Best of the Week
Most Popular
1.SNP Offers Labour Deadly Death Embrace Alliance, Holding England to Ransom, Destroy UK From Within - Nadeem_Walayat
2.Gold And Silver – Most Widely Used Currency In Western World? Stupidity - Michael_Noonan
3.Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - Nadeem_Walayat
4.Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - Nadeem_Walayat
5.Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - Mike_Shedlock
6.Leaders Debate Election 2015 - Natalie Bennett Green Party Convincing Anti-Austerity More Debt Argument - Nadeem_Walayat
7.Labour Economic Collapse vs Coalition Recovery - UK Election Forecast 2015 - Video - Nadeem_Walayat
8.China’s Stock Market Mania; How High can Red-chips Fly? - Gary_Dorsch
9.Gold and Misery, Strange Bedfellows - 31st Mar 15 - Dan_Norcini
10.Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - Nadeem_Walayat
Last 5 days
Stocks Bull Market Looks to Resume - 25th Apr 15
Gold And Silver - The U.S. Is A Corporation. Precious Metals Stand In The Way - 25th Apr 15
When the Nuclear Money Option Fails - 25th Apr 15
The War on Cash Special Report - 25th Apr 15
China Economic Slowdown Story - Why “Didi Dache” Is a Phrase You Need to Know - 25th Apr 15
The Trans-Pacific Partnership and the Death of the Republic - 25th Apr 15
Stock Splitting Caused the Stock Market Crash - 25th Apr 15
China Stock Market Parabolic Mania’s Global Risk - 24th Apr 15
What Will Happen to You When the U.S. Dollar Collapses? - 24th Apr 15
Why 2 of U.S. Dollar's Recent Bottoms Have 1 Thing In Common - 24th Apr 15
UK Economy Debt Timebomb Will Explode After Election - 24th Apr 15
Are Gold Stocks the Cheapest Ever? - 24th Apr 15
God, the Stock Market and Pascal's Wager - 24th Apr 15
Greedy Insurers Are in for a Nasty Surprise – Positioning You for Big Profits - 24th Apr 15
Four Things Missing From Obama’s First-Ever Energy Review - 24th Apr 15
How to Grow a Regenerative Medicine Industry - 23rd Apr 15
Stocks and Bonds Seven Year of Negative Returns; Fraudulent Promises - 23rd Apr 15
The Existential Danger To The Euro Is Elections - 23rd Apr 15
Stock Market No Clear Direction As Investors React To Quarterly Earnings Releases - 23rd Apr 15
Is China The Next United States? - 23rd Apr 15
U.S. Oil Glut: How High Can It Go? - 23rd Apr 15
Distorted Financial System Expect Deflation, Inflation And Hyperinflation - 23rd Apr 15
What McDonald’s Corporate Earnings Report Is Really Telling You - 23rd Apr 15
Gold Price Forecast to Become Priceless - 23rd Apr 15
FDIC Plots a Bank Heist Involving YOUR Accounts - 23rd Apr 15
$GOLD Price Year 2007 Again - 23rd Apr 15
Stocks Bubble - The Spread between Stock Prices and GDP is Blowing Out - 23rd Apr 15
Ukraine War - When Did We All Become Murderers? - 23rd Apr 15
Libya Crisis - EU Leaders Are Indicted for Nazi-Style Crimes against Humanity - 22nd Apr 15
Why Alternative Energy Isn’t Taking It on the Chin Despite Low Oil Prices - 22nd Apr 15
Bill Gross - German 10-Year Bunds Short of a Life Time - 22nd Apr 15
How to Profit from the Drop in the Oil Price - 22nd Apr 15
The U.S. Dollar's Move Is More Dangerous than You Think - 22nd Apr 15
Apple Watch Means Apple Will Become Worlds First $1 Trillion Stock - 22nd Apr 15
Half a Stocks Bubble Off Dead Center - 22nd Apr 15
They Said Go to College - Learning to become Debt Slaves - 22nd Apr 15
Best Cash ISA 2015/16, Instant and Fixed Savings Interest Rates, New Flexible Withdrawal / Deposit Rule - 22nd Apr 15
Unsound Banking: Why Most of the World's Banks Are Headed for Collapse - 21st Apr 15
Bitcoin Recent Low Price Volatility Might Be Deceptive - 21st Apr 15
Currency Wars Back As Russia Buys Gold - One Million Ounces in March Alone - 21st Apr 15
The Greece 'Grexit' Issue and the Problem of Free Trade - 21st Apr 15
Why Europe Lets People Drown - 21st Apr 15
Wealth Destruction for the 99.9 Percent - 21st Apr 15
SNP Publish England's Suicide Note as Pollsters Still Forecast Labour-SNP Election Disaster - 21st Apr 15
Characteristics of Extremely Over-Indebted Economies - 21st Apr 15
Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 21st Apr 15
Gold & Silver Alert: Silver Stocks’ Signal - 20th Apr 15
Now is the Time to Buy Resource Stocks, Especially Gold Equities - 20th Apr 15
DJ Transportation & Utility Averages Suggest Stocks Bull Market Is Over - 20th Apr 15
Crude Oil Price Bull Market Hope - 20th Apr 15
Stock Market Bears Get Slaughtered Despite Greece Counting Down to Grexit Financial Armageddon - 20th Apr 15
The Rise of the Paper Machines - 20th Apr 15
Gold and Silver Inflection Point - 20th Apr 15
SP500: A Butcher's Stock Market (Chop Chop Chop) - 20th Apr 15
Are Stock Market Bears Slowly Gaining Control? - 20th Apr 15
Sugar Commodity Price Bear Rally - 19th Apr 15
Avoid the Spread of the Stock Market "China Syndrome" - 19th Apr 15
Stock Market Going Nowhere Fast - 19th Apr 15
An Easy Way to Profit From the Two Biggest Trends in the Stock Market - 19th Apr 15
No Scripture Is Divine, Authentic and Beyond the Creation of the Human Brain - 19th Apr 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Historic Bubble

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.


© 2005-2015 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