Sales must increase. That is largely dependent on household formation, which in turn is dependent on growth in full time jobs. And that's not happening.
Perceptions have turned very negative and the media has been increasingly playing on fears (e.g. the U.S. debt ceiling crisis and the big default scare). If the economy gets so bad, and the stock market falls low enough, many believe the Fed will step in with another short term fix to prop up the stock market - QE3.
Consumers used to have discretionary income which they would use or not use depending on their mood. Beginning in 2008, consumers had less money but the price of commodities shot up and that has kept consumer spending high – but that doesn’t mean they are happy about it.
After an amazing week of whipsawing market action, we explore why trading was so erratic and conclude that the days of fearless dip-buying and trust that "The Powers That Be" can support the markets may be coming to a messy end.
The model in my forecast says that meaningful reform to the status quo will not be readily accepted by the power elite. They will promote a 'new normal' which will span a leisurely 'five to ten years' for economic recovery, while they are comfortably standing above it all on other people's necks.
“Some wags are saying this downgrade is already built in, but with the level of cognitive dissonance in the market I say otherwise. I am sure all the government put mucky mucks are meeting over the weekend and are stirring and preparing their usual toxins to stem any blowback." (Russ Winter)
