Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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.


© 2005-2014 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

Free Report - Financial Markets 2014