Guest Post: Consumers Are Confident Of Recession

Tyler Durden's picture

Submitted by Tony Pallotta of

Consumers Are Confident Of Recession

And that my friends is the nail in the economic "recovery." August consumer sentiment was just reported at 54.9 from 63.7 in July. This is the lowest level since May 1980. The chart below shows the correlation with sentiment and the consumer component of GDP which is about 70% of the economy and why I say the "recovery" is over.

In Q2 the consumer component of GDP was 0.07% from 1.46% in Q1. Based on historical correlations and today's sentiment data the Q3 consumer component will contract much further in the (2%) range. This will bleed into the fixed investment and inventory components of GDP causing further contraction.

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Bam_Man's picture

I say that comparing "confidence" now with 1980 is apples & oranges.

How many "consumers" were taking anti-depressants in 1980?

Angel Face's picture

I wasn't then....I am now.

Fish Gone Bad's picture

Comparing apples to oranges is easy.  I generally eat apples when given a choice.

gall batter's picture

I'm not taking them.  Just wallowing in my depression and in the depression.

Pay Day Today's picture

Part of the healing process. And when you are good and ready, snap out of it and re-engage with life. The world needs more people to do that, the times require it.

samslaught's picture

How is it that the democrats get away with saying that a balanced approach is raising taxes and raising spending by nearly 10 trillion over the next 10 years?

As an American I would draw the centrist line at a spending freeze and no tax increase.  I would say leaning to the right would be cutting spending (not reducing from the baseline but actually spending less next year than we did this year) and lowering taxes.  I would say that leaning to the left would be raising taxes and increasing spending.

What Barrack Obama calls for as a balanced approach is actually a leftist dream outcome.  The republican alternative is a leftist dream light.  The mainstream republicans are either too dumb to see this or they are actually in on the scam to increase the size of government while pretending to be fiscally conservative.  In today's enviroment I tend to believe the latter.

V in PA's picture

Didn't have to. You could smoke on planes and at work. Remember kids, smoking is bad. Now take this pill.

eurusdog's picture

 Had not yet discovered the 420 in 1980. Now.......

Don Birnam's picture

Consumer Confidence the lowest since Jimmy Carter's last summer in the White House. Well done.

The Isley Brothers. Billboard R&B Singles Chart, #1...May, 1980. Prime groove...

Aductor's picture

How many times must I explain this to you.

1) It is transitory.
2) Conensus was too high.
3) The time period chosen was unfavorable.

Seasonally adjusted, consumer confidence was 99.6. At least.

JPM Hater001's picture

Excellent list.  Let me add a few more:

1) Besides earthquakes the Astroid ELEnin also pulled consumer confidence in an unnatural way.

2) Tea Partiers flooded the survey.

3) The college kids were far smarter in 1980...the data is bad.

StychoKiller's picture

4) The sun was in the poll-takers' eyes!

SheepDog-One's picture

So whats the market doing now then, last designed hurrah pump before the HUGE Jackson Hole dump within a few hours/days?

glenlloyd's picture

looks to me like it's trying to establish a holding pattern until JH, that is unless something in Europe implodes.

Oh regional Indian's picture

Indeed SD1, next week is the one it seems. Perhaps a massive break in the eastern markets on Monday morning open, followed by a slew of announcements, measures, interventions, circuit-breakers..... till the US opens that is.
Then, we'll see something incredible. As I'd pointed out before, strong rhymes with August 15th 1971 (also a Monday to boot). And Gold, no good feelings about Gold going into next week.

Moonday morning, it's going to be something.


SheepDog-One's picture

Yea....just incredible to see how totaly controlled and manipulated it all really is. Bankrupt Europe, bankrupt USAA+, but all is well for today while we figure out how to do it all again another day. How about a meteor the size of a school bus slams directly into Manhattan? Sure would cure a lot instantly.

Ratscam's picture

come on guys and girls this news is bullish!

Dealer Broadcast

12 Aug 2011 at 14:49:28 (GMT) Futures Margin Update: With effect on 17 August 2011 @ 2:00PM CET the initial and maintenance margin for D.J. EURO STOXX Bank Index Future(FESB) will increase by 7%, ECX CER Future(CER) by 5%, D.J. EURO STOXX 50 Index Future(FESX) by 18% and SPI 200 Index Future(AP) by 17% and D.J. EURO STOXX Insurance Index Future(FESI) by 2%.

