Consumer Confidence at 3 Year High

Meanwhile, US debt hits an all time high. China still on the rise with no end in sight.

Did you know that if the government taxed 100% of every Americans income for 2011 ...the federal government would still be in tons of debt.....FACT

High consumer confidence under these circumstances is a bad thing, and would be more appropriately described as consumer irrationalism. Confidence is only a feeling; that is, a person's mental state resulting from his perception of external facts. But a mental state is not itself an external fact. Consumer confidence thus only measures how strong people think the economy is; high consumer confidence does not in any way indicate that the economy actually is strong. The bubble that potentiated the recession was fundamentally a result of severely misplaced consumer confidence. People felt richer than they really were with their home equity and more secure than they really were in jobs in industries that grew up around the housing bubble. We are seeing the same thing now, except the consequences will be far worse when the next bubble (US treasuries) bursts.

Problem I have with recent "good news" in the economy is that it really isn't that good at all in comparison to modern historical standards. In addition this is only after overwhelming efforts by the government to spend, cut taxes, and virtually throw trillions of dollars of money out the door. So really, this "good news" is actually horrible news in the long run.

that only helps sell imports. it doesn't help people in the usa. there's still 25% effective unemployment in the usa and it's not changing very much at all.

Considering the last three years, saying confidence is a at three year high is like setting an age group PR a month after turning 40.

It's a pretty low standard to compare it to.

Jerry Brown will soon unleash a proposal to structurally reform state, county and city bureaucracies. Entire cities, school districts, libraries, social services, etc. will evaporate overnight. Big shot bureaucrats will be forced from their individual office palaces into cubicles (like Apple) and bull pens (like Facebook). Hundreds of police departments, fire departments, etc. will be merged into mega-departments. Chiefs and captains will be demoted to patrol cops and water hose boys. It's going to be an earthquake in California ;-]

This doesn't tell me that the economy is getting better, it tells me that the public is getting ever less capable of assessing our state of affairs.

OP, consumers are notorious retards.

In the mean time, unemployment is still above 9%, food and commodity prices are skyrocketing, European banks are blatantly under-capitalized, the US national debt is increasing at a faster rate than ever, and oil was up an absurd amount today.

I am by no means a permanent bear (remember I Like Peeps? whatever happened to him?) I believe in the long run strength of the American economy, but we are in the middle of a junk rally fueled by monetary policy and a mass exodus from fixed income securities that were yielding obscenely low levels. People got sick of 10 year treasuries yielding less than 3% and the actions of the Fed gave most people the conviction they needed to move back into equities. There have been massive outflows from fixed income funds for 12+ straight weeks. The money had to go somewhere. I very much believe the economy will see unemployment in the 5-6% range in the next 5 years and real GDP growth, but increases in equity markets are premature. The economy will improve, we will not see hyperinflation (the Fed is more capable than most people think), and equities may even run up to October 2007 levels, but they will pull back significantly at some point. The Fed will not be afraid to remove liquidity when core PCE goes above 3-3.5%, and equities will take it in the shorts when rates start to rise. Corporations will continue to sit on high cash levels and refuse to deploy it in effective ways due to the pain everyone felt the last 3 years.

The American Consumer still has much deleveraging to do, much more so than American corporations. A large percentage of homes are underwater (20%? don't quote me on this) and despite record low mortgage rates the decline in housing prices has not stopped. Housing start numbers are poor. Consumer Confidence is all well and good, but poor employment and housing values, the primary determinants of consumer wealth and spending, are both very weak.

We are seeing such a high percentage of companies beating Wall Street consensus numbers right now because analysts are gun-shy after the crisis and corporations are leaner than they have been in the last 20-30 years. Massive restructuring programs have led to seemingly excellent earnings (and high unemployment that won't come down). When companies beat numbers and go up by 5-10% it is totally unreasonable.

Bottom Line: There are dozens of economic data points you can look at. Consumer Confidence is one of the last ones investors should look at.

