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Con Con Surprise, No Surprise

It’s odd the way the players pay attention to some numbers and not others. There’s no reason why the market should have been surprised by the ConCon.  ABC News does a comprehensive consumer confidence survey weekly that always foreshadows the ConCon. Last Tuesday ABC had this to say:

Consumer confidence is on a cold streak, locked in place since the beginning of the year at very
near its worst-ever rating – and more than three in four think the economy is stalled or will
decline in coming months.

The ABC News Consumer Comfort Index stands at -49 on its scale of +100 to -100, in a 2-point
range and without significant movement for the past six weeks. It is hovering just 5 points from
its all-time low, -54 last January, and is far worse than its long-term average, -13 in 24 years of
weekly polls.

Nice charts too. Anyone who isn’t an economist knows damn well that the economy isn’t recovering.  The ConCon shows that the public gets it.

Furthermore, anyone who follows the stock market also knew that the ConCon would be terrible. The survey was taken in early February.  In the short run the ConCon follows the Dow every month, so it’s a given that a survey taken in early February would reflect the steep selloff in the market in January and early February. Duh-uh…

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The biggest past exception to this rule was in 2007 when the ConCon followed housing prices down the tubes. Stocks were late. The CNBC Gang had the stock boys looking the wrong way, as usual.

There was another notable and ominous exception. In 2006 and 2007 the public obviously was not fooled by the bull market in stocks. People are not stupid. They know that just because CNBC says it’s so, doesn’t make it so. They know the difference between reality and the ignorance and misinformation spewed out daily by the likes of Bartiromo, Pisani, and Burnett.

So why is that example ominous. The same pattern is developing today. The ConCon has remained weak for almost a year while Wall Street has been throwing a party.  I suspect that the outcome will be the same this time as it was in 2007.

Finally, the usually bullish puts out a nice chart showing the 3 components of the ConCon. This chart wasn’t updated yet, so I added a few lines to show the changes reported today, plus a little interpretation of the Present Situations Index. Barfing’s excuse? “Consumer sentiment indices get way too much attention.  The simple fact is that sentiment does not correlate strongly with consumer spending and thus has little predictive value.” In other words, anything that clearly shows secular decline should be ignored. Blind whores. You gotta hand it to ’em.  What audacity.

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“Consumers”, i.e. Joe Sixpack, the public, get it. The US is in a long term secular economic decline, with two possible outcomes from here–another dead cat economic bounce, or outright collapse.  The stock market rally of the last 11 months is the bogus result of the Fed shoveling money into the trading accounts of the Primary Dealers. There’s no substance to it, just the delusions of a few economist madmen.
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Outright collapse from here is not out of the question. Deluded by the illusion of  success, the economic shysters at the Fed are now withdrawing their support of the market. We are about to reap the whirlwind of real results.

As long as the Fed keeps interest rates near zero and the banks are allowed to earn whatever spread they can, no rational person is going to borrow or save. It is only rational under the circumstances to pay down debt–to disinvest, when the cost of that debt is greater than the return available on savings or any rational investment. Furthermore, most people, retirees in particular, have no choice. They aren’t earning any income on their investments, so they MUST liquidate their assets.

These government policies of keeping wholesale interest rates at zero, while government borrows to the hilt, saddling us with massive debt that we and our children will be forced to pay for the rest of our lives, are nothing more than reverse Robin Hood. They rob from the middle class to give to the rich and privileged criminal money rentiers.

The ConCon trend represents the ultimate moral degradation of an economy that was once marginally “fair”. The public obviously gets it.

We’re doomed.

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  1. Frothy Conundrum

    Actually, I’d say the drop in the ConCon # was substantially larger than the relatively modest 2-3 week drop in stocks could explain.
    So, I guess I agree with you, except even moreso, but in a somewhat different manner. More or less.

  2. Just4Laughs

    “It is only rational under the circumstances to pay down debt–to disinvest”

    Actually, in low interest environment it pays to borrow provided the banks will lend you of course. But banks do the obvious: They buy treasuries from the same crooks who print the money and give it to them since lending to you or me they may never see their money again, he-he.

  3. Lee Adler

    Where can you borrow at low interest? Only the banks and corporations who can access the commercial paper market can borrow at low interest. Everyone else pays a usury rate. Even mortgage loans aren’t cheap. 5% is a usurious rate when the value of the underlying asset is wasting or stable. No one can earn 5% on their money in savings. So instead of borrowing, people pay off their debts. That’s why loan demand is crashing and we are in a deflationary spiral.

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