3 replies to this topic

[4caster]

It is generally well known that credit card debt is at an all time high of $1.1 trillion. It appears that consumers

have gotten to the point where they realize that they need to cut back on their spending. This is evidenced by

the fact that retail sales plummeted 0.8% in Jan. Some of the people I refer to as the Broad & Wall folks said

they were surprised by this drop. Well, I think they're in for more negative surprises as we go further into 2024.

The Conference Board reported that Consumer Confidence fell sharply in Feb. to 106.7 from 115.0 in Jan.

which has negative implications for consumer spending which accounts for 70% of GDP. Durable Goods orders

plunged 6.1% in Jan. after declining 0.3% in Dec. This also has negative implications for GDP. and some of 

the Broad & Wall folks said they were surprised by this drop as well. The Chicago PMI fell to 44 in Feb. from

46 in Jan. More bad news for GDP. The Broad & Wall folks are saying that the jobs market is in good shape

which is not supported by the data. The ADP jobs reports are showing much smaller jobs growth than the

BLS reports. Wells Fargo strategist, Erik Nelson, agrees with my contention that the FED will lower rates

because the jobs market is not as strong as the BLS says it is and the Broad & Wall folks think it is. Money

Supply is the fuel that allows our economy and mkt to grow. The most watched is M2. M2 takes into account

everything in M1 and savings accounts, money mkt accounts and CD's less than $100,000. The FED reported

on Feb 27th that M2 was 20.78 trillion in Jan. vs. 21.7 trillion at the peak in July 2022. This is the largest drop

in M2 since 1933. The National Association of Small Business reported that it's small business index fell 2

points in Jan. to 89.9. This is the biggest drop since Dec. of 2022. The % of small business owners who said

they plan to boost employment plummeted to the lowest level since May of 2020. Small businesses account

for 75% of new jobs. Housing starts fell a whopping 14.8% in Jan. as homebuilders cut back on future plans.

Foreclosures in the commercial real estate mkt continued to rise, especially in California where commercial

real estate foreclosures rose by 75%. The current FDIC data show that in their category of "major banks"

reserves for delinquent commercial loans has fallen from 1.60 to .90 for each dollar of commercial mortgage

loans which are at least 30 days delinquent. And last week NYCB's stock got crushed. I think we'll see more

of this as we go further into 2024. On the other hand, in defense of the Bulls, they have been pointing out

and correctly so that the earnings of the AI stocks are doing just fine. But how much more will investors be

willing to pay for those earnings? Another point for the Bulls is that since Mid-Feb. some of the breadth

indicators have been going up to get in sync with the indices. As of Jan. 24th the 10 yr. SPX P/E is at 32.2

which is 1.5 standard deviations above its' long term average. However, at the top in 2000 it was 3.0 so

the Bulls might have a point in saying that this puppy has more room to the upside. About a week ago 

B of A released a survey it did of the Broad & Wall folks. The survey showed that 80% of them said that

they're bullish because they see a soft landing. Well, I think it could be reasonable to believe that the

soft landing scenario is already baked in. I think it'll take more bad economic news to come out, which

will come out, to finally force the Bulls to have to come to grips with economic reality. Although I'm

extremely bearish on  the economy and the mkt it really doesn't matter to me which way the mkt goes.

When the mkt goes up I buy Calls and when it goes down I buy Puts. Trading the mkt is not rocket science.

So, we're seeing more evidence that the economy is unraveling. As the clique says, caveat emptor.

 

[pdx5]

There is more financial data in your post than I have seen before. I learned a lot just reading your post. 

[4caster]

Hi PDX, thanks for your comments. And this week we're seeing some more bad economic news. 

Yesterday the ISM Services PMI fell to 52.6 in Feb. from 53.4 in Jan. The Broad & Wall folks were

looking for the index to be 54. The prices paid index fell sharply to 58.6 in Feb. from 64 in Jan. This

shows that demand in the service sector is falling. The employment index fell 2.5% pts. in Feb. to

48 which is below 50 - in contraction territory. This is bad news for the jobs mkt. In the report it is

written, "The slowdown in the service sector growth and the contraction in employment underscores

the complexities facing the U.S. economy". Earlier today ADP reported new jobs in Feb. of 140,000.

According to a survey done by Dow Jones the Broad & Wall folks were looking for a much higher

number of 198,000. Also, ADP reported that small businesses (less than 50 employees) added only

13,000 new jobs. I'm kind of thinking that maybe the Broad & Wall folks are spending too much time

at P.J. Clarke's eating Tartare instead of analyzing the economic data. it'll be interesting to see what

the bogus folks at the BLS report on Fri. In a report by Scott Rechler, the CEO of RXR Realty, he

wrote that he thinks that "500 or more" of the banks which have an exposure to commercial mortgages

will either fail or be taken over by larger banks. I wonder if the Bulls care about the macroeconomic data.

I doubt it. It seems to me that the Bulls are fixated on the AI stuff. It sure looks to me like the Bulls want

to take this puppy higher so ok go ahead and take it higher I'll go along for the ride. I know how to buy

Calls and can get a trade electronically executed in 5 seconds. I'm just patiently waiting for the Bulls to

get their heads screwed on straight about the economy and provide me with the opportunity to load up

on Puts. It's just a matter of when.

 

[4caster]

Today the FED reported in its' Beige Book that overall economic has increased slightly while consumer

spending has fallen slightly. Because consumer spending accounts for 70% of GDP this has negative

implications for the 1stQ GDP. It was in the Beige Book that businesses are having a tough time passing

costs on to their customers which has negative implications for profit margins. However, I doubt seriously

that the Bulls care about overall economic activity because they're fixated on the earnings of AI companies

which are doing just fine. I'm kind of thinking that the Bulls aren't anywhere near to throwing in the towel. I

suspect the Bulls want to take this puppy higher.