Consumer Confidence Hits Record Low
Bloomberg is reporting consumer confidence has hit an all-time low or at least its lowest point since consumer sentiment has been tracked as an economic indicator, starting in 1967.
IMHO this is a huge contrarian indicator as the economy finds its floor. I expect the economy to have its worst performance in the first six months of 2009 since the awful recession of ‘73-‘74. This may create the best investing environment in a generation (or longer).
The stock market is a fairly accurate leading economic indicator and tends to reflect economic growth six to nine months ahead of actual performance. The January reporting period will be rocky at best for the markets as bankruptcy filings grow, thousands of enterprises liquidate and acquisitions and consolidations become more common. Looking a year out from today, equities may be at their cheapest point in decades for investors.
The difference this time, and a difficult-to-quantify one, is the role of the media, and the speed at which bad news travel. The media have been using the most terrible headlines they could find for months, because they need to sell advertisement and they get more views with scary headlines.
The way this influences consumer sentiment is a new thing of our age.
Eighty years ago consumer sentiment would turn bad when people had problems with jobs and with buying what they needed. Today consumer sentiment turns bad because people are told so, very efficiently, with unprecedented visual directness on TV.
This does not mean that consumer sentiment should be ignored. A bad sentiment still should have a bad effect on spending. But IMHO its origins are different this time.
“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition