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Just How Irrelevant And Misleading Is The UMichigan Consumer Confidence Index?
The biggest driver for today's stock market ramp, aside from the initial claims number which next week will be revised substantially worse, was the UMich Consumer Confidence index, which "beat" expectations of 69.5 coming at a five month of 71.6. The fact that a self-referential index can be market moving in the first place is mindboggling: this particular index is mostly driven by moves in the stock market, and any higher read in the index send the lithium addicted stock market higher, which in turn leads to a higher subsequent read in confidence and so on ad inf. This self-recursion probably explains why it is such a favorite of the Fed, which has now openly made clear that it will do anything to facilitate any and every ponzi component to the US economy, of which UMich is precisely one. Yet philosophical matters aside, what is most troubling is the ever increasing divergence between the UMich index on one hand, and another "confidence" index, which is far more comprehensive, far more exhaustive, and far more frequent in its polling: the weekly ABC Consumer Comfort index. If you have not heard of it before, it is precisely due to these three qualifications. And being far more indicative of the true state of how people perceive the economy, it is inevitable that there would be a massive divergence between UMich and the ABC indices. As the chart below demonstrates, this is precisely the case. While UMich is almost back to its December 2007 level, a reading that is so ridiculous when one considers that America now has 42 million people on foodstamps (and had under 28 million in Deceber 2007), the ABC index is now just 5 points away from its all time lows, and its yesterday print of -47 is the lowest it has been since August. All this begs the question: why does the market pretend to trade base off an index as discredited and flawed as the UMichigan Consumer Sentiment.
As a reminder the UMich survey is conducted over the phone and includes a paltry 300 households for the preliminary numbers and 500 for the final one. This happens once a month. On the other hand the ABC News Consumer Comfort Index represents a rolling average based on telephone interviews with about 1,000 adults nationwide each week. There is thus no point in even comparing polling methodologies: it is imminently obvious that UMich is geared to not create a broad sample narrative but as narrow one as possible. Furthermore, there have been occasional allegations in the press that UMich goalseeks its periodic calling list in a way that affords a desired question outcome.
All this means that for anyone who wishes the get a fair grasp of how America is feeling (as closely as possible) the UMich index is the very last thing one should look at. Yet that is never the case, as the index merely reinforces the upward, self-referential bias in the ponzi. A fact which the market most certainly loves.
Yet for those few people who actually care about the truth, and wish to avoid the now ubiquitous propaganda, here is yesterday's narrative associated with the most recent ABC reading.
Consumer Confidence: The Red and the Black
Consumer confidence hangs stubbornly in the deep red heading into
Black Friday, signaling significant challenges for retailers at the
start of the holiday shopping season.
The ABC News Consumer Comfort Index stands at -47 on a scale of -100
to +100, the same as at this time last year and just 5 points from its
worst ever in a Black Friday week, -52 in 2008. (The nearly 25-year-old
index hit its record low, -54, a week later.)
One component of the index, measuring views of the buying climate,
holds little hope. This week 74 percent of Americans call it a bad time
to spend money, and it’s been 70 percent or more continuously for nearly
three years (this is the 150th straight week). That’s shattered the
previous record, just more than a year and a half, from 1991-92.
In the CCI’s two other components, only 10 percent of Americans rate
the national economy positively, and just 44 percent say their own
finances are in good shape – fewer than a majority for the 46th week in a
row, now tied with the record set in June 1992.
As noted last week, the CCI has correlated with retail sales
long-term at a significant .37, and since December 2007 at an especially
robust .63. Moreover, the CCI in Black Friday weeks has correlated with
year-on-year percent change in Q4 retail sales at .53 since 1992 (the
start of the current retail sales time series); and with Q3 to Q4
percent change at .39. Black Friday CCI also correlates significantly
with Q4 retail sales at .48, when both variables are detrended for time.
Its levels in the last 24 Black Friday weeks have ranged as high as
+27 or +28 in the go-go days of 1998, 1999 and 2000, with an average of
-15.
