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7/06/09
So why have Stocks registered noteworthy declines
over the past couple of weeks? Because the economy hasn’t bottomed yet.
The week’s report will simply reiterate the message we’ve been sending
out over the past months and that is….despite all the hype that the
economy is bottoming and could be turning positive…reality is that it
isn’t. The major spin that GoldiLocks supporters have stressed is the
reduction in the rate of decrease in some economic data series. As we
pointed out some weeks ago, being the rate of descent since the middle
of 2008 was at a near chaotic pace, it was a natural occurrence that the
rate of decline of economic growth would slow. However this does not
imply that the economy is bottoming or ready to turn positive.
Last week’s
pathetic employment report was case in point. Non-farm payrolls indicated
yet another near half a million loss of jobs over the past month, a clear
indicator that the economy is not bottoming (even despite the lag
characteristic of the series). The simple fact remains that much of the
growth the US economy experienced over the past decade was the result of
bubble consumer spending or purchases of goods and services by US consumers
with income from bubbled up assets. These bubbles have burst and instead of
an augmentation to incomes now, many US consumers are experiencing an
evaporation of income due to lost jobs. Goldilocks and a rebound in the
near future? When will this nonsense stop. |
