, it is expected to grow more in 07. Considering that unemployment in tech is about 2%...Expect wages to start going up.

My point is that this sector will not be too negatively effected by the housing bubble...There will still be industries that will keep this economy going....

Anonymous said...

>WE NEED A 3RD PARTY. IT IS THE ONLY SALVATION FOR THE USA OR SAY GOODBYE TO OUR CUNTRY IN 20YRS.

That is what saved us 100 years ago, now that we are back to the same situation (rich vs poor, etc.) time to try again

Anonymous said...

My vote for Ross Perot was a vote for Ross Perot, not Bill Clinton. I had hoped more voters would see things as I did - a vote for a change from the choices offered by the Democratic and Republican parties for that election cycle. Sadly, that movement ran out of steam and we continue now some decade plus later with only the choices offered by those two parties. Republicans should strip away their neocon democratizers in red white an blue capes and Democrats should strip away their "fringe" (that is as politely as I can put it) element and the two groups should band together to form a third party of nation building, gay rights protecting, abortion on demand providing, military loving at the expense of the nation as a whole, suburbia driving, I am woman declaring, takes a village to raise a child believing, "American" (his idea of American - not mine) way of life is not negotiable believing dolts. Republicans should go back to Goldwater types and Democrats should go back to Truman types and drop all the bullsh*t.

Anonymous said...

"My point is that this sector will not be too negatively effected by the housing bubble"

Well... I do hope that you're right,
however, things like broadband, prepay, net services, etc are affected by consumer spending indices and what I've noticed is that IT executives tend to do hiring spurts and hiring freezes in unison.

Now, what's helping now is that India's fallen flat on its face. Nearly 100% of US tech companies tried to outsource to Tata, Infosys, and Wipro simultaneously which caused all the established Indian IT outsourcers both headcount/turnover problems and inability to manage complex projects. This collective boondoggle has caused the main hiring spurts that we've noticed recently and could possibly get us through the upcoming RE recession.

Anonymous said...

Yeah, the dems failed. Of course to think that you'd have to ignore the amazing time of progress and prosperity they ruled over for those 40 years.

Don't forget, the reason dems were able to gain 80% control of Congress and remake this country was because of the 30 years, from the 1890s to the 1930s, that republicans ruled unilaterally leading us to a very bad place- the Great Depression.

This housing crash will lead us back there. When millions lose a lot and realize the folly of worshipping the wealthy and flirting with a modern-day feudalism, watch out. You'll not only see a Speaker Pelosi but perhaps a Stalinist backlash on republicans.

Makes me hard to think about.

Anonymous said...

the prosperity of the 1970's was wonderful.

i bet you're one of those retarded liberal morons who thought bill clinton's dotcom bubble was the best thing since sliced break and blamed george bush for popping the NASDAQ

Anonymous said...

You probably weren't even alive in the 70s. You just parrot right wing radio rhetoric. Besides, Nixon reigned through much of the 70s though he was a liberal by the standards of today's ignorant piece of shit fascist conservatives.

But more people were happy and prosperous then than now. But people like you only look at the top 10% to gauge the health of a culture.

Enjoy your time, republican. It's just about over.

Anonymous said...

"Besides, Nixon reigned through much of the 70s though he was a liberal by the standards of today's ignorant piece of shit fascist conservatives."

And don't forget Ford/Rockefeller from '74 through till the start of '77. Weren't these suppose to be the progressive Republicans?

a.creampuff said...

No politician(s) of any stripe can solve:

* peak oil and lack of sufficient alternative energy sources
* runaway greenhouse effect

We are decades too late (known problems since the 1970's at least) and about a trillion dollars short (r&d $ squandered on oil wars and other boondoggles).

Top it off with unfolding housing bust. Human nature is to ignore problems like this until it's too late. Dems and Reps both guilty of being all-too human. No point in squabbling over ideology.

Scott Arthur Edwards said...

Are you tired of getting nice compliments on your blog, when really you're not makeng the kind of money that you deserve? Now you can join a completely FREE program. FREE to join. All you do is refer customers. To get started fast, click here: internet money making idea site. It pretty much covers internet money making idea related stuff and it's FREE to join.

Anonymous said...

HEY LOOKY HERE!!! Rene Keiser signed up, and here's what happend..."This website is so viral - I received over one hundred sign-ups and my network is already 5 levels deep in less than 48 hours." ~ Rene Keiser. Learn more about it here: proven system site. It pretty much covers proven system related stuff and it is FREE to join.