Given the CCI’s comparative low this year, it looks like retailers
are going to need heroic efforts to close the deal in what for many is
their make-or-break season. In these times of 9.6 unemployment,
regardless of today’s upward revision in GDP, aggressive pricing may do
more than plastic holly and red-suited Santas.
The CCI is produced for ABC News by Langer Research Associates. Click here for tables with this week’s data.
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One big difference... one is reported late in the day and the other isn't.. guess which one is reported during the 'market' open?
UoM is based on 500 telephone interviews... what a joke, the market moves a staggering amount of money based on a few phone call interviews?
Wow, this is incredible... I thought it was more sophisticated then just 500 phonecalls....
Unemployment is done the same way...60,000 phone calls if I remember correctly. I couldn't believe it when I read it myself at the .gov site.
Might the 500 receiving calls been taking their hopium?
How much of the Planet needs to lie in ruins before you'll say "mission accomplished"? I think you're new ZH motto should be "we destroyed the town because we loved it!"
It's not misleading. Consumers are as stupid as they've always been.
SPX
http://99ercharts.blogspot.com/2010/11/spx_24.html
NQ
http://99ercharts.blogspot.com/2010/11/nq_24.html
http://www.zerohedge.com/forum/99er-charts
Odd that it was relevant in September when you wrote:
As for consumer confidence: somehow the record September surge in stocks did nothing to make people forget juw how broken the US economy is, and that they do not enjoy being lied to about recessions being over. The Conference Board printed at 48.5, compared to 53.2 revised in July, on expectations of 52.4.
Another example of when the number goes down = good, it goes up = fraud/lie/manipulation, etc.
Actually it is an example of you not knowing the difference between the Conference Board Consumer Confidence Index and the UMichigan Consumer Sentiment Index. The two are completely separate, totally different, have different sampling methodologies, and input and output algorithms. But thanks for illustrating the point: who cares about facts when you have propaganda on your side.
My bad. I thought you were referring to UM Consumer Sentiment in that post. My apologies.
Harry, is being junked on ZH one of your hobbies?
Moron.
ROTFLMAO! THANK YOU TYLER! Put that ignoramous HairyWang in his place. I wish he would simply just go away.
Man, I still can't stop laughing! You shot a cruise missile at him and he was blown to pieces!
ZH is a terrific site. The one feature I wish it included is an ignore button. Harry would be at the top of my list.
http://www.youtube.com/watch?v=te-8MJ84834&feature=fvw
I know better than to start an argument about input output algorithms, but are the U Michigan and Conference Board surveys really different in a way that makes one of them less likely to be influenced by stock market performance around the time of the survey?
Michigan’s monthly sample size is smaller (500 vs 5,000 for Conf Bd). Michigan also asks people to think over a longer horizon: 12 months to five years. The Conf Bd only asks people to look forward more than six months with respect to inflation, interest rates and stock prices. The Conf Bd asks more specific questions. But the inputs would seem to have a fair amount of overlap:
Michigan asks (1) whether you’re currently better off or worse financially than a year ago.
The Conf Bd asks for an assessment of (1) current business conditions (“good, bad, normal”) and of (2) current employment conditions (jobs “plentiful”, “not so plentiful” or “hard to get”).
Michigan asks (2) whether you’ll be better off or worse in six months.
The Conf Bd asks for assessment of (3) business conditions (“better, worse, same”, (4) employment conditions (more jobs, fewer jobs, same) and (5) total family income (increase, decrease or same) in six months.
Michigan asks (3) whether business conditions (“the country as a whole”) will be good or bad over the next 12 months; and (4) how the “the country as a whole” is going to do over the next five years.
The Conf Bd, as discussed above, asks no longer-term questions, but seems to me to be asking the same things, just over a shorter horizon.
Finally, Michigan asks (5) whether now is a good time to make a major purchase.
