Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Is Still More Economic Stimulus Needed?

Economics / Recession 2008 - 2010 Jul 03, 2009 - 01:29 AM GMT

By: Sy_Harding

Economics

Best Financial Markets Analysis ArticleIt hasn’t been a good week for Wall Street’s ‘green shoots’ analogy. This week’s economic reports looked more like crop-killer than fertilizer, certainly not providing much support for the current popular wisdom that consumers will soon be spending us out of the recession.


I have said from the beginning that consumer spending will not pick up to any degree until consumers are no longer seeing the value of their homes plunging; are no longer seeing neighbors lose their homes to foreclosure; begin to see ‘For Sales’ signs thinning out as homes begin selling; and no longer have fear of losing their jobs. Only then might they stop saving and paying down debt out of concern, and begin spending again to a degree that will have the recession bottoming.

That is, the problems began in the real estate industry and spread into the rest of the economy, and the eventual recovery will have to begin in the real estate industry.

But it is not happening.

Instead consumers are seeing their housing worries worsen even as more problems come at them from all directions, including banks refusing to make loans; credit-card issuers raising interest rates on unpaid balances; and gasoline prices surging.

This week’s economic reports, at the midway point of the year in which Wall Street says the economy will be picking up in the second half, will not raise their confidence.

The rain actually began to fall on the ‘Feel-Good’ parade last week, when Warren Buffett, who has been out on the interview circuit for the last year spouting bullish and confident remarks about the economy and stock market, seemed to abruptly reverse course. Perhaps it’s realization that his previous pronouncements have not worked out so well. He suffered unusually large losses last year, and is down significantly again so far this year.

In an interview on Bloomberg TV last week he painted a very gloomy picture, saying “Things will continue to get worse before they get better . . . . . . . It looks like we’re going to need more medicine [more stimulus from the government], not less. . . . . We’re going to have more unemployment. The recovery hasn’t gotten going [from the stimulus efforts so far].”

This week’s economic reports have a growing number of analysts and economists expressing the same opinion, that still more stimulus will be needed.
Among the week’s reports, which for the most part were the first look at how the economy performed in June:

The Conference Board’s Consumer Confidence Index for June declined to 49.3 from 54.8 in May.

It was reported that mortgage applications were down 18.9% last week.

The Institute for Supply Management reported its ISM Mfg Index ticked up to 44.8% in June from 42.8% in May. But it was a faint ray of hope, as it fell short of forecasts that it would rise to 45.6%, and any number below 50 indicates manufacturing is still slowing.

The S&P Case-Shiller Home Price Index reported home prices fell another 0.6% in April, and have declined 33% from their peak in 2006.

The National Association of Realtors reported its Pending Home Sales Index rose a hardly discernible 0.1% in May. And ‘pending’ home sales are quite different from actual home sales, because they are based on sales contracts that have been signed, some of which will be cancelled, and some of which will not close because the buyers will not obtain financing.

The ADP Employment Report showed another 473,000 jobs were lost in June, considerably more than had been forecast.

Auto sales for June were reported and were dismal; Ford sales down 10.9%; General Motors -33.6%; Chrysler -42%; BMW -20.3%; Honda -29.5%; Nissan -23%; Porsche -66%; Toyota -32%; and Volkswagen reported sales down 18%.

The worst punch to the gut of consumer confidence, and the hope that the second half of the year will see recovery, came with the Labor Department’s Employment Report on Thursday, which showed 457,000 jobs were lost in June. That was considerably higher than the 350,000 forecast, and was a considerably faster pace of losses than May’s 322,000 jobs lost.

The news this week certainly blunted the popular talk that the recession is already bottoming, instead stimulating opinions that yet another stimulus package will be needed to halt the economy’s slide.

The question for investors is whether the stock market will finally realize it has gotten significantly ahead of reality by factoring into prices that good times are right around the corner.

In February I predicted one of the biggest bear market rallies ever would begin at any time off the market’s very oversold condition and investors’ extreme bearish sentiment and fear; that temporary improvement in economic reports would be the fuel; but that significant profits would be available from the downside again in the market’s unfavorable summer season. The rally has lasted longer than I expected, but I’ve seen nothing to change my original expectations.

Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily market blog at www.SyHardingblog.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules