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Consumer Confidence Misses (Again), Tumbles To Lowest In 7 Months

Tyler Durden's picture




 

No matter what measure of confidence, sentiment, or animal spirits one uses, the consumer is not encouraged by the record-er and record-er highs in the US equity market. The Conference Board's consumer confidence data missed for the 2nd month in a row - its biggest miss in 8 months - as it seems in October consumers were un-confident due to the government shutdown... but in November they are un-confident-er due to its reopening. As we have noted in the past a 10 point drop in confidence has historically led to a 2x multiple compression in stocks (which suggests the Fed will need to un-Taper some more to keep the dream alive). Ironically, more respondents believe stocks will rise of stay the same over the next 12 months even as the 'expectations' sub-index collapsed to its lowest in 8 months.

 

 

Once again we remind that it's all about confidence and hope appears to be fading...

As we have noted previously - this move in confidence is key...

But, it's all about confidence... investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable... And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels...

 

 

 

and the cycle appears to be shifting...

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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Tue, 11/26/2013 - 11:15 | 4190443 Say What Again
Say What Again's picture

So no end to the QE, which means the "market" will continue to "rally"

No need for me to do any more "research" today.

I think I'll go to the mall and buy shit.

Tue, 11/26/2013 - 11:19 | 4190462 XAU XAG
XAU XAG's picture

Top chart shows alot of support at the 60 level approx 12 months ago and further back.

 

Read along time ago we will keep bumping on and off the bottom for many years

Tue, 11/26/2013 - 11:21 | 4190469 hedgeless_horseman
hedgeless_horseman's picture

 

 

America markets don't need confident consumers.   We have Kevin.

Tue, 11/26/2013 - 11:23 | 4190476 CH1
CH1's picture

Geeze, everyone else can manipulate numbers, but not these guys?

Get with the program! Good numbers only!

Tue, 11/26/2013 - 11:24 | 4190478 Say What Again
Say What Again's picture

#AsktheFed

or should I say

#EndTheFed

Tue, 11/26/2013 - 12:33 | 4190652 RSloane
RSloane's picture

Actually HH I was thinking that this is a good sign because if anything it proves that American consumers are not stupid or are at least smarter than the denizens of the stock market. Economic environments matter except to the people supporting the 'show'.

Tue, 11/26/2013 - 11:22 | 4190472 Say What Again
Say What Again's picture

I'm 98% confident that Old Yellin will continue to buy "assets" from the Primary Dealers so that they can continue to get rich at our expense. 

Q.E.

Q.E.D.

Tue, 11/26/2013 - 13:12 | 4190835 midtowng
midtowng's picture

They better hope the S&P doesn't turn over, or confidence will really collapse.

Tue, 11/26/2013 - 11:15 | 4190448 TwoJacks
TwoJacks's picture

just once, I would like to see one of these misses matter

Tue, 11/26/2013 - 11:26 | 4190493 CH1
CH1's picture

They all mater, but you'll never see it on the "news." And QE solves all ills... until it doesn't.

Tue, 11/26/2013 - 11:29 | 4190506 Say What Again
Say What Again's picture

They DID matter, for about 15 minutes.  That was your chance to buy the dip.  Now we're off to NEW HIGH heaven.

You may want to consider placing trailing buy-stop orders next time this happens, so you don't miss the dip in the future.

</sarc>

Tue, 11/26/2013 - 11:16 | 4190456 CheapBastard
CheapBastard's picture

Moar EZCredit.

Tue, 11/26/2013 - 11:58 | 4190565 yogibear
yogibear's picture

With all this easy money payoff your student loans with the bankster HELOC or buying non-clawback assets.

Then default and bankrupt.

Tue, 11/26/2013 - 11:18 | 4190460 gjp
gjp's picture

Market not budging from ATHs, PMs going down.  Did you say there was news?

Tue, 11/26/2013 - 11:18 | 4190461 FieldingMellish
FieldingMellish's picture

Fuck it... the top 0.1% are CONfident. They are confident they will continue to milk assets out of the system until there are none left. Trash 4 Gold anyone?

