Forget Green Shoots: These Are the Brown Shoots Turning Black 51 comments
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I never believed in green shoots - they were always brown at best - and now they are turning black and will stay black through 2010. As I write this Larry Kudlow is screaming, telling viewers and suckers to essentially ignore very disappointing retail sales data and invest based on consumer confidence. Well, pal, consumer confidence is still negative - just not as negative as it was - we all know that - but it is headed south again. C'mon, Zucker, do you really want ratings that badly? Remember what you want badly, you get badly.
Where was I? Oh, black shoots. My newsletter, ChangeWave Shorts, is published by Investor Place Media and we have an in house brand - ChangeWave - and in house survey group that has been doing sentiment surveys on everything from consumer purchases to oil exploration budgets for eight years plus. And they survey the same people, enabling them to create and use great baseline data. And they are never wrong - truly - my interpretation of their results may be wrong, but the data is always spot on and typically weeks if not months ahead of other data gatherers.
The last consumer survey, finished up earlier this week, tells us the slight uptick in some categories of consumer spending and the rebound in confidence was a head fake. My interpretation - brown shoots turning black. Simply put, consumers continue to spend less and plan to spend less heading into the rest of the summer.
Let me quote the report:
The mixed picture we reported back in June has worsened in ChangeWave's July consumer spending survey. And for the first time in four months we're seeing an actual pullback in the 90-day spending outlook going forward. The ChangeWave survey of 2,681 U.S. consumers, completed July 6th, has also picked up a significant worsening in consumer sentiment and expectations. Spending on travel/vacation, durable goods for the home, and consumer electronics all edged downward in the current survey, even as automobile and restaurant spending stayed flat.
After three consecutive months of improvements, our July survey has registered a setback in U.S. consumer spending. Better than two-in-five U.S. respondents (45%) now say they'll spend less over the next 90 days - 2-pts worse than the previous survey in June. Only 22% now say they'll spend more - 3-pts worse than previously. The spending outlook is down across all income categories, with lower income households (under $50,000 per year) particularly hard hit.
The travel/vacation category was the biggest loser - only 26% of respondents are spending more and 35% less on these products and services - a six point shift, more versus less, in the past month.
I got these results on Tuesday and look what we saw Friday morning - very weak retail sales data from everyone from Macy's (M) to Costco (COST) - data Kudlow continues to scream at me to ignore. I guess the desire for celebrity and rankings is stronger than his ability to do third grade math. And that math says the consumer is dead and getting deader. At a macro level, let me summarize what you hopefully already know.
Housing: Dead and believe it or not, getting deader. Forget historical norms - the 2.6 million peak was fueled by funky mortgages and investors, perhaps 60% or more of demand - and 500,000 starts is still too many with 11 months inventory and more than two million foreclosures on the horizon. Maybe more. Home prices will not stabilize, nationally, until 2012 at the earliest - when foreclosures peak - and consumer confidence cannot seriously until that happens.
Consumer Spending: Dead, deader, dying again - besides the loss of wealth - housing and stock market crashes - take away more than $4 trillion in credit and more to come. No wealth, no cash due to falling incomes and unemployment, no credit - ain't no meaningful consumer spending rebound for as far as the eye can see. Don't believe me? I vacation midway between Myrtle Beach and Wilmington every year for a generation and take, excuse me, took the kids for a movie, an ice cream and some shopping at a large enclosed mall - several department stores, food court, the works - in North Myrtle Beach. Wanna buy that mall? It is empty and on the market for $3.3 million - not $33 million, $3.3 million.
Banks: On the mend in the headlines, the big ones - Citi (C), Wells (WFC), BOA (BAC) - broke and getting broker as delinquencies and defaults climb faster than anticipated - well ahead of reserves - and toxic assets sit there like a vacant lot in New Jersey. Citi keeps comparing its performance and capital to its $2 trillion dollar balance sheet - what about the $1.2 trillion in off balance sheet assets (last November's count) that are off balance sheet for a reason? Wells says it is fine, yet it has almost $350 billion in commercial real estate loans not to mention more than $90 billion in option ARMS on its balance sheet. And BOA still has Ken Lewis, a blind, deaf and dumb board, and unknown liabilities from its purchase of Merrill. For purposes of full disclosures, most of my assets are at Citigroup and I bank at BOA.
Credit Markets: What credit markets? They do not exist for all but a couple of investment banks and AAA rated companies. Otherwise, it is all government backed borrowing. Trillions backed by Uncle Sam - and a few billion in private transactions.
I know you know all this - but I put it together with new consumer spending data to prove a point - optimistic anchors and pundits can talk up the market or the economy and Congress can re-write laws but no one can change the laws of math. And those laws tell me, and should tell you, consumers are right to pull back and they will do so throughout 2010.
