Consumer Confidence, Home Prices and Markets

Prices of U.S. single-family homes fell 18.7 percent in March from a year earlier, while prices in the first quarter dropped at a record pace, according to the Standard & Poor’s/Case-Shiller Home Price Indices released on Tuesday.

The Conference Board Consumer Confidence Index™, which had improved considerably in April, posted another large gain in May. The Index now stands at 54.9 (1985=100), up from 40.8 in April. The Present Situation Index increased to 28.9 from 25.5 last month. The Expectations Index rose to 72.3 from 51.0 in April.

The  stock market focused on the positive one. Markets are rallying and as of this writing DOW is up nearly 150 points (+1.7%).  An excellent move. We’ll see what market closure brings.

If you recall, sometime back I mentioned that “O-Benti” trio might be winning the war, at least for short term. Consumer confidence, at least in my opinion, is pretty much the reaction on the stock markets. If you see the stock markets moving nicely up, consumer confidence jumps-up. The “Hope” or “Green Shoots” campaign is working as well.  I have shared my bearish bias earlier and I am still on that path (yes while protecting upsides as well).

The world economy suffered the steepest decline in the 1st quarter. World trade volume during the first quarter of 2009 fell 11.3 percent below the fourth quarter of 2008, according to an independent research institute.

CPB Netherlands Bureau for Economic Policy Analysis said the decline amounted to an annualized drop of 38 percent, the steepest fall since the institute began to track data in 1991. Leading the downturn was Japan, whose imports dropped by 16.6 percent, and exports by 28.2 percent during the quarter.

Germany -14.4%, Mexico -21.5% and many more. Guess what, most of the export oriented economies are not in good shape as the biggest consumer is not importing much. According to Briefing, U.S. real (price adjusted) exports over the past nine months have declined from $95billions in Jul to 72.8 in Mar (monthly) and Imports (x-energy) declined from $125billions to $96billions (monthly).  Since July, U.S. exports have declined 23.4%, a 35.1% annual rate. Non-petroleum imports have declined a similar 23.0%, or a 34.5% annual rate. Green Shoots!

Over a decade I have learned not to fight with markets. Mr market can remain irrational longer than I can remain solvent so I just go with the trend while preparing for a worst case scenario.  Bottom line, I am in bear camps but I have due respects for the bulls. I don’t want to wrestle with fierce bull either and hence protected OPN portfolios for further upside till markets clear current resistance levels.

Have fun, be careful, be profitable, OP





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