Sense on Cents

America is unimpressed by the rebound in the equity markets. Why? The economic data, no matter how heavily massaged, indicate many consumers and businesses are increasingly strapped and insecure. In light of that, the average American neither trusts the markets nor the public officials overseeing them. I make that statement with no sense of malice. I view that as reality.

Lack of trust and credibility is ultimately nothing more than a measure of increased risk. Let’s factor that in while we navigate the economic landscape and review the month to date performance of the markets.

Are we witnessing signs of a double dip in the economy? As government stimulus wears off and the reality of the underlying economy is reflected, I do not believe we will experience a double dip simply because I do not believe the real economy has ever truly bounced. Let’s navigate.

ECONOMIC DATA

1. Retail Sales: reported as a 1.4% increase versus a .9% expectation, but analysts failed to share that September’s report was revised from an initial reading of -1.5% to -2.3%. The overall trend lines over the last three months indicate no bounce. Expect serious price discounting for the upcoming holiday season.

2. Producer Price Index: increased .3% versus an expectation of .5%. The real news, however, is in the core rate (that is, excluding volatile components of food and energy) which registered a very surprising -.6% reading versus expectations of a .1% increase. Can you say deflation?

3. Industrial Production: increased by .1% versus an expected increase of .4%. This number indicates 4th quarter growth is slowing relative to the 3rd quarter when government stimulus provided its maximum benefit.

4. Housing Starts: declined by 10.6%!! This report took all the wind out of the sails of those  who were calling for a V-shaped recovery. Mortgage delinquencies, defaults, and foreclosures continue to increase. There is no way housing can stabilize and recover until those figures stabilize.

Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis: (more…)