So what to do now? The crazy value investors are looking at hotels - hotels! I just stayed at a great Hilton (HLT) in New York for less than half what I paid 20 years ago. Look at shorting hotels - Starwood (HOT) looks ripe to see continuing problems in bookings and revenue - and maybe the booking sites like Expedia (EXPE) - they are going to take another hit this quarter and be in the doldrums for at least another 4-6 quarters.
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On Jul 11 10:11 AM the.bighouse wrote:
> Mr. Shulman you said about your firm's statistics " And they survey
> the same people, enabling them to create and use great baseline data.
> And they are never wrong - truly -" But perhaps Mr. Dorgan is closer
> to correct by saying "Maybe you have provided quality statistics,
> and you have displayed a practice which Peter Lynch was also very
> fond of i.e. the use of personal anecdotal evidence" Mr Shulman...Remember
> economics and their statistics are STILL not a pure science or pure
> mathematics and can be wrong or skewed or anecdotal. Even in your
> firms survey.
> Im not saying you are wrong but dont be too glued to the numbers
> cause you'll never see the true Green Shoot or Mustard Seed when
> it comes. You have to be statistically flexible while you watch the
> numbers so that you are not at the airport when the ship gets in!?!
>
> AND...please cut Mr. Kudlow a break! I am a moderate politically
> and dont always agree with his political/economic view. However,
> I do enjoy Mr. Kudlow's enthusiasm for his trade as well as his quests
> who I think give a balanced economic viewpoint. I really think you
> mix Mr. Kudlow's enthusiasm with what you call "screaming". Also
> I think you are a bit presumptuous by saying his viewers are suckers.
> (This is your quote " Larry Kudlow is screaming, telling viewers
> and suckers to essentially ignore very disappointing retail sales
> data and invest based on consumer confidence.") Finally, I think
> in your screaming enthusiasm you owe Mr. Kudlow or at least his viewers
> an apology.
On Jul 12 01:35 AM BPYHO wrote:
> It's amazing how fast people jump on the negative train. I know our
> economy has serious problems but earnings will be on the upside this
> week and you will be costing yourself $$$ if you are shorting (this
> week). This upcoming crash will be delayed until August b/c this
> earnings season will surprise!
Good Grief
On Jul 11 03:00 PM Paul H. M. wrote:
> Another bitter GOP supporter.
>
> McCain lost (as he should, clearly a mental midget next to Obama).
>
>
> The facts: Obama raised more money than any candidate, and probably
> owns more stock that any of us. So to imply that he's a socialist,
> while he's clearly in the pockets of big business, is just retarded
> (almost as retarded as G.W. Bush).
He has abandoned the policies he stated he stood for while running for election at every chance when faced with industry pressure. He has allowed wall street to manipulate the markets increasing borrowing costs, driving up the price of oil , delaying recovery.
He has knowingly talked about green shoots when there were none, creating false expectations. If we wanted a president we knew would lie to use we would have kept bush.
He has spent trillions bailing out wall street to keep credit flowing while American's need help to reduce debts.
He has staffed the White house with wall street insiders.
If you believe, like I do, that Mr. Obama needs to change course and has had enough time I urge you to write the white house explaining why he has had enough time, and why he doesn't deserve more. Below is the link:
whitehouse.gov/con.../
Get rid of Summers and his proteges, the whole Rubin - GS group. Tell Geithner to resign. Put Volker at Treasury. Start rolling back TARP and the whole alphabet soup of similar programs. Do the same with pork. Stop pumping trillions of dollars into Wall Street. Pass a new Glass - Steagall. THAT would be "change we can believe in."
Endless excuses based on "Bush did it" won't cut it anymore. Leadership is in order. Not more of the same old stuff.
On Jul 12 02:58 PM EX-AD-MAN wrote:
> Wall Street threw the country's financial body over a log and banged
> away while W ruled the roost, but somehow it's Obama's fault for
> not fixing things after less than a year in office? That IS priceless.
{In it, the host of Mad Money says he regularly manipulated the market when he ran his hedge fund. He calls it "a fun game, and it's a lucrative game." He suggests all hedge fund managers do the same. "No one else in the world would ever admit that, but I could care. I am not going to say it on TV," he quips in the video.
He also calls Wall Street Journal reporters "bozos" and says behaving illegally is okay because the SEC doesn't understand it anyway.}
Michael Shulman is a specialist in short selling. It is to his advantage to foment negative market sentiment. It is both illegal and immoral. If you take someone who doesn't care if 20 M retired lose their means of survival...you probably find someone who also believes in evolution-that is to say, this 'highly adapted animal' ( in his own view ) sees "The Weak" as" Prey". Moreover, he feels it his Duty to devour them in order to "advance the species"
( himself ).
