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Consumer Comfort Plunges To 13 Month Lows

Tyler Durden's picture




 

Another day, another collapse in a measure of the 'peoples' confidence. Despite the animal spirits of euphoric dot-com bubble betting that is the new-normal US equity markets, it seems both rich and poor are not loving it. Bloomberg's consumer comfort index dropped to -37.9 - its lowest since October 2012 having dropped for the 6th week in a row. The last time we saw a collapse of this size, the Fed saved us all with QE3... what this time?

 

 

"they" better hope confidence comes back soon...

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence...

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

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Thu, 11/07/2013 - 10:55 | 4130740 bnbdnb
bnbdnb's picture

Rates will rise! USD to 100!

Thu, 11/07/2013 - 11:05 | 4130813 Headbanger
Headbanger's picture

I'm telling ya... THE CRASH IS UPON US NOW cause the idiots in charge "went plaid" and reached LUDICROUS STUPIDITY last week.

 

Thu, 11/07/2013 - 12:01 | 4131070 FreedomGuy
FreedomGuy's picture

My serious question for traders is "How do you trade this market in the short and long run?"

The Fed can crash both bonds and equities simultaneously. The other Fed, Federal Government and Obama seem hell bent on crashing healthcare and the economy. Commodities are flat or risky. I am not sure where one goes in a centrally planned economy whether it's day trading or 401k.

Thu, 11/07/2013 - 13:01 | 4131395 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

I don't trade.  Capital preservation is what is important to me.

There are no easy answers.  All assets have their risks.

Central Planning is destroying the American Experiment.

Don't let Central Planning destroy you!

***

#Winning  

#Obamacare

#theendisnear

#CATIYMFs

#NOMI

Thu, 11/07/2013 - 13:55 | 4131675 GreatUncle
GreatUncle's picture

My serious question for traders is "How do you trade this market in the short and long run?"

The game is over you don't this is about fleecing people.

 

Thu, 11/07/2013 - 10:57 | 4130752 LawsofPhysics
LawsofPhysics's picture

"Beating expections" - all the way down...

I expect that the "markets" will melt up on this news.

Thu, 11/07/2013 - 10:57 | 4130754 Randoom Thought
Randoom Thought's picture

They will turn off the grid. How is that for comfort?

Thu, 11/07/2013 - 11:06 | 4130823 LawsofPhysics
LawsofPhysics's picture

and then expect people to actually deal with one another face to face, oh the horror...

Thu, 11/07/2013 - 11:15 | 4130872 Headbanger
Headbanger's picture

I know!  It's getting more and more like the Bruce Willis movie "Surrogates" out there these days.

http://www.youtube.com/watch?v=P6qtEvcH3XU

Thu, 11/07/2013 - 10:58 | 4130760 Smiley
Smiley's picture

Have no fear, the government will hand out $100 trinkets and it will only cost you an extra $2,000 a year in taxes.

Thu, 11/07/2013 - 10:59 | 4130767 Dr. Engali
Dr. Engali's picture

Tech bubble 2.0 will save us. All hail Twitter.

Thu, 11/07/2013 - 10:59 | 4130768 The Devil
The Devil's picture

"what this time?"

 

Free anal probes for everyone! (That was my idea)

Thu, 11/07/2013 - 10:59 | 4130771 alien-IQ
alien-IQ's picture

Clearly bullish...and as we all know, Twitter IPO will save the US and Global economies.

Is it too early to start drinking Vodka?

Thu, 11/07/2013 - 11:02 | 4130790 Headbanger
Headbanger's picture

It's not just for breakfast anymore!

Thu, 11/07/2013 - 11:31 | 4130931 Nobody For President
Nobody For President's picture

Celebrate with Brandy like Nobody.

Thu, 11/07/2013 - 11:38 | 4130964 Snoopy the Economist
Snoopy the Economist's picture

It's never too early to start your Russian 'vodka career'.

