Wednesday, August 31, 2011

Larry Levin: Telling it like it is | Put the Crack Pipe Down

Crack Pipe

The market was smoking from the same crack pipe as Monday. Much like yesterday the market received bad news (arguably MUCH worse), but chose to ignore it in favor of the buzz elicited from the crack pipe. On second thought, perhaps I should give the pipe another name, because the one being smoked on Fraud Street is packed with hopium - not opium.

Last month’s consumer confidence report was a lowly reading of just 59.2. The reason why that is considered a low data point is because if the economy was indeed “recovering,” consumer confidence would be north of 90.0. Moreover, confidence in ones future is what drives sales of homes, appliances, electronics, cars, etc. so this is an important report to be sure.

The lowest estimate of the incompetent group of soothsayers on Fraud Street known as “economists” had this number coming in at 45.0 with a median guess of 52.5. The actual reading was just 44.5 – below the lowest estimate, less than ½ of what it should be, and the worst reading since the depths of the crash!

From Bloomberg we read “This paints a picture of underlying demand weakening,” said Bricklin Dwyer, an economist at BNP Paribas in New York, whose forecast of 45 was most accurate in a Bloomberg News survey. “Consumers are seeing their wealth deteriorate. We’ve seen a huge decline continuing in the housing market. They’ve also been hit on the chin by the equity markets.”


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