All Time Low Consumer Confidence Good News from Contrarian Perspective

The Present Situation Index of the Consumer Confidence survey from the Conference Board fell to 29.4:

That’s lower than the 2002 bear market bottom. Lower than the confidence level in 1991. Lower than the early 1980’s. Even slightly lower than the darkest days of the 1970’s bear market.

As far as I can tell, the current reading is the lowest that this survey has seen since it was started in the 1960’s!

The Conference Board surveys 5000 US households and their answers to questions about their employment, spending and

From a contrarian perspective this is good news. And this is just another in a long line of extreme pessimism from the average consumer and investor in the US. But from another perspective we need to see at least the start of a change in the doom and gloom before things get better.

If you have a really long term view and don’t particularly care about further declines in the short term, then this is a good signal. But if you want to avoid such potential losses then you have to give up trying to anticipate the market’s exact inflection point and wait for confirmation by giving up some gains to the upside.

Comments

[ChickenLips:]

During past recessions, credit saved the day. This time around, it's different. Credit has dried up for business and consumers. Besides, consumers are up to their neck in outstanding debt. In my opinion, the inflection point in the stock market will occur when the Obama administration gives huge tax incentives for business development in the US, and the credit markets are "forced" to lend to business investment Then I'll confidently start buying stocks like mad.

Jan 14 11:57 AM

[Dave Wrixon:]

Yes, once things are as bad as they can possibly get, then they can only improve.

Unfortunately, there is still no indication that we are there yet or when that will be.

There is also no guarantee on the pace of the recovery.

The last one was referred to as the jobless recovery. This one will be worse.

Indeed, it is probably only because the GDP statistics are so meaningless and inflation will not be properly accounted for that there will be an upturn at all.

When will it start to feel better? No time soon. That's when!

Jan 14 12:42 PM

[Jason Rines...:]

Government can inject large sums of money in the Small Business Administration. Banks make the loans, government guarantees 50%. This would spur entrepenuarship and job creation. The tax cuts for middle class will help some and the U.S. should cut capital gains tax for the next three years.


On Jan 14 11:57 AM Chicken_Lips wrote:

> During past recessions, credit saved the day. This time around, it's
> different. Credit has dried up for business and consumers. Besides,
> consumers are up to their neck in outstanding debt. In my opinion,
> the inflection point in the stock market will occur when the Obama
> administration gives huge tax incentives for business development
> in the US, and the credit markets are "forced" to lend to business
> investment Then I'll confidently start buying stocks like mad.

Jan 14 12:58 PM

[patio:]

Asteroid hitting the Earth is positive news, from a contrarian point of view.

Jan 14 01:24 PM

[CJJ:]

For people actually rooting for the US to go broke, unemployment to hit 70%, the dollar to go bust, etc...should not be worrying about what they are invested in. Owning gold will be worthless because unless you have come up with some novel way to tote it around with you without becoming a target of death. Any other investments you have that are in any currency will be worthless.
In the above situation what does a 3 month supply of food and water do for you? How many guns and ammo can you really amass(again at what point do you become THE target)? Some short term plan, even a longer term plan will only give you a small head start over the scrambling that will begin.
To save the world in your minds it must be destroyed...sorry but not a good solution...
The bottom line is the world's economy was never designed to work in a downturn, especially a really, really deep downturn. Sure a new system is needed, but A)No one will ever agree to a system B)Chaos would reign the day before a new system could be implemented...So, really, start to hope things do turn around at some point, whether it be a years, 3 years or 5 years, because the alternative leaves everyone losers and any investment you are discussing, even if it is a winner today, isn't going to get you anywhere when IT goes down.

Jan 14 02:05 PM

[{5U}:]

Throw out all contrarian indicators until the credit markets can function without the aid of Uncle Sam.

The markets are like a drug addict right now. It gets a high from government intervention only to suffer lower lows until it gets more government smack.

Jan 15 01:13 AM

[Big K:]

A turnaround must come fairly soon to avoid the 70% unemployment scenario. The longer this downturn continues, the worse it will get. Each day, more and more employees are layed off. This just makes the economy worse, which then leads to even more employees getting layed off. This is a death spiral, and is accelerating. It will be unstopable after the first quarter.

Jan 15 01:34 AM

[Conan the B...:]

The trend is your friend and don't fight the Fed.

What do you do when the Treasury starts Rabbit punching and the Fed is hitting below the belt?

IMO: time to leave the ring.

Jan 15 09:35 AM