Friday, March 2, 2012
Economy: Super to Stinky--how quick it changes
Here's a sampling from Tuesday, Feb. 28th:
* "Confidence among U.S. consumers climbed to a 12-month high in February, signaling household spending will help sustain the expansion." -- Bloomberg
* "Steady declines in applications for unemployment aid are pointing to another strong month of hiring in February." -- AP
* "The U.S. economic recovery is gathering strength as cheaper natural gas drives business investment and boosts exports" -- BusinessWeek
* "Consumers earned a little more in January and spent most of the extra money. The modest gains should keep the economy growing slowly." -- AP
Jeepers! No wonder the market went up and crossed over the 13,000 mark.. All that positive news is just super.. hmm, super... really.. super.. super duper..
And we said what the economic power elites are going to need to do is to start being negative and dour in their economic assessments, have the media cover some economic reality (within the narrative of 'recovery' of course) and the market will need to start dropping..
When the common know-nothing woman and man on the street who only bases the economy on the Dow and headlines believes things are getting worse, then will come the political cover to push QE3.
So what happened since?
* Goldman Sachs cut their tracking forecast for 2012 Q1 GDP twice in one day on Thursday, dropping its projections from 2.3% growth to 2.0% to 1.9%. Its basis? Weaker consumer spending data; "The new orders index—the most forward looking component—fell to 54.9 from 57.6 previously, returning close to its level in December... the production index slipped to 55.3 from 55.7... Construction spending declined by 0.1%..."
And understand this-- GDP growth, year-over-year, peaked in the third quarter of 2010 at 3.5%. By the second quarter of 2011, it had fallen to 1.5% and it’s basically flat-lined from there. So it is impossible to have a growing economy or a sustainable recovery when the assumption will be that GDP for first quarter of 2012 will be 50% of what it was 21 months ago.
Gee, I thought consumer confidence/sentiment was on the rise?
What happened to all those rosy news blurbs on Mon. & Tues??
And what about Bernanke's testimony to Congress? Certainly everything must be peaches & creme since as the media tells us, unemployment is down, consumer optimism is rising, and its basically 'Morning in America" again.. Right?
* "In Congressional testimony, Fed Chairman Ben Bernanke told legislators the Fed “can’t do much about the price of gas,” after lashing out at those that criticize him for “hurting” the dollar... While he recognized rising gas prices are a concern, as they erode purchasing power and put a strain on consumers, he told legislators to chill out about higher gas prices." -- Forbes (Yes, Forbes Magazine used the phrase, 'chill out'.. just shows how far the decline of print journalism as fallen)
So much pessimism suddenly...
March and April are going to be rough months, folks. And you should expect far more negative headlines, commentaries and op-ed pieces from mainstream media as well as a declining stock market. Its not so much that the 'sky' will suddenly be falling, but that its been continually falling for years, but now you will get a couple months of semi-honest news reporting on the state of things (within framework of 'recovery'), until political cover has been obtained for Fed to launch another Trillion dollars or so of asset purchases and backdoor bank bailouts known as Quantitative Easing.
Its easy to see why so many in the world of finance, banking and investment make constant assumptions about where things are headed. It really is quite a predictable game if you understand it well enough.