Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Gold Price Closely Tracks Debt-to-GDP Ratio - 9th Apr 20
Gold, Silver and Rigged Market Socialism - 9th Apr 20
Going to School in Lockdown Britain, Dobcroft Sheffield - 9th Apr 20
Amazon Face Masks to Protect Against Covid-19 Viral Particles N95, FPP2, PM2.5, for Kids and Adults - 9th Apr 20
Is Natural Gas Price Ready For An April Rally? - 8th Apr 20
Market Predictions And The Business Implications - 8th Apr 20
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Consumer Spending, Last Bastion of U.S. Economy In Full Retreat

Economics / Recession 2008 - 2010 Jan 19, 2009 - 12:00 PM GMT

By: Oxbury_Research

Economics Best Financial Markets Analysis ArticleIn previous economic slowdowns, it was always consumer spending that kept the American economy afloat. Millions of Americans continued shopping at malls, buying cars, ordering gadgets through the mail and TV and otherwise putting their wallets and purses on the line. It was always the brave American consumer rushing unto the breach to beat off the demons of economic gloom and uncertainty.


But not this time, it seems. Retail sales have now declined for the sixth straight month .

The U.S. Census Bureau announced that advance estimates of U.S. retail and food services sales for December (adjusted for seasonal variation and holiday and trading-day differences but not for price changes) were $343.2 billion. That's a 2.7% drop (±0.5%) from November and a 9.8% collapse (±0.7%) from December 2007. The 2.7% December drop was more than twice as much as the experts expected.

What's more, retail sales fell 0.1% for all of 2008 as compared to 2007 which is the first decrease in the Commerce Department's records (although like-for-like data only go back to 1992).

And so last month's drop was a bit more than "just average" for this downturn. Look here...

This drop is in spite of the global collapse in commodities dropping imported goods prices of goods for a fifth month.

There are also signs that businesses themselves are also cutting spending. Inventories at all businesses in November dropped 0.7% (again, more than economists estimated) for the third straight time in combination with a 1.7% decline in retailer stockpiles.

A full 11 of the 13 major categories fell, with the worst being the 16% implosion (partially offset by dropping fuel costs) in gas station revenues.

There's some hope, however: beauty and health stores bucked the trend and saw December spending increases. So at least the nation's women will continue looking beautiful even as we grimace at our reduced ability to buy them flowers and fancy dinners. Perhaps they'll be happy with some e-cards and home-cooked meals?

Obama's Rescue Plan Keeps Getting Bigger and Bigger

President-Elect Barack Obama is proposing a two-year recovery plan that aims to save four million jobs via a $850 billion package that features $300 billion in tax cuts for individuals and businesses as well as infrastructure spending.

This is a tad larger than the earlier package of about $775 billion, but these days even a hundred billion or so seems like small money, right?

Supposedly this package will prevent a deeper and more prolonged recession, but we're not so sure. After all, the government and its friends apparently never saw this problem coming or pretended not to . Why should we suddenly believe they have all the right answers?

While tax cuts are certainly a good idea (we support the idea of impoverished citizens keeping more of their hard earned cash in their pockets and out of the hands of foolish government mandarins) government spending is rarely a great idea in practice.

Given that government is probably the most wasteful institution on the planet, shouldn't businesses which have to watch their bottom line be the best judge of when and where to spend their capital?

That won't stop Washington , though. In the rush to be seen as “doing something” (even if it's exactly the wrong thing), they're determined to intervene for the sake of intervening. Politicians like to appear useful (especially when they aren't) and the public rarely knows the difference between good policy and bad policy until it's too late.

In that light, the falling GDP figure and the growing unemployment number in the middle of this chart look very ominous, indeed. (Table from FinancialForecasts.com)

The Dow Rests on a Precipice

Rather predictably, stocks disliked the retail report and descended in ungainly fashion today and now sit at important support. If the Dow's 8200 level fails this time, it's unlikely to bounce back as quickly as it did in late November.

That's because the traditional Santa Claus rally isn't on the horizon and there's apparently nothing but bad news to come for the foreseeable future.

You might do well by anticipating that 8200 will hold and prove to be "just the right time to buy" … but we don't think there's truly enough "blood on the streets" yet.

That will arrive at some point in the future when all the hope has been sucked out of even the most optimistic bulls. A good sign that a bottom isn't in is the apparent willingness of most investors to be looking for one.

Why shouldn't they? That's because this is not the bear market of a typical recession, given the economic statistics which are coming out. We suspect this bear market will turn out to a be a once-in-a-lifetime event by the time it's all over.

And therefore, it makes a lot more sense to conserve your investment dollars for better opportunities in the future. After all, if this does turn out to be a highly-unlikely bottom, you can always catch the next wave of the resurgent bull a few months from now.

Some of the first pioneers got their hands on the first homesteads, true. But most of the others got the first arrows in their backs too. 

Bailing Into Bare Treasure-y Chests

So where has the money been going? Treasury coupon securities, apparently.

The New York Fed has reported that “the financial sector maintains that the industry is still far from hitting bottom.” Lehman Brothers' failure continues to wreak havoc on banking balance sheets while Citigroup stands on the precipice of being split up.

So there's more to come, and Treasury securities remain the continued safe harbor. They certainly don't offer much, but apparently the promise of a government that's blowing up the money supply is good enough for some. (Table from Bloomberg.com).

And so the yield across the full spectrum of Treasuries has dropped today. Who would ever have guessed that lending your money for 30 years would return only 2.89%?

The TARP and Obama's revised stimulus plan (as well as this year's project trillion dollar deficit) don't augur well for the dollar.

But it seems that investors in these paltry yields are betting that other governments will be even more profligate and that the dollar will somehow maintain its power in relation to its paper competitors. Are they right? We'll find out soon enough …

Good investing,

Nick Thomas
Analyst, Oxbury Research

Nick Thomas is a seasoned veteran of technical analysis and has mastered all intra-day trading in stocks, options, futures and forex. He prefers to scout investments as one asset class of many and shapes his investment strategies accordingly. He writes extensively about offshore banking and offshore tax havens and is active in the career development field of independent investment research.

Oxbury Research originally formed as an underground investment club, Oxbury Publishing is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2009 Copyright Oxbury Research - All Rights Reserved
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.

Oxbury Research Archive

© 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