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Here’s Why You May Want To Tiptoe Out Before The Party Ends

Private spending on capital goods is a measure of business confidence in the economy. If business people believe the economy will grow, they invest more in plant and equipment. If they are not optimistic, they pull in their horns. This week’s Commerce Department report on Durable Goods orders contains a nugget or two that help us to see how business people are behaving in that regard.

The picture isn’t good. Apparently business people have been growing less confident in the growth potential of the US economy for the past 16 years. That belief, and the reduction in investment that follows from that belief, runs the risk of being a self fulfilling prophecy. This isn’t just a long term phenomenon. Business investment in capital goods has been flat since 2011, and has been declining for the past 2 years. Meanwhile, over the 5 years that growth in business capital spending has stalled, stock prices went to the moon. The disconnect matters.

Real Nondefense Capital Goods and Stock Prices - Click to enlarge

Read the rest of this post and view all the charts at David Stockman’s Contra Corner.

 

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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