Ratscam's picture

more bullish news

Dealer Broadcast 12 Aug 2011 at 15:15:32 (GMT) Important news 1/2: Following recent market events, the European Securities and Markets Authority (ESMA) have requested a suspension on short-selling on equities in the financial sector from August 12th 2011 for 15 days, covering credit institutions and insurance companies. So far Italy, Spain, Belgium and France have decided to enforce the ban. Sure as hell will I short Reggies French banks next week. 

Ratscam's picture

12 Aug 2011 at 15:16:29 (GMT) Important news 2/2: With immediate effect, it will not be possible to open new short CFD positions in affected companies during this period. Note: existing short CFD positions will be permitted and do not need to be closed. Please refer to your trading conditions in the account menu.

Ratscam's picture

Greece CFDs: Also the Greek securities regulators Hellenic Capital Markets Commission have banned short-selling on the Athens exchange for a period of two months with immediate effect. Clients will not be able to short Greek CFDs until this ban has been lifted. Note: existing short CFD positions will be permitted and do not need to be closed.


Why not include the entire world? Or lets ban all leveraged instruments

paul mansfield's picture

I was wondering if zero hedge stand by their '$2000 quote for gold in less than a month - with near 100% certainity'?

think you lot are top notch,


SheepDog-One's picture

Um, well Zerohedge didnt make that statement, that was a statement from someone else that was posted here.

And that article did not say 'Gold to $2,000 within 1 month', it said some options trades suggest someone believe gold would be that high next year.

Bam_Man's picture

You sound like an astute investor who may be in a bit of a hurry.

Debt Rolling's picture

Zerohedge doesn't make this kind of predictions, it's often just play on the words. 

By the way, if you buy gold to make money, you shouldn't, because you don't understand this product. It's a tool to preserve capital, not to increase it. You will have a bigger purchasing power in wage-dependent products and services, because most people will have become poorer, but it will stay exactly the same (which is already fine) in incompressible things like apples and bread. 

And that's why all the people who comment or rejoice on gold reaching "new highs" are incredibly stupid. Gold does not make new highs. Paper money makes new lows. 

Against gold, but also against wheat or oil. Strangely, I have seen many people talk about a "gold bubble" on forums (even generalist ones), but very few (if any) talk about a CHF bubble or a corn bubble. 

The sheeple has always the same memes, suggested by the medias... 

gdogus erectus's picture

Yes, but, but - how about if you park your hard earned money in gold, plant potatoes and store rice in buckets?  Then when deflation hits levered assets such as real estate, you roll your gold over to hard assets at reduced prices?  This will feel like you made an investment rather than just preserved capital.  At this point it becomes semantics.

Debt Rolling's picture

Like I said. You become richer relatively (i.e. because the other people become poorer), not absolutely. So you'll be able to purchase far more wage-dependent assets (land, boats, stocks, etc.) but the same number of incompressible assets (i.e. electricity, gasoline, apples, pears, things made by robots, very low margin products, etc). 

You don't "make money", beause in my (very strict and schumpeterian conception of the thing) it would mean being able to buy more incompressible assets also. For example, at the beginning of the month, you have $10 and can buy 10 apples. At the end of the month, you earn your pay of $200 and can buy 210 apples. You have made money. You have more units of currency in your pocket. 

When you put your capital in gold, it's in order to keep the same number of units of currency, not to increase it. 

If you keep your 2011 $210 and decide not to buy apples with it, but rather gold, you'll still have $210 in your pocket (of 2011 value) when you sell it in 2013. 

Which is already incredible: in a negative growth world, the challenge is to preserve your K and not lose it like the rest of the people. 

To "make money", you need to take further steps, and, indeed, buy wage-dependent assets when there is "blood in the streets". But it takes intelligence and guts (you need to buy when everything around you screams apocalypse), and only a few of the current gold bugs will be able to become millionnaires (in today's dollars) through gold. 

The Hawk's picture

So wait... I get what you're saying, but (speaking apples here) I'm thinking since Jan 2004 (random date , $400) apples haven't increased in price by OVER 4x.  I could be wrong, but thinking not... What about banans? over 4x? So instead of $.69/lb now, they were $.16/lb?  Does this mean gold is overpriced?  I own both g and s btw...

Debt Rolling's picture

That's because gold has already priced the coming inflation, in anticipation. It's up to you to see if the potential inflation will be higher than what has already been priced in.

