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UMich Confidence Drops Most In 3 Months

Tyler Durden's picture





 

Previous month's epic miss and hurriedly revised expectations from UMich confidence was 'baffled with schizophrenic bullshit' when the Conference Board printed at near record post-crisis highs earlier in the week. It is perhaps not unexpected that despite a drop MoM, following the huge miss last month that UMich confidence would very modestly beat expectations. As in the last 2 cycles, we saw an echo surge in confidence and that has now (just as in the last two cycles of confidence) begun to fade. Both current conditions and economic outlook fell MoM.

 

The cycle is once again echoing - 4year 4 month rise, echo bounce and now fade...

 

Of course, confidence remains crucial in the reflation of market multiples and hope-fueled exuberance but - as we reiterate below - the cycle once again appears to have peaked...

 

As a gentle reminder, as we have noted previouslyUMich Confide - 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...

 

 

[18]

 

and the cycle appears to be shifting...

Via Citi,

Is consumer confidence set to turn?

[19]

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...

[20]

 

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.

[21]

 

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.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.

 


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Fri, 01/31/2014 - 11:08 | Link to Comment Rainman
Fri, 01/31/2014 - 11:13 | Link to Comment Temporalist
Temporalist's picture

And a terrorist banker was arrested too...

 


Indian-origin woman banker arrested in UK anti-terror raid

http://timesofindia.indiatimes.com/india/Indian-origin-woman-banker-arre...

 

"Kuntal Patel, who works at Barclays Bank in Canary Wharf, has reportedly been under arrest since Sunday after her home in east London was raided by the Metropolitan Police's Counter Terrorism Command.

She is the daughter of magistrate Meena Patel, who sits on the bench at Thames Magistrates' Court in east London."

Fri, 01/31/2014 - 11:24 | Link to Comment WarriorClass
WarriorClass's picture

The plan is coming together!  (Evil laughing at the Rothchilds and Rockerfeller houses)

Thank you Mr. Keynes...

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls . . . become 'profiteers', who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished not less than the proletariat. As the inflation proceeds . . . all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless."  - From pages 220-233 of The Economic Consequences of the Peace (1919), by John Maynard Keynes

 

http://americandictators.blogspot.com/2014/01/economic-studies-even-you-...

Fri, 01/31/2014 - 11:13 | Link to Comment Obama_4_Dictator
Obama_4_Dictator's picture

“He made valuable contributions that helped our clients and many of his fellow associates.”

 

Bullfucking shit...so easy a caveman can do it.  Just BTFD and the follow the Bernake, how much did he really contribute. Now that the Bernake pulled teh punchbowls these losers don't know what to do...... 

Fri, 01/31/2014 - 11:19 | Link to Comment 29.5 hours
29.5 hours's picture

 

 

At the Tacoma Narrows Bridge?  That does not resonate...

"Being an economist is bad for your health. Another jumper."

 

 

Fri, 01/31/2014 - 11:24 | Link to Comment ihedgemyhedges
ihedgemyhedges's picture

I figured the Univ of Michigan students would be much happier given all the cancelled classes due to the Polar Vortex....

Fri, 01/31/2014 - 12:09 | Link to Comment National Blessing
National Blessing's picture

Deflation, deflation, deflation.  That's all I have to say.  Word up.

Fri, 01/31/2014 - 11:08 | Link to Comment TeamDepends
TeamDepends's picture

All your confidence are belong to us.

Fri, 01/31/2014 - 11:09 | Link to Comment Obama_4_Dictator
Obama_4_Dictator's picture

I'm sorry this is how I feel today:  Yes, FUCK yes, eat it Bernake, egg, ehhh EHHH, HELL YEAH, FINALLY, *pumps fists....let this be the real DEAL, I've waited so long, finally it's happened to me! Could not have happened on a better day - Bernake's last day. Burn market burn....FUCK YESSSSS!  WOOO HOOOO....TIME FOR A DRINK!!

Fri, 01/31/2014 - 11:10 | Link to Comment MillionDollarBonus_
MillionDollarBonus_'s picture

As I've often said before, the University of Michigan is not an accredited Ivy League college, which for me casts some doubt on the credibility of this figure. You can' just trust every figure out there. Everybody needs a filter that ignores the less trustworthy sources in order to get a more accurate view of the economy.

