An observation...

[Guest kawikaho]

I've been following Paul Kasriel from Northern Trust for macro advice.  His motto is: the economics of what is, and not what you want it to be--or something like that.  He's called for a recession about a year and a half ago using his proprietary indicator (which is more accurate than the LEI), and now he's forecasting for a recovery by the end of the year/early next year.  Reading their daily mailings, they are seeing bottoming in several indicators.  I think the caveat is, if the next GDP reading for this past quarter is worse than expected, all bets are off.  I think the stock market will TANK if that happens, since everyone is betting recovery is already here.  The latest economic readings, though, have thrown a slight wrench in the forecasts.  The ISM for new orders has improved drastically since the beginning of this year.  However, recently, there has been some renewed worries about the consumer.  The readings for personal income, consumer spending, civilian compensation, and continuing unemployment claims have been deteriorating.  Personal savings rate has been climbing too.  This basically means that the consumer is getting squeezed hard, and they are conserving.  Also, their credit lines are getting cut -- although, I fail to see how this will affect the economy or spending. 

 

And based on what BAC, MSFT, and some of the industrials are saying, it looks like the economy is getting worse, not better.  I think those that have been saying things have gotten better are not being honest.  I mean, just look at how bad earnings have been.  I wonder what the S&P 500's PE will be after this disaster of an earnings season--and let's not delude ourselves, lots of the #'s were horrendous, even though they beat estimates.