A Stroll Down Wall Street

As if we’re allowed to believe otherwise, Wall Street’s continued surge is all but sure to continue to rise toward a closing bell figure of 10,000. And there are plenty of examples of news to keep those faint of pocketbook from being fearful of losing their skivvies after their pre-recession wealth has already been stripped of their greenbacks.

The second quarter 1% decline in the Gross Domestic Profit was better than expected by one-half a percent point, a vast improvement over data released by the Commerce Department for the previous two quarters that showed declines of 6.4% January-March and 5.4% October-December 2008.

Looking ahead, an anticipated 2% increase in GDP for the period July-September is based on the assumed affects from the $787B stimulus plan and the Cash for Clunkers program. If this fails to materialize, expect to hear the words “market correction” as financial news commentators continue to grin in front of the camera to no one’s joy but for their own paychecks.

A hopeful sign for economic recovery was the announcement that only 247,000 jobs were lost in July, the smallest figure in nearly a year. It could have been worse and may still spike higher on the chart of the unemployed, but the outlook on the Street is a view of a clear road ahead to a higher Dow Jones Industrial Average. Consumer spending declined a mere 1.2% during the same period. Not too dismal, huh?

A positive light in employment figures show that state and local governments have added 110,000 jobs since the recession began, along with their above free market salaries and overly generous benefits. But Jon Shure, deputy director of states’ fiscal policies of the Center on Budget and Policy Priorities, is realistic in saying, “Crunch time is still to come for the states.” What a killjoy!

In May, the savings rate among Americans reached the highest level since 1993 at 6.9%, keeping nearly $770B from circulating through the economy, the highest rate since 1959 when statistics were first gathered. Not only that, in April borrowers slowed down their buying power with a 16.5% decline in credit card purchases, or 16.5B on $1 trillion of total debt. This is no way to spur an economy that thrives on ever-increasing consumer debt.

According to international lender ING Direct, European Union members have cut back on using plastic money by 10-20% while 46% Americans say they have refrained from adding to credit card debt. Meanwhile, with high unemployment, foreclosure figures, tight credit and reduced consumer spending….

The Conference Board, an independent research group, released information last week that the Consumer Confidence Index (CCI) rose from 47.4 in July to 54.1 in August, quite a bit better than the expected 47.9 that had been forecast. Still, the index is well below 90, the minimum level indicative of a healthy economy. There’s a lot of boom to go before the economy is deemed revived.

As a reference, the significance of historical data of the CCI, it stood at 109.4 (August 1996); 82.2 (October 2001, after 9-11); 110.3 (January 2007).

The Expectations Index, taken from the same sampling of 5,000 households and measures a 6-month view on economic conditions, rose from 63.4 in July to 73.5 in August.

On the flipside of consumer view of economic recovery, the Reuters/University of Michigan Consumer Sentiment Survey, also taken of 5,000 participants, decreased from 66.00 to 63.2 from July to August although economists surveyed had expected an increase to 69 so, although the news isn’t good, it’s not as bad as feared, so it’s actually good news. Right?

The benchmark for the Confidence Survey is 1985; the Reuters/UM Sentiment Survey is referenced to 1966 with both having a base figure of 100.

As if to confuse matters, a third sampling of 1,000 participants conducted by telephone, the ABC News Consumer Comfort Survey reflected a rating of –45 (yes, that’s a negative sign on a scale of –100 to +100). Putting this in perspective, the 23-year average is –12. Only 8% rated the economy in a positive light, maintaining a single-digit trend for 43 of the past 46 weeks. By all measures, not very comforting.

And let’s not ignore the 77% decline of funds held by the FDIC from $45.2B a year ago. The current $10.4B balance would be considerably, and alarmingly, less but for the $9.1B in higher deposit fees garnered from banks in the first quarter. Not to worry, your banking account balances are still covered up to $250,000. The FDIC can draw on its no-limit credit line with the Treasury Department as it did in 1993.

Sales of new one-family homes increased 9.6% in July (plus or minus 13.4%) over June figures but 13.4% below July 2008 figures (plus or 12.9%). The plus or minus figures leave a don’t add up to anything but confusion and doubtful significance.

On a truly positive note, August figures show an increase of 4.9% for durable goods over July, and upward swing for three out of the past four months.

Who’s to say our economic future is anything other than what is portrayed by the wooly bullies on Wall Street? Anybody?