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"Catastrophic" Winter Storms Send Consumer Confidence Outlook To 6-Month Highs

Tyler Durden's picture




 

Take your pick of which "confidence" measure you choose to watch to confirm your previous "common knowledge" meme. Unsurprisingly, the government's own Conference Board indicator provides the highest level of confidence relative to recent months but today's beat by UMich (81.2 flat from last month but above 80.2 expectations) is the highest overall level among the indices. It seems not even the weather can dampen the enthusiasm of the US consumer (who is retail spending at a dismally low level?) Hardly surprising is the fact that the tumble in the current conditions index was entirely dissolved by the hope for the economic outlook which stands at 6 month highs! Short-dated inflation expectations also ticked up. Of course what really matters is keeping the dream alive that multiple-expanding confidence will cover up any and all missed expectations in macro and micro data.

 

All driven by a six-month high in hope...

 

Take your prick - Bloomberg Comfort, Conference Board Confidence, or UMich Sentiment...

 

Of course, what is critical is the continuation of the confidence bubble... because earnings won't get the market to Nirvana so multiple expansion better keep rising...

As a gentle reminder, as we have noted previously [17] - 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, 02/14/2014 - 11:08 | 4436350 Headbanger
Headbanger's picture

Oh that makes sense..

 

WTF are these people smoking!!?

Fri, 02/14/2014 - 11:09 | 4436357 stocktivity
stocktivity's picture

It's all Bullshit!!!

Fri, 02/14/2014 - 11:24 | 4436400 creeko
creeko's picture

and I'm baffled by it!

Fri, 02/14/2014 - 11:29 | 4436419 derek_vineyard
derek_vineyard's picture

to infinity and beyond

Fri, 02/14/2014 - 12:14 | 4436554 ndotken
ndotken's picture

Don't worry ... Be happy

Fri, 02/14/2014 - 11:13 | 4436362 DoChenRollingBearing
DoChenRollingBearing's picture

The Federal Reserve: "It's all the weather's fault!"

Barack H. Obama: "It's all George Bush's fault!"

 

Geez guys, please get back on the same page...

Fri, 02/14/2014 - 11:13 | 4436363 VD
VD's picture

THERE ARE NO PEOPLE -- it's ALL FAKE DATA so just sit back and let this conspiracy theory become fact....

Fri, 02/14/2014 - 11:25 | 4436393 Grande Tetons
Grande Tetons's picture

Qe, reverse repos, policy tools, firmly anchored, robust, subdued, forward guidance...bla bla bla bla bla. It is all a bunch of fucking bullshit that the common joe and jane does not even know is bullshit.  Lucky bastards.  

 

 

Fri, 02/14/2014 - 11:09 | 4436353 Kaiser Sousa
Kaiser Sousa's picture

i can confidently say that this country is in a mother fucking depression and if u aint got some real money in preperation for the GRAND reset of the debt based worthless currency paradigm u r ASS OUT........

Fri, 02/14/2014 - 11:13 | 4436367 Grande Tetons
Grande Tetons's picture

Word. 

I stopped telling people to buy PMs ages ago. Just a bit.....I would say. Nahhhhhhh was the usual reply. 


Fri, 02/14/2014 - 11:28 | 4436404 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

"Buy gold?"

Nobody wants to hear it, I gave up years ago with my family.

Fri, 02/14/2014 - 11:36 | 4436427 Grande Tetons
Grande Tetons's picture

DoChen, 

I just do not get it. WTF is 10 ounces of AU to somebody with a decent net worth? Nothing!!  Nope, they do not want even a little for an emergency.  

Silver......fuck...do not go there. I would have had a warmer reception being a Jehovah's Witness or Amway salesman. 

True. I am lucky...as my wife loves Gold and Silver...and does not bust my ass when I pick up a few ounces here and there. 

Fri, 02/14/2014 - 11:38 | 4436455 Kaiser Sousa
Kaiser Sousa's picture

well here comes the London close...

what type of action would you guess you r going to see????

http://www.kitco.com/charts/livesilver.html

Fri, 02/14/2014 - 11:43 | 4436465 Grande Tetons
Grande Tetons's picture

They will be pissing of the fire. No doubt. 

I am going to reserve excitment until we break 1380.  

Fri, 02/14/2014 - 11:44 | 4436472 29.5 hours
29.5 hours's picture

Maybe they heard about gold being inedible. I bet they spent their excess credit on a nice cruise.

 

 

 

Fri, 02/14/2014 - 11:50 | 4436483 Grande Tetons
Grande Tetons's picture

Most of the time the dollars go into autos. Yep, give me an asset that depreciates by 25 percent as soon as buy it. 

Fri, 02/14/2014 - 11:11 | 4436354 youngman
youngman's picture

Just wait until they get their utility bills...

Fri, 02/14/2014 - 11:11 | 4436355 Max Damage
Max Damage's picture

Thats because they are all housebound having a shag. Of course they are happy under those circumtances

Fri, 02/14/2014 - 11:18 | 4436378 BandGap
BandGap's picture

Would't you be? Beats shoveling snow.

Fri, 02/14/2014 - 11:12 | 4436358 thismarketisrigged
thismarketisrigged's picture

just in time for the 10 am ramp .

 

what a farce, so used to it though.

 

markets just magically turn green at 10 am no matter what levels they were at previously

Fri, 02/14/2014 - 11:21 | 4436388 Kaiser Sousa
Kaiser Sousa's picture

bro i feel you...

the shit is so stupid its like theyre just mocking everybody with the blatant nature of this shit show....

