The AP is reporting this noon that stocks are tumbling today (Dow Jones down 165 at noon EDT) because of rising fears by investors about consumer spending.
“While other parts of the economy, including housing and manufacturing, are showing signs of progress, the country cannot have a strong recovery unless consumers are spending more freely. Their spending accounts for more than two-thirds of U.S. economic activity,” the article said.
The article also touched on investors’ concern that the reluctance of consumers to spend will hurt corporate earnings.
As we used to say when I was in junior high school—“no shit, Sherlock”.
Consumers are reluctant to spend for a couple of basic reasons. One is that they don’t have as much disposable income as they did a couple of years ago. Another is that a lot of us don’t have jobs. Still another is that so many people ended up getting bit in the butt by carrying way too much credit card debt that they have neither the ability nor desire to incur any more.
And yet another one, I think, is that consumers couldn’t give a rat’s behind about corporate earnings—those same corporations which were all too willing to shove dubious finance strategies up our behinds for their own profit and then bemoan their fate when the mortgage market blew up in their faces.
I monitor my SEP IRA balance everyday (if I had been doing that a year ago I’d have a lot more money in it now!) and it has gone up over 20% in the last 4 months. That’s unrealistic. I know it. The Wall Street types know it.
I guess it’s our patriotic duty to go on spending sprees so that the Wall Street types can keep getting their bonuses. Is this cynical? Probably. But with what has been done to consumers in the last year, maybe it's time for a healthy