Thu, 11/07/2013 - 11:00 | 4130778 Never One Roach
Never One Roach's picture

Consumers would feel lots better if Ben hands out more zero down houses where the buyer can then stop paying his mortgage after a payment or two and live for Free.

 

It's only Fair.

Thu, 11/07/2013 - 11:19 | 4130883 Yen Cross
Yen Cross's picture

    If it wasn't for all the hilarious comments on Z/H, I would have paid someone to take me out with a metal folding chair a long time ago!  WWF style...

Thu, 11/07/2013 - 11:36 | 4130953 Nobody For President
Nobody For President's picture

http://www.youtube.com/watch?v=CFFVVo9usFY

 

Larry Waters had a better idea.

Thu, 11/07/2013 - 11:21 | 4130893 Caveman93
Caveman93's picture

I am not a consumer...I'm a human being with feelings, emotions and needs. Cheap shit from China ain't one of them.

Thu, 11/07/2013 - 11:28 | 4130922 youngman
youngman's picture

wait until they try to go to a doctor to get that pain fixed after Obamacare kicks in.....they are really going to be in great pain...less comfort...lol

Thu, 11/07/2013 - 11:43 | 4130978 RaceToTheBottom
RaceToTheBottom's picture

Quick, implement the negative Taper!

All hands on deck! To the printing presses!

Thu, 11/07/2013 - 11:58 | 4131042 FreedomGuy
FreedomGuy's picture

I would attribute the drop in confidence indicies to Obamacare, at least in large part. First, if you are in healthcare and healthcare related industries the future is cloudy, at best...I stress at BEST. It is probably dark and fraught with revenue drops and administrative increases. Second, right now millions of people are experiencing angina episodes as they open letters from their health insurers finding out they have been dropped. This is followed by finding out that their premiums and out of pocket costs are doubling. This is direct, no BS theory reduction in disposable income. I will add that because of the nature of it, it really is a new higher expense that really does not directly buy a product or service, at least in the short run. So people spend more for nothing on both the premium and the out of pocket side immediately. It is a very real double whammy. Add to that, the idiots in NJ raised minimum wages about a buck for no increase in productivity. I watch moronic liberals defend this on TV as good for the economy. It reminds me why you don't let your plumber do your brain surgery, too.

I believe Obamacare has the potential by itself to wreck the economy, especially as the employer mandates kick in next year. I believe in the short run you will see things like these consumer indicies and measures of confidence fall first. There is a sense of what is coming by those who pay attention and Obamacare is absolutely going to get everyone's attention, even the young American Idol, bar hopping, live for today types or the "sheeple" as many here like to say.

 

Thu, 11/07/2013 - 13:06 | 4131432 The Carbonator
The Carbonator's picture

The NJ Raise is worse than you think.

 

They amended the NJ Constitution to put in AUTOMATIC minimum wage increases based on inflation.  The way things work in NJ many Union contracts are based on multiples to the minimum wage.  So if you are a bridge builder and you get 14x the Min wage, you will get a nice bump every year from now on end when they new inflation adjusted minimum wages come out.

Thu, 11/07/2013 - 13:08 | 4131446 analyzer_66
analyzer_66's picture

When did productivity ever get considered on minimum wage or salary wage growth? During the last housing bubble we had rising productivity but wage growth stagnated in the face of steeply rising home prices I.e. 2001-2007. Productivity is a red herring in any discussion of economics.
Unless we are talking about how productive algo's are at making millions on one penny movements of individual stocks.

Thu, 11/07/2013 - 13:45 | 4131637 GreatUncle
GreatUncle's picture

"rising productivity but wage growth stagnated"

When you discard that dearer to do here components then efficiency and productivity looks to rise rather well.

Wage growth is more a stagnation of revenues earned because all that you lost now has to be supported and it costs.

Fri, 11/08/2013 - 09:09 | 4134607 kwality
kwality's picture

Excellent point. Implied increase of 13% in wages across the board to remain competitive/ keep up with inflation.  Can businesses handle this? 

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