The Conf Bd asks (6) the same question more pointedly, asking about specific plans to buy specific items (a car, home, certain appliances and a vacation) over the next six months.
The Conf Bd also asks about (7) inflation, (8) interest rate and (9) stock price expectations over the next 12 months.
So the Conf Bd asks six more specific questions to Michigan’s five about essentially the same things, over a shorter horizon. You could say that Michigan’s longer horizon makes it more subject to error but that seems like too fine a point for as blunt an instrument as consumers telling telemarketers how they’re feeling. The Conf Bd's way larger sample size and more specific questions probably make the survey more robust. But I don't really see anything about the Conf Bd survey that makes it any less subject to I-feel-good-cuz-are-up or gives it meaningfully less self-referential potential than the Michigan survey. I’d be interested in the details of how the survey math changes that.
Apples and oranges Wanger. Of course for you it's bad news = buy AAPL, good news = buy APPL so what difference does it make?
I apologized. As I said, I thought he was referencing the same index. My bad. I admit my mistakes - something that seems to be lacking by most here.
You post here as Hairy Wanger for crying out loud. You want to be a dick, and treated like one, and you are sucksessful. Stop your bitching. You love it or you wouldn't tow the line you tow.
It's always fun to punish the wanger.
No, he posts here as HarryWanger, not Hairy Wanger, get YOUR facts straight.
DavidC
Maybe he just has an exceedingly unfortunate name.
I knew a kid in high school named "Benjamin Fagin". That is, Ben Fagin. I really feel for that kid now.
You could be right. Could be. In the most extreme interests of fairness I have to give you that. But do you think Benjamin would come to Zero Hedge and post as "Ben Fagin?" Or would he be more likely to use the opportunity to create a persona that did not draw the ugly fire that comes his way in RL? Again, you could be right. But Harry Wanger sure seems like a gag name to me. I did do Peterpeter an injustice once along similar lines.
YOU admit nothing. You're an arrogant prick, for lack of a better term.
Harry,
What you always seem to miss is that we are on a road to nowhere. You may live for today and play in the POMO marching band but what you don't understand is sustainability. Anybody can live on borrowed money, however borrowed money is merely a hit off the borrowed time crack pipe. How do you honestly feel about the FED having to monetize our debt to keep America out of foreclosure? Better yet, how do you feel about this endless game of kick the can? I have 3 kids that I worry about everyday and I could really use some resourceful insight as to how you think their future is going to pan out. How do you think they will survive in a society that is built on nothing but cover ups and lies? And please tell me how we will ever be able to meet not only our current obligations but our enourmous future entitlement obligations as well? So Harry, here is your chance to make amends, enlighten me pleeze.
Make hay while the sun shines, a storm is coming but no sense hiding in the basement while the sun is shining.
Harry, I actually like it when you post. Because then I get to watch TD humiliate you. PLEASE KEEP IT UP!!!
and then some people simply humiliate themselves
The more I hate my job, the more important TD and HW battles are to my sanity. Thx guys.
Sitting down with the UMich Consumer Confidence index and a bag of popcorn is one in the same. Nothing to read and nothing to eat.
Just how irrelevent and misleading is the UMichigan consumer confidence index?
About as irrelevent and misleading as economic data points originating from a state that lacks an economy.
Please excuse my off topic comment;
Tyler,
Mohamed El-Erian of PIMCO has advised his sister who lives in Ireland to withdraw all her money out of Irish banks! Posted at businessinsider.com through bloomberg "El-Erian: "What You Advise Your Sister In Ireland Now Is That You'd Say Take Your Money Out Of Irish Banks."
When the manager of the worlds largest bond fund says that - WOW!
Shouldn't he have told her that a long time ago? He is a bit behind the curve isn't he! There are a lot of people who have done so already and they aren't in charge of any bond funds
Yes. Usually you expect some decorum from such a pubic figure, not come out pubicly and say that! Or is there some ulterior motive at play? Hmmm...
