Since they both reflect prevailing social mood, the stock market and consumer confidence move together. Today’s CC figure (about as high as last summer), is another sign that the investing public’s opinion of our economic prospects is overly optimistic:
If this were a stock chart of a company with horrible fundamentals (a prospective short), I would wait a bit longer to see if it kissed the 2002-2003 bottom before going heavily short, though I might start to establish a position at these levels.
What is striking about this 9-year view is how closely CC tracks the stock market, and how much more lackluster the mood was in the dead-cat bounce from 2003-2007 than the true secular peak in the late 1990s to 2000.
Do you have a chart for Japanese consumer confidence? I do believe in the US = Japan (perhaps worse) meme.
No, but if anyone else does I would like to see it. Mood seems to be worldwide, however.
BTW, I was stunned by a chart of sunspot activity vs. the stock market in a recent EWI publication. I have a hard-nosed empirical view of humanity and the universe, so I put zero credence in things like astrology, but the idea that humans, like other solar-energy based life forms, react in measurable ways to the solar cycle does not seem completely loco.
I’ll see if I can dig up a chart later.
My views on equities state that they “fairly valued” (I say this sarcastically) at a P/E of 15. I do not expect P/Es to rise in deflationary environment (a balance sheet recession) where slow/no growth would (or should) be priced in. Of course, real slumps do result in lower P/Es, but because I picture an L shaped recession, I do not see earnings rising at all.
I do not see any more suprising shoes to drop (although Kyle Bass does forecast sovereign defaults and perhaps protectionism would increase and the markets would react negatively to it) because the government “stabilized” the financial markets with the bailouts. Despite going sounding a little bullish, I will say that the credit markets are thawed. I also think Bernanke will be more relunctant to use the printing press the second time because the US is not a closed economy and China acts as a potential straight jacket for that policy option. (I question I want to ask is whether treasury yield are up because of quantitative easing or despite QE). The next shoe to drop would be the market getting an epiphany that the V shaped recovery paradigm is wrong despite the increase in the second derivative; the first derivative would be flat or have a small upward or downward slope.
For some “bullishness” for a generally reliable sources:
I am not calling a bottom in housing though or anything like that.
But going short on equities seems to have a nice risk/reward still. Adam on Gold versus Paper should that during a bear market, the general market doesn’t rise above the 200 day EMA. I suppose a nice technical trigger to add to shorts is when this line is crossed preferablly with an RSI of > 65. VIX needs to fall further and the put/call ratio needs to drop.
These articles show how I see the world:
Also some bullishness (for what it is worth to you):
(Those links make it tempting to go short)
Last, but not least; Peter Thiel is correct: we are in a government bubble:
(He got f—ed because “reflation” was the word of the day month for March-May)
see web on beans prices. will shortages 2009 of
physical beans link to squeeze, defaults in
futures contracts for many commodities? then currency turmoil?
When coffee was $5/lb people switched drinks.
“Adam on Gold versus Paper should that during a bear market, the general market doesn’t rise above the 200 day EMA.”
It doesn’t significantly rise above the 200 day EMA. It did during March of 2002 on the S&P 500, but it was not a strong thrust. It was not a strong rally then… during the peak, the RSI was a 64.