 

Fri, 02/14/2014 - 11:10 | 4436359 max2205
max2205's picture

Dyslexia

Fri, 02/14/2014 - 11:12 | 4436361 1stepcloser
1stepcloser's picture

Spending money, I don't have, makes me feel soooo confident....i'm never going to pay it back

Fri, 02/14/2014 - 11:17 | 4436371 Smegley Wanxalot
Smegley Wanxalot's picture

My confidence ... that we are fucked ... is at an all time high.

Fri, 02/14/2014 - 11:24 | 4436373 Disenchanted
Disenchanted's picture

Perception management...

 

"Things are not always what they seem to be.


And that is exactly the way some people like it.


When times are bad, they want us to think they are good and getting better.


When damage is being done, they hope we will be unable to see the clear cutting behind the line of trees cleverly left to block the sight of drivers along the road system.


Long ago, Alice discovered that Life really was a Mad Tea Party and Wonderland was a clever theme park meant to displace that tedious thing called reality."


~Jamie McKenzie [October 2004]

 

Concealing the truth from public view has become a dishonorable but lucrative profession in many nations as power brokers seek to maintain their grip by distorting perceptions of reality. Good citizens in this brave world will be compliant and accepting rather than challenging and critical.

 

Fri, 02/14/2014 - 11:20 | 4436379 Kaiser Sousa
Kaiser Sousa's picture

what the fuck is up with the fucking DJIA...

the worse the news gets the more it rallys????

fucking joke.

Fri, 02/14/2014 - 11:26 | 4436398 Dr. Engali
Dr. Engali's picture

Uhmmmm helloooo. That's been the tail of the tape for five years now. 

Fri, 02/14/2014 - 11:28 | 4436408 Kaiser Sousa
Kaiser Sousa's picture

yeah doc i know...

but dont u think its gotten absolutely absurd beyond absurd????????

Fri, 02/14/2014 - 11:23 | 4436394 monopoly
monopoly's picture

Door number 2 please.

Fri, 02/14/2014 - 11:23 | 4436396 All is chosen
All is chosen's picture

Constant ice storms, the new way to prosperity.

You north Americans have it made.

Fri, 02/14/2014 - 11:31 | 4436424 Raging Debate
Raging Debate's picture

Confidence is improving because the economy is improving. However a UI rate of 11.2 dropping to 11.1 after five years is the reality, speed of current recovery.

It will pick up a tad during the 2016 presidential election year and after. The headwinds out there are indeed legion, if you invest take extra time and do so slowly.

For me to feel more confident. I want to see what other tax surprises await (in various forms) and I do believe we'll certainly see them. A lack of policy toward innovators would be a other condition that would keep my investment pace slow. I think policy in many areas will take several more years to implement. During which, it will remain a stagflationary environment with tepid growth.

Fri, 02/14/2014 - 11:36 | 4436443 toady
toady's picture

'Consumers' planning to spend on beans, bullets, and bandaids? And generators, space heaters, and snow tires?

Fri, 02/14/2014 - 11:36 | 4436444 Disenchanted
Disenchanted's picture

Confidence is up because of the new 1 Billion$ "Climate Resilence Fund"

LOL @

 

While no single extreme weather event can be attributed directly to climate change, Obama will stress the scientific understanding of how climate change makes events like the drought more extreme, said John Holdren, director of the White House Office of Science and Technology Policy.

Fri, 02/14/2014 - 11:53 | 4436494 optimator
optimator's picture

The object is to spend or give away enough fiat bucks to bring the system down so "They" can rebuild it in their image.  (If you can't talk about someone they own you).

Fri, 02/14/2014 - 11:43 | 4436464 29.5 hours
29.5 hours's picture

 

 

High consumer confidence but retail figures are off a cliff, cars sit in dark corners of warehouses and foreclosure filings up. Pity I'm too dumb to learn economic basics.

 

 

Fri, 02/14/2014 - 12:13 | 4436543 forwardho
forwardho's picture

Agree,

Sometimes I feel like that one eyed man in the land of the blind that people are always refering to,

 But I sure don't feel much like a King.

More like Cassandra.

Fri, 02/14/2014 - 11:48 | 4436485 gookempucky
gookempucky's picture

Always a SENSATIONAL DISASTER to push fear---and create purchasing---what a bunch of lemmings the people are. Talk about the walking dead.

 

http://twitchy.com/2014/02/10/atlanta-store-shelves-emptied-in-preparati...

 

 

Fri, 02/14/2014 - 11:52 | 4436489 Lumberjack
Lumberjack's picture

YAY! the laid off snow plowers will be able to pay 'some' of their bills. 

Fri, 02/14/2014 - 12:06 | 4436530 forwardho
forwardho's picture

What consumer confidence?

This "consumer" has already dug a deep grave for this frankenstien economy.

Can only hope when the adrenaline stops working, it falls into the hole already dug.

 

Fri, 02/14/2014 - 12:39 | 4436647 carbonmutant
carbonmutant's picture

The fog of Socialism....

Fri, 02/14/2014 - 12:44 | 4436661 MagicMoney
MagicMoney's picture

I don't really see the consumer confidence index as anything of much value. Might as well call it the hope index, or the hopium index, or "i feel happy today" index, or whatever. Am I missing something?

Fri, 02/14/2014 - 12:51 | 4436680 q99x2
q99x2's picture

Most people don't consume unless the government pays for it. I've held off on buying silver and LiteCoin until my FAFSA money came in.

Fri, 02/14/2014 - 15:29 | 4437281 MFLTucson
MFLTucson's picture

Missing one factor writer, there is no end to artifical money printing by these criminals!

Do NOT follow this link or you will be banned from the site!