He said the same thing on CNBC shortly after the 2008 bank run in the US. "I told my wife to go and take as much money as she could out of the atm." At the time, I couldn't believe he was admitting to it...
probably he just heard it on Kaiser tv
A little late- ZH warned about that months ago and savvy individuals took heed.
I wonder if he's reccommending to families members in the U.S. that they do they same here in the USA. I would!
In a word...
Very!
ORI
http://aadivahan.wordpress.com
Dulplicate.
Conference Board data has been sideways since June '09. I'd post a chart but...
Get me to America, things are looking average.
Other self reinforcing stk index influenced indicators : LEI and ECRI, throw in a little money supply and you have a fukking boom!
Famous and cheery song from the pre-1929 era:
I was blue, just as blue as I could be
Ev'ry day was a cloudy day for me
Then good luck came a-knocking at my door
Skies were gray but they're not gray anymore
Blue skies
Smiling at me
Nothing but blue skies
Do I see
Bluebirds
Singing a song
Nothing but bluebirds
All day long
Never saw the sun shining so bright
Never saw things going so right
Noticing the days hurrying by
When you're in love, my how they fly
Blue days
All of them gone
Nothing but blue skies
From now on
I should care if the wind blows east or west
I should fret if the worst looks like the best
I should mind if they say it can't be true
I should smile, that's exactly what I do
I thought i was the only one who looked at ABCCC left in the world. UMICH is a rigged survey to say the least, if they dont like the responses, they just call different people untill they get what they want. SS DD.
All I can say is that the tape is ignoring bad news, institutions are buying stocks, and following the big money is the number one most important thing to do if you want to make money in stocks.
I attended an IBD Level 2 workshop last weekend, and all of O'Neil's fund managers said they are buying the leading growth stocks hand over fist once they pull back to the 50-day. These fund managers do some extensive networking with other big funds, and everybody is buying dips right now.
Now that I trade stocks for a living, I don't fight the tape, no matter how bad the news or data is.
It's the key to survival. Stay with the trend, otherwise you will go broke fast.
The trend is your friend, at least until you can't fucking stomach aiding and abetting this farce.
As good a site as ZH is, I wish it had an ignore feature. Harry and Robo would be the first two honorees on the guest list.
It's the same person
I also made that request this morning, I'd love an 'ignore user' feature.
The day that happens is the day ZH dies.
The last thing you want on a site that prides itself on cutting thru the BS is to only allow its BS to not stink.
Agree.
+1
You either agree with censorship or oppose it. There is no half way.
Those who try to silence dissenting views are far more dangerous than the provocateurs. Vive la renaissance!
Most stuff that comes from Harry and Robo and GW is pretty weak, but I personally love having good and bad opinions on this site. Even though I think most of what they believe in is utter gibberish, I give them credit for getting into the ring and getting their faces smashed in. And then getting back into the ring and getting their face smashed in again.
Nicely expressed. After all, it IS Fight Club. Boooo-yahhh! :)
Wouldnt make a bit of difference quss13 to have a personal 'ignore user' feature, everyone could still see them.
institutions maybe buying but they are buying from the insiders who are selling them their rotting tulips
The trend is your friend, until you find yourself ass deep in margin calls, on one of those increasingly frequent massive sell offs, and you can't find a bid to save your balls.
You are absolutely right, Robo. And once that changes, follow the money to the short side. Until then, it's foolish to fight it and whine about it. Make some money while the sun shines on the long side. Then when it reverses, go with it the other way.
Beats the hell out of waiting for the "system to collapse".
EXACTLY ! I've been saying the same thing for months, don't fight the tape...or the Fed. The market is going HIGHER . The market could care less about insider trading, Korea, Europe and anything else negative thrown at it. You also have a wildly bullish time of year for stocks from now to year end. Wait until Monday when they announce retail sales for Friday where WAY up, bears will get crushed....again. Get long or get the hell out of the way.
Bingo! Going to be a huge weekend for Retail Sales. Stores are open longer now than ever in the past. That will translate into much bigger revenue numbers over the weekend.
