Paul...if I may continue on the theme....what doesn't make sense to me....and I think they are fooling...are the consumer confidence numbers..
When stocks were gaining 20-100%.....and people enjoyed the stock appreciation gains from 95-early '00....I bought the argument that stock gains could be substituted for savings.....and that it was allowable for the savings rate to even be negative....however, I think logic dictates....if ones accepts this "new world" view.....that if those gains evaporate, then the consumer is forced to start saving again....and that must impact consumer spending..
It seems now that some want to promote a- I think- pretty indefensible theory.....oh yeah, it doesn't matter if $4 trillion dollars of market wealth is gone....as long as people feel good...they'll spend....and, well, the negative savings rate is irrelevant....it can get worse, etc.......sorry, but this logic reminds me a little of dot.com's mantra, "profit don't matter....price/sales do....then, it was.......price/sales don't matter....click do"....IE., just try to hit the moving target...
Like the failed dot.bomb thingy, could the American consumer be setting us up for a dropping bomb (sometime in the future)...if he/she keep spending their way deeper into a hole?
I suppose one could argue that consumer confidence is based more on jobs and job creation.....well, I struggle to find the great news there either.......the unemployment rate is going to go up.....perhaps jobs are still being created, but I would think that they are mostly low-end, service (correct me if I'm wrong).....but that the jobs being lost are high-paying, tech...managerial......hardly a great offset in the grand scheme of things..
Also, given that supply/demand is coming back better in focus in high-end labor markets, companies are not going to throwing around the kind of $$ and premiums they did....when trying to hire management talent in 99-00....sure, there will likely be a premium...but not the same as before...
Finally, with most companies looking at reduced profits for this year....how are they going to pay the kind of merit bonuses and raises seen in the past few years? Without growth in pay, how does the indebted consumer buy even more?....
I can't see how this scenario adds up to anything but a reduction in consumer spending sometime this year....the only reason why it hasn't taken place in greater degree until now.....is that, as the recent behavior psychologists have noted, humans are not always logical, and do not (and market theory often espouses) immediately and rationally to circumstance....eventually they do....but I think the consumer is living in the same irrational world that the Nasdaq once lived....Eventually, it must come down to earth...and I would argue, the sooner, the better (for the long-term health of our economy, country).....But to bet that the economy, markets are going to be pulled out of their collective funk due to this current irrational behavior....
Well, THAT seems irrational... |