I consider this contributor to SA a predator= breaking the law. I will now file a formal complaint to the SEC, using his own fear tactics above in the original article. I will also be looking for others on SA who I feel are in collusion to create market fear/panic, in order to maximize their gains from short sales. Soon, all these 'animals' will be in the bread lines with the now unemployed, and despised Hedge Fund managers. Then, of course, I want to have a discussion with them about survival of the fittest.
Wrong. What Obama did was say whatever it took to get what he wanted. Thus in January the sky was falling unless we passed the trillion dollar pork barrel spending bill falsely called 'stimulus'. When - surprise, surprise - deficit spending and bailouts of govts programs combined with threats to increase deficits, taxes, regulations and govt control fail to 'stimulate' a brow-beaten private sector, we get nonsense like VP Biden "nobody predicted this" and Obama's arrogant "I wouldnt have done anything differently."
Obama has already blown it. His stimulus is already a failure. What's changed in the last 2 weeks is that the 'green shoots' that signal that failure have become obvious - 3 million lost jobs and counting. That's 6 million jobs deficit compared to what Obama promised. What's also changed is that Obama has dug himself a hole by tying himself to his own fraudulent promises with his bogus claim that the stimulus has 'worked as intended'.
3 million unemployed Americans beg to differ.
More jobs have been lost in 6 months under Obama than under Bush during any period of time. Or that matter, this is the worst jobs performance for any first-6-months-of-a-pr... ever.
"
Endless excuses based on "Bush did it" won't cut it anymore. Leadership is in order. Not more of the same old stuff."
BINGO. If I had an employee who whined that his non-performance was due to the last loser I fired, I'd fire him too. So let's get real and not simplistic here: The US market is underperforming China's stock market -why ? Obama's socialist agenda scare the bejeesus out of the business sector. Cap-and-trade and socialized medicine is whats killing the 'green shoots'.
I seem to recall last year a bogus claim by Obama that his inexperienced self was going to be ready on day one. I seem to recall a promise that the bogus 'stimulus' had to be rush-passed to stop the bleeding, and that it would 'save or create 3 million jobs'. I seem to recall that the Obama administration estimate was a max unemployment of 8% if the stimulus passed. We are at 9.5%, and we will not get under 8% for ... years.
If you make big promises, expect to be called on it when you BLOW IT. Obama lied, Jobs died. America is in a hole, and Obama's plan? Dig DEEPER.
The argument that smoeone cant be a socialist because liberal billionaires supported him is lame. What's retarded is not knowing that there are some very rich people who are very leftist, even communists. George Soros, the billionaire who funded not just Obama but Moveon.org, comes to mind, as does the Lamont family, one family member took on Sen Lieberman in 2006, from the left.
We are what, the only Westernized country in the world where you can lose your house by getting sick?
I absolutely agree with the above posters that the trillions of dollars in bailout money should not have been spent on the banks. This was largely engineered in the Bush administration, and Obama disappointed me by not giving back the shit sandwich they handed him.
As a small business owning American who can't afford the extra seven hundred dollars a month it would take for health insurance-I'd be OK with paying a hundred bucks a month extra in taxes towards that goal. No one's ever been able to explain how that would hurt me really.
They say 'but oh, in France you have to wait, you'll have no choice!' which to me sounds like they don't think we're smart enough to do it better than France. Are they right?
My business could compete in its hiring practices based on work environment, quality, reputation etc. and not just 'do you have health insurance?'
How many lawsuits from accidents etc. would not happen if people could just go in for checkups and not have to worry about it, versus losing years of their lives paying for being hurt in a wreck? How much SSI money gets paid out for people who got hurt and couldn't go to the hospital, so were permanently damaged instead, now unable to work? Wouldn't insurance companies themselves save a fortune in not having to pay all those medical bills?
Healthcare opponents take the short view. The banks should be allowed to sink or swim with no taxpayer assistance. The car companies have to pay back what they were loaned.
healthcare reform would greatly help the economy of this country by vastly improving the health, sanity and productivity of its workforce.
Health-care premiums are bankrupting American business -- and taking all the purchasing power away from American workers and consumers.
One of the reasons salaries in America are stuck is because of the collusion that has driven health-care costs through the roof. Doctors, medical providers, pharmaceutical companies, and insurance companies all have been having the times of their lives in America. Everybody has been getting rich, at the expense of the American worker and at the expense of sick and dying Americans. Businesses that provide workers with health-insurance benefits have watched insurance premiums rise nearly 10% per year for more than a decade. Doctors, hospitals, drug companies raise prices; insurance companies raise premiums. The worker asks his employer for a raise and the employer says I’d love to give you a raise – but I already gave you a 9% raise in your health-care premium. A worker making $35,000 a year in 1998 would receive a comparable salary of $90,314.90 in 2009 if health-care premium increases had been delivered directly to him in the form of salary instead of being directed to the insturance companies directly. The worker is still being paid $30,000 a year in 2009 -- his purchasing power has been stuck, and he has been driven further and further into debt. The insurance companies don’t care if doctors and drug companies raise prices, in fact they want them to raise prices; they just pass the costs on to the worker and the employer.