You assume that longer hours, means bigger revenue numbers. And even if it does translate into larger revenue numbers, does that make a store more profitable? Net Margins?
Further, will one weekends sales translate into a strong 5 weeks, or merely canabalize demand to a 2 day period?
Like we said yesterday Harry, a record 532 billion in Holiday sales will equate to 3.2% of total GDP! Whoopie shit! And 532 billion doesn't even cover the interest payment on the additional debt we have accrued since the depression began in 2007! So once again, Celebrate nothing because it don't mean shit in the end!
A steam roller is coming and they want to pick some spilled nickels off the road. Could be they are very athletic and can safely get them. Guess it is their right to try. It is our right to yell at the fools to 1. Stop enabling the Ponzi because 2. they become Ponzi scammers too and deserve no sympathy when they get rolled over.
May I suggest Gambler's annoymous for you and your IBD Level 2 workshop buddies? What does IBD stand for anyway? I've been duped? Just remember ROBO, The house always wins in the end.
I had a manager in the early 70's that you remind me of.
We had been together through a special training program in NYC for 6 months, and he was on the management track and I was a sales manager. For those who may not remember, the market sucked in the early 70's. I was trying to make sense of the market environment and also our need to generate commissions with stock and bond sales. I thought it would be smart to understand, as best we could, the factors that were driving the market.
I spent a couple of weeks putting together data from our NY office, and other industry sources, along adviser info and technical data, and contrarian opinions.
As we begain our meeting with the office sales staff, he said something I will never forget.........."I don't want to hear no Bearish Bullshit". and that was the end of the market review.
Bill
Robo, you are viewing the market from a objective point of view in which to make money. If others on ZH understood this, they would be making money in the same manner.
You and they both understand that the market is broken and insolvent. You make money off of it while they lose.
The key will be to pull money before the giant panic strikes. When that may be we do not know.
I hope you have some of your savings in gold. That trend is the only one that really matters.
Well, that and the dollar trend.
Largely agree. As the old saying about markets and irrationality goes.. However, some of the market indicators that I follow are diverging from the market action. Of course, divergence doesn't always work out.
Re the O'Neil guys buying - if the stock breaks down beyond a certain point, they will be selling hand over fist. Cut my trading system teeth on CANSLIM, and it is a good approach for newbies and those who want to follow another system versus create their own. However, have found that better, consistent returns can be had outside of the IBD rules, if one is so inclined to do their own research. Also, other traders know the IBD rules and game them, and those trading them.
you only got three junks. i got four. that PISSES ME OFF!
Is this more of the proverbial "money on the sidelines" argument...this one never goes away even if the Dow was to reach 36,000.
I'm still stuck on the theory the cnbs people buying retail sector because people are fine defaulting on their mortgage and spending the money eating out and iPads.
That is such a disconnect with reality. I don't know how much Prozac you'd need to live like that.
Most people who lose their houses is sourced from job loss. They have no money. I call BS on CNBS.
And for retail doing so well, durable sales just crashed. WTF?
I'll steal the quote from Bloomberg on this:
Today's durables report...should be viewed in the context of being one of the most volatile monthly series for a major indicator produced by the government. Also, a weaker dollar points to likely improvement ahead for durables orders and manufacturing.
We had Philly fed polar opposite of new York last week, funny on the gm ipo day.
Last month durables ramp likely bullshit prior to voting.
My guess is durables will keep on tanking. Who around the world will be buying. Austerity does not equal more demand.
In other words..
Another example of when the number goes up = good, it goes down = benign volatility
Sound a bit familiar?
You are guilty of the same confirmation bias you accused Tyler of up thread.
"Another example of when the number goes down = good, it goes up = fraud/lie/manipulation, etc."
"Today's durables report...should be viewed in the context of being one of the most volatile monthly series for a major indicator produced by the government."
"a weaker dollar points to a likely improvement ahead for durables orders and manufacturing."