Variance Doc's picture

"When you put your capital in gold, it's in order to keep the same number of units of currency, not to increase it."

I think there is an error in your reasoning.  The idea is that gold is money (ignore what Benoccio claims - he is lying to keep the ponzi going), i.e a store of value, which the USSA dollar is not; it has decreased in purchasing power.  So, you do not in fact have the same number of units of currency at exchange (in the future), but you have increased the number of units.

For example, say in 2010 you have $1 and buy gold with it.  In 2010-2011, the dollar has lost 15% of it's value.  In 2011, you exchange your gold for USSA dollars and get 1.18 back.  It is important to note that we are talking about money and not goods.

Now look at purchasing power.  Let's say that an apple costs $1 in 2010.  In 2011, that apple costs $1.18.  If you held cash, you cannot afford an apple - you're 18 cents shy.  However, if you held gold, you can purchase an apple by exchanging gold for ben/clown bux; thus the presevation of capital.  So, when you put your capital in gold, you preserve the PURCHASING POWER of your capital and not to keep the same number of units of currency.

Strider52's picture

Now, lemme get this straight. If I buy a ton of apples NOW, cook them and preserve them using canning methods, they will be worth more a few years down the road? [end stupid comment tag]

Clearly_Irrational's picture

Although acting as a store of value is one of the large benefits of owning gold, you'd be mistaken if you think that makes up 100% of the current price.  It's also a fear trade instrument that is negatively correlated with the stock market.  When things go badly people flee stocks and even bonds to gold and treasuries.

Variance Doc's picture

What DR is referring to is found in the trend and not in the volitility (square root of the 2nd centered moment - the standard deviation) which you speak of.  The trend is the loss of purchasing power of the USSA dollar which is shown in the increase in the price of gold.  You're right if you look at the variation around the trend.

@ DR

Excellent observation!

fuu's picture

Well I have found that taking the advice of random people on the internet is a great way to make money. I would go all in if I hadn't already spent my money on Lulu, Netflix, Amazon, and LinkedIn like that RoboTrader guy suggested. I just gotta stay long and strong till 8/26 then all of you will be drooling on my Porsche.

JW n FL's picture

There is No! Recession!

BTFD's! Look at BAC! LOOK! AT!! IT!!!

Party on Wayne!

Party on Garth!

People are losing money! by not accepting the new normal training! see the Market go lower! BUY!!

and when the training of the sheep / retail is complete! the FED will NOT! have to add liqudity! the Idiot, Sheepish, Consumers will do it for the FED!

SheepDog-One's picture

JW there never was any actual recession, all created chaos by world banksters to soon bring everything back up under their total control with 1 world currency. This is all simply a farce.

JW n FL's picture

I am trying to encourage the blind from participating in the BTFD program!

But yes One World sounds Great too!

where can I sign up??

never mind the wigger already signed U.S. ALL up!

But? isnt him being there against the Constitution?

Fuck Me!

V in PA's picture

Where do you buy your coffee?

SheepDog-One's picture

NAH, I'm trying to encourage them to participate MORE in the FED's 'BTFD program'!

JW n FL's picture

i think we all just want austerity so that the burning starts sonner than later..

better to get this shit over with.

dragging it out is boring!

Max Hunter's picture

JW there never was any actual recession

Hmm.. reminds me of a conversation I just had with a friend.  I told him trouble on the horizon. He said; "but everywhere I go people are busy". I said; "yeah, they were busy in 08' before the credit crisis too, right?"

Even though we do have fundamental problems, the triger is completely controlled..

JW n FL's picture

i was only funnin! my bad fellow brothers in arms! my bad! i will tone down my crazy fishing posts some. lol

Debt Rolling's picture

The "recession" (hate that modern term) itself is not a big event. 

The big event, which would have lasting -- and in fact irremediable -- consequences on the world economy and Zeitgeist is when this recession will, finally, trigger defaults of >medium importance, defaults which would have already happened in 2008 without the tens of trillions USD of government guarantees. 

That's when some real action will start, before that, it's background noise.

BurningFuld's picture

+1  When governments finally run out of taxpayers money and give up keeping this whole thing afloat.....the real fun begins. Could be a ways off yet...or not.

digalert's picture

This calls for a Barama/CONgress vacation...

Oh, they're on vacation. Never mind.

SheepDog-One's picture

Did you read the article saying AIPAC funds all these politicians vacations?