This morning was a fantastic rollercoaster ride for the markets as optimism beat out logic.
As the S&P/Case-Shiller housing price index dropped 18.
7% and North Korea committed nuclear attention like an ignored child, the markets were set to start the inevitable correction.
Stop the presses.
All of a sudden the markets make a miraculous turn-around all in the name of a surge in consumer confidence.
I think we should take this with a bit of caution as other factors present possibly make consumer confidence part of a self fulfilling black hole.
The average consumer, as important as they are, are not very reliable when it comes to their relative grasp of the economy.
So, I think it's fair to say that gauging whether or not someone is confident about something they don't know about, is futile at best.
A few years back it was the consumer that thought they had enough money to buy houses three times greater than they could afford, and they did so because they were confident that the US economy was an unstoppable growth machine(of course irresponsible banks actually gave out the loans).
They were also confident that the prices of their homes would continue to appreciate indefinitely and that they had an eternal asset source(their home) to pay for all of their additional consumerism.
The recent recipe for confidence seems to be a bear market rally in the stock market with a generous helping of media telling everyone that the stock market will lead us out of the recession.
Unfortunately these reports don't come out with disclaimers that outline the lack of corporate earnings to support forward growth, nor the lack of jobs to actually allow the consumer to buy us out of a recession.
We are dealing with a history making recession of a kind never before seen with a crisis trifecta of housing, financial, and global trade.
Of course we will come out of this recession at some point, but it will take a lot more than just pure optimism.
There is a stark difference between being confident and being real.
On top of the economic skyscraper, confidence makes you believe you can fly and being real stops you from jumping.
Copyright: Dominic Mazzone, Regent Global Funds 2009
As the S&P/Case-Shiller housing price index dropped 18.
7% and North Korea committed nuclear attention like an ignored child, the markets were set to start the inevitable correction.
Stop the presses.
All of a sudden the markets make a miraculous turn-around all in the name of a surge in consumer confidence.
I think we should take this with a bit of caution as other factors present possibly make consumer confidence part of a self fulfilling black hole.
The average consumer, as important as they are, are not very reliable when it comes to their relative grasp of the economy.
So, I think it's fair to say that gauging whether or not someone is confident about something they don't know about, is futile at best.
A few years back it was the consumer that thought they had enough money to buy houses three times greater than they could afford, and they did so because they were confident that the US economy was an unstoppable growth machine(of course irresponsible banks actually gave out the loans).
They were also confident that the prices of their homes would continue to appreciate indefinitely and that they had an eternal asset source(their home) to pay for all of their additional consumerism.
The recent recipe for confidence seems to be a bear market rally in the stock market with a generous helping of media telling everyone that the stock market will lead us out of the recession.
Unfortunately these reports don't come out with disclaimers that outline the lack of corporate earnings to support forward growth, nor the lack of jobs to actually allow the consumer to buy us out of a recession.
We are dealing with a history making recession of a kind never before seen with a crisis trifecta of housing, financial, and global trade.
Of course we will come out of this recession at some point, but it will take a lot more than just pure optimism.
There is a stark difference between being confident and being real.
On top of the economic skyscraper, confidence makes you believe you can fly and being real stops you from jumping.
Copyright: Dominic Mazzone, Regent Global Funds 2009
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