ACCREDITED INSIGHTS – A DAY INSIDE THE LIFE OF A SILVERBUG
Fri, 01/31/2014 - 11:13 | Link to Comment Pheonyte
Pheonyte's picture

If everyone had that filter then you'd be completely silenced.

Fri, 01/31/2014 - 11:16 | Link to Comment Dr. Engali
Dr. Engali's picture

Not everybody. Some of us appreciate good satire.

Fri, 01/31/2014 - 11:13 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

ahhhh... good point.  Looking forward to the future feast when the liberal Keynesians go cannibal and eat one another.

Fri, 01/31/2014 - 11:19 | Link to Comment Dr. Engali
Dr. Engali's picture

Coming from Ohio and being a Buckey fan I have to agree with you. Michigan is nothing but a big turd bowl.

Fri, 01/31/2014 - 11:44 | Link to Comment superflex
superflex's picture

Damn Doc.

I had respect for you until you said you were a fan of the Buckeyes. 

Are you an OSU grad, or just one of the millions of unwashed masses who never even sniffed the campus but rides the bandwagon?

Go Bearcats!

 

Fri, 01/31/2014 - 12:15 | Link to Comment Dr. Engali
Dr. Engali's picture

Lol

 

No, I went to Kent state, but I have been to a few Ohio State games. I've been a Buckey fan since the days of Woody Hayes.

Fri, 01/31/2014 - 12:32 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Jack Lambert .... one of the great linebackers of all time!  Kent St (will never forget his incredibly heads-up lateral in a key game)

Fri, 01/31/2014 - 12:31 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Jack Lambert .... one of the great linebackers of all time!  Kent St

Fri, 01/31/2014 - 12:57 | Link to Comment Dr. Engali
Dr. Engali's picture

Jack was one of my all time favorites. I used to love watching him play. He didn't take shit from anybody.

 

One of my favorite football memories:

 

https://www.youtube.com/watch?v=N3AsPRiAN2I

Fri, 01/31/2014 - 12:40 | Link to Comment superflex
superflex's picture

I wont hold it against you since your head seems to be on pretty level.

I started my edumacation at a MAC school.  Ball State, aka Teste Tech.

Fri, 01/31/2014 - 13:00 | Link to Comment Dr. Engali
Dr. Engali's picture

My wife went to Ball State.... Small world.

Fri, 01/31/2014 - 12:30 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Detroit ..... the economic blueprint for obliteration

Fri, 01/31/2014 - 11:40 | Link to Comment superflex
superflex's picture

Oh, I do enjoy your humor MDB.

Thanks for the laugh.

Now get back to masturbating to your picture of Krugman.

Fri, 01/31/2014 - 11:12 | Link to Comment fonzannoon
fonzannoon's picture

FB green, GOOg green, chipolte flyin...move along, nothing to see here.

Fri, 01/31/2014 - 11:12 | Link to Comment asteroids
asteroids's picture

The boyz drove the markets after hours where they wanted them. Now, during the trading day they are teasing the muppets again only to rape them later on. Stay the fuck out of this travesty.

Fri, 01/31/2014 - 11:12 | Link to Comment Dr. Engali
Dr. Engali's picture

Damn Christmas credit card bills sure are a bitch when your rate is 29.9%.

Fri, 01/31/2014 - 11:16 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

so you're saying that those $14 pair of shoes I bought at Payless on my Chase CC will end up costing me $212 when I pay my balance off in 37 years?

Fri, 01/31/2014 - 11:33 | Link to Comment Smegley Wanxalot
Smegley Wanxalot's picture

Simple.  Obama doesn't have a SOTU to deliver today, so there is no need to lie and report positive info.

Fri, 01/31/2014 - 12:59 | Link to Comment disabledvet
disabledvet's picture

I'm actually getting very bullish on Michigan...40 years of pure hell of course...but again this is a State with massive energy reserves.

Detroit actually BEING bankrupt does change the calculus since the City can now be "managed" for the best possible tax efficiency.

Detroit has a massive port facility....the industry is basically within the City itself.
It isn't Chicago, New York, Toronto, etc which really don't have much going on industrially anymore.

The infrastructure is relatively new...and well laid out.
Built to scale I might add.

They also have access to an unlimited amount of wind power with access to lakes on three sides of the State.

http://en.wikipedia.org/wiki/Upper_Peninsula_of_Michigan This area alone could become the basis for the build out of a massive hydrogen economy.

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