On Jul 13 10:47 PM Bolton Peck wrote:
> I think that, for me personally as well as a small business owner,
> it would be to my advantage not to be able to lose my house and everything
> I own if I get sick enough that I can't go out and fix bikes in my
> home based business.
>
> We are what, the only Westernized country in the world where you
> can lose your house by getting sick?
>
> I absolutely agree with the above posters that the trillions of dollars
> in bailout money should not have been spent on the banks. This was
> largely engineered in the Bush administration, and Obama disappointed
> me by not giving back the shit sandwich they handed him.
>
> As a small business owning American who can't afford the extra seven
> hundred dollars a month it would take for health insurance-I'd be
> OK with paying a hundred bucks a month extra in taxes towards that
> goal. No one's ever been able to explain how that would hurt me
> really.
>
> They say 'but oh, in France you have to wait, you'll have no choice!'
> which to me sounds like they don't think we're smart enough to do
> it better than France. Are they right?
>
> My business could compete in its hiring practices based on work environment,
> quality, reputation etc. and not just 'do you have health insurance?'
>
>
> How many lawsuits from accidents etc. would not happen if people
> could just go in for checkups and not have to worry about it, versus
> losing years of their lives paying for being hurt in a wreck? How
> much SSI money gets paid out for people who got hurt and couldn't
> go to the hospital, so were permanently damaged instead, now unable
> to work? Wouldn't insurance companies themselves save a fortune
> in not having to pay all those medical bills?
>
> Healthcare opponents take the short view. The banks should be allowed
> to sink or swim with no taxpayer assistance. The car companies have
> to pay back what they were loaned.
>
> healthcare reform would greatly help the economy of this country
> by vastly improving the health, sanity and productivity of its workforce.
On Jul 12 01:36 PM dcb wrote:
> Yesterday Mr. Obama asked for more time patience from the public
> from regarding the economy. Personally, I do not believe Mr. Obama's
> policies deserve more time, they are misguided, driven by special
> interests, not directed towards the root of the problem , will actually
> make the economy worse, and rip off taxpayers for wall streets benefit.
>
>
> He has abandoned the policies he stated he stood for while running
> for election at every chance when faced with industry pressure. He
> has allowed wall street to manipulate the markets increasing borrowing
> costs, driving up the price of oil , delaying recovery.
>
> He has knowingly talked about green shoots when there were none,
> creating false expectations. If we wanted a president we knew would
> lie to use we would have kept bush.
>
> He has spent trillions bailing out wall street to keep credit flowing
> while American's need help to reduce debts.
>
> He has staffed the White house with wall street insiders.
>
> If you believe, like I do, that Mr. Obama needs to change course
> and has had enough time I urge you to write the white house explaining
> why he has had enough time, and why he doesn't deserve more. Below
> is the link:
>
> whitehouse.gov/con.../
On Jul 13 10:47 PM Bolton Peck wrote:
> I think that, for me personally as well as a small business owner,
> it would be to my advantage not to be able to lose my house and everything
> I own if I get sick enough that I can't go out and fix bikes in my
> home based business.
>
> We are what, the only Westernized country in the world where you
> can lose your house by getting sick?
>
> I absolutely agree with the above posters that the trillions of dollars
> in bailout money should not have been spent on the banks. This was
> largely engineered in the Bush administration, and Obama disappointed
> me by not giving back the shit sandwich they handed him.
>
> As a small business owning American who can't afford the extra seven
> hundred dollars a month it would take for health insurance-I'd be
> OK with paying a hundred bucks a month extra in taxes towards that
> goal. No one's ever been able to explain how that would hurt me really.
>
>
> They say 'but oh, in France you have to wait, you'll have no choice!'
> which to me sounds like they don't think we're smart enough to do
> it better than France. Are they right?
>
> My business could compete in its hiring practices based on work environment,
> quality, reputation etc. and not just 'do you have health insurance?'
>
>
> How many lawsuits from accidents etc. would not happen if people
> could just go in for checkups and not have to worry about it, versus
> losing years of their lives paying for being hurt in a wreck? How
> much SSI money gets paid out for people who got hurt and couldn't
> go to the hospital, so were permanently damaged instead, now unable
> to work? Wouldn't insurance companies themselves save a fortune in
> not having to pay all those medical bills?
>
> Healthcare opponents take the short view. The banks should be allowed
> to sink or swim with no taxpayer assistance. The car companies have
> to pay back what they were loaned.
>
> healthcare reform would greatly help the economy of this country
> by vastly improving the health, sanity and productivity of its workforce.