Tue, 11/26/2013 - 11:18 | 4190468 Yen Cross
Yen Cross's picture

  WTF is this? 7:00       USD         Richmond Manufacturing Index     13     3     1

  Scratching bald spot in head... A 400% beat on estimates! LMFAO

Tue, 11/26/2013 - 11:24 | 4190475 virgilcaine
virgilcaine's picture

Welcome fellow 3rd worlders..the Bannana republic is here..QE money printing sealed the deal as Bannana Republic.

Tue, 11/26/2013 - 11:26 | 4190486 Cognitive Dissonance
Cognitive Dissonance's picture

May I please have my Banana Republic with chocolate ice cream and rainbow sprinkles?

<Oh....and a cherry on top.>

Tue, 11/26/2013 - 11:36 | 4190525 Cursive
Cursive's picture

@virgilcaine

"Now I don't mind choppin' wood,

And I don't care if the money's no good,

You take what you need and you leave the rest,

But they should never have taken the very best."

 

RIP, Levon Helm

 

The South has been here before, same as it ever was.

 

 

Tue, 11/26/2013 - 11:25 | 4190484 Everybodys All ...
Everybodys All American's picture

They make these numbers all up out of thin air when it's to their benefit. In this case the benefit is more QE from the Federal "Crime Syndicate" Reserve.

Tue, 11/26/2013 - 11:30 | 4190510 semperfi
semperfi's picture

bullish !

(someone had to say it)

Tue, 11/26/2013 - 11:49 | 4190552 playnstocks
playnstocks's picture

bullshit !

(someone had to say it)

Tue, 11/26/2013 - 11:48 | 4190551 John Law Lives
John Law Lives's picture

We will print until you are confident, and we will then print some more. - Chairsatan

Tue, 11/26/2013 - 11:54 | 4190559 yogibear
yogibear's picture

Count on QEen Yellen. She'll just increase the amount to get the same effect.

Triliions and trillions more to be added to US debt.

Zimbabwe is the Fed's economic model. Printing leads to higher stocks.

 

 

Tue, 11/26/2013 - 12:37 | 4190667 RaceToTheBottom
RaceToTheBottom's picture

They should do these tests by wealth and income profiles.

While the average of these look like successive receding hills, I bet for the 5-%'ers it looks like the opposite...

Tue, 11/26/2013 - 12:51 | 4190668 virgilcaine
virgilcaine's picture

If the value of Money is worthless what incentive is their to save, invest or or start a business?.. chirping sounds..  Zirp has led to the destruction of a real economy.  Interest Income is the safe way to grow a business and personal wealth not specultive stocks, this has always been the case until Chairsatan. Stocks are the caboose of the economic train not the engine. Hence the crazy train economy we now have, when you have a sound savings, now PM's, business or investment proprty then you can buy the riskier assets,, but no more. It's a nitemare what they have done.

Tue, 11/26/2013 - 12:52 | 4190735 disabledvet
disabledvet's picture

lower yields won't help confidence either...but that's what's coming. Want to blame JPM for all the world's problems? Wait 'till Mr. Market chimes in...

Tue, 11/26/2013 - 13:13 | 4190833 Racer
Racer's picture

"

The QI Elves @qikipedia 6h

Evolution... pic.twitter.com/WLcFrElFbg

 

Shame I can't post the image

Tue, 11/26/2013 - 14:15 | 4191081 SDShack
SDShack's picture

Why is anyone suprised by this? It's just 0zer0care sticker shock that is going to be 0zer0care Wallet Shock after Jan 1 when the $100-$200 higher premiums and double higher copays and deductibles kick in. That will trigger the next wave of Consumer Confidence Crash. The only thing that is holding this off is low gas prices, but that will end next summer. After that the real 0zer0care shitstorm will hit when 50-100 million EMPLOYEE plans get dumped in October 2014 just in time for the mid term elections. But hey, at least we get "Free" mental health care now to deal with the upcoming 0zer0 Depression.

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