I'm very, very negative on the medium-term (next 5-10 years) outlook for the US economy, the long-term outlook for the US dollar and most fiat currencies of developed countries.

However, the contrarian in me can't help but notice that 100% of the 10 replies thus far are negative.

Hmmmmm.....

This is not a surprise to me at all as I have seen the rise in manufacturing now for a year and a half...and in my opinion, so goes manufacturing, so goes the economy.While there's a kernel of truth to all of the negative things that have been said in this thread so far, those negative things aren't going to keep the economy down for ever or even for long. Just because we have challenges ahead doesn't mean that good things won't happen and aren't happening NOW.For people who were doing the right things before the Great Recession hit and didn't panic and sell when they shouldn't have, they should be all right...in fact better than all right. I'm in a better financial position today than I was right before the big market crash, and that's really insane considering how much doom and gloom everyone spouted..."the Dow won't get back above 10,000 for 20 years, the Dow is going to go to 1250 or even to ZERO, you'll have to work until you die", etc.March 2009 was the point at which people will point as the turning point (yes, I used "point" three times) in the economy, but it's not stopping today (Feb. 2011). Here's what you should expect to see over the next couple to few years:1) A Dow that surpasses its all-time high (S&P 500 too).2) Unemployment in the 7% range.3) A re-elected Obama.4) A decently robust economy.5) Finally, after all of the above, serious attacking of the national debt.My prediction after Obama is that another Democrat will be elected President but as is the cycle, some bad numbers will hit and then that President will not be re-elected; this president will be considered one of the worst a la Jimmy Carter. I then see 3 consecutive terms for Republican Presidents before the Democrats get it again.

coach d wrote:

Flagpole, I guess this one's for you:

Americans are feeling more chipper about the economy than they have in three years.

The Consumer Confidence Index rose to 70.4 this month, up from 64.8 in January, as Americans expressed more optimism about their income prospects and the direction the economy is headed, a private research group reported Tuesday.

It's the strongest reading since the early days of the most severe recession the U.S. has seen since the 1930s.

A robust stock market and falling unemployment are lifting Americans' spirits in spite of rising food and energy prices and a still-weak housing sector. In addition, a cut to the Social Security tax meant Americans started seeing more money in their paychecks in January, which may be boosting consumer spending.

http://barchart.com/headlines/story.php?id=981250

Obama haters ignore good news. If consumer confidence was at a 3 year LOW, it would be a big deal. Fox News would be telling us how this country is going down the drain.

We'll have to bump this up in 2032 to see how Flagpole's presidential predictions did.

Ha!

Nat Turner wrote:

Obama haters ignore good news. If consumer confidence was at a 3 year LOW, it would be a big deal. Fox News would be telling us how this country is going down the drain.

Very true.

With the prices on oil going up, confidence will drop drastically.

Flagpole,

Problem is, I'm not negative. Its just that what people say is a "good" or "not good" economy has become increasingly foreign to me over the years. Maybe its just me but I think I speak for a lot of Americans. There a ton of people who retain a job throughout high growth and low growth periods. And a lot of them feel just as well off when the stock market is tanking. They were never getting that much ahead in the boom times. The "boom times" have been mostly about a relatively few people getting ridiculously rich by laying off American workers, outsourcing, creating economies of scale and getting fabulously wealthy. In recessions they may make less money but they are also benefiting from lower prices. Yet when our leaders even see a hint of deflation they press the panic button and do all this artificial inflation of the economy.

I think the $700 billion bailout bill illustrated how oblivious the main stream media outlets are to a lot of Americans. They were presented with the prospect of the economy falling off a cliff and a lot of Americans said "yeah, so what?". And of course they had a heck of a time getting it passed.

crazy math wrote:

Did you know that if the government taxed 100% of every Americans income for 2011 ...the federal government would still be in tons of debt.....FACT

Oh, aren't you the smart one. Did you figure that out all by yourself?