In this case "likely" is a weasel word that allows for your bias to be applied to a statement without facts.
Harry,
Take a look at this article Tyler posted earlier. Try to understand it and maybe you will realize you should read something other then Bloomberg. Maybe you should start reading stories instead of just commenting on them!
http://www.zerohedge.com/article/durable-goods-massacre-plunge-33-revised-50-expectations-01-inventories-grow-10-consecutive-
Utter BS, I am sure the 500 people they interview are quickly dropped if they don't give the "right answers" Yes man comes to mind.
Got to keep the PONZI going....don't want to be the last one holding the very expensive book of stamps.
This is just another Harvard index that means shit.. Think about it. Consumer confidence. What the fuck does that mean? Duhh, Im a consumer. I took a nice healthy stringent shit this morning and i feel confident. Please
Thanks for posting this, Tyler. I thought that this MichU figure seems at odds with reality.
If you look at where the two go north and south of each other you will recall that month was when FSAB decided too change the mark to market rules and lie about values. So it is only obvious that this to is a lie. I can only hope the day comes soon when their schemes fall apart.
nice!
Watch the U of M confidence index drop once Ohio State beats them Saturday (again)...
Harry, Robo,
This market is going to go...DOWN.
NOTHING has changed - interest rates at ALL TIME historic lows and being pushed into negative territory by people intent on returning to 'normalcy', i.e. the highs of the tech bubble and housing bubble. I've got news - these were not normal.
We have institutions STILL sitting on toxic debts marked to fantasy. The US has U6 unemployment stuck at around 17%, record numbers of people on food stamps. ALL the problems of 2008 have been pushed under the carpet or demand pulled forward to kick the can down the road.
We have institutions acknowledging the FRAUD they committed with regard to mortgages, who go crying to the Fed or Congress to get help to change the law to circumscribe the BREAKING of the laws they committed.
We have countries starting to buckle under the Sovereign debt problem (Greece, Ireland et al) with one of the biggest debtors being the US who, by virtue of having the de facto reserve currency, thinks it can bully everyone else into accepting its currency devaluation whilst, at the same time, berating others for what it is openly doing itself.
And we have stock market today with a priapic move as a result of one set of dubious figures, whilst at the same time ignoring other much more relevant and accurate figures.
Need I go on?
DavidC
Just keep shorting into this rally, you'll only end up losing money and feeding the rally further. I guess some people get, and some don't....sad.
Well said. I sold my T's a few weeks ago, right on time. Rates have only one way to go and that is up. Just wait until China begins to sell their holdings in the EU/UK/US or a war breaks out. Or both... Stay short banks for sure. They are about to implode and IMO a collpase of JPM is now imminent...
http://www.youtube.com/view_play_list?p=BC8D4475D9DA7B4D
^^ a rough draft, final version to be posted Sunday morning :D
Statistics fraud!
Wouldn't you be Up on a $100 BILLION bailout?
Besides California, Michigan is the Bridesmaid Welfare state... wait until they blow through that moola.
Confidence indexes do not measure economic trends, or even map the likelihood of economic trajectories and outcomes, they only measure how effective fake stats and Govt and 'marketz' propaganda is at suckering chumps into losing or wasting money.
i.e. a confidence game.
I ignore all confidence levels and their trajectories, as they are meaningless in the real-world. Any actual business operator can tell with sufficient accuracy what the REAL economy is doing in their area, via simply paying attention to traffic intensity, people in shops, lines at banks, and the number of times a business’s phone rings per day (not to mention the accts).
That isn't complex at the micro level, so how does a survey help?.
I don't think anyone can see 3 to 6 months ahead but if that is what I required, to gain some insight when making a deal or big decision, I sure would not be looking at a feckin pathetic CON-fidence survey!
At the macro level all these 'measures' seem to be complete drivel.
I don’t know why anyone gives them credence, or why/how they came to exist. They seem to be designed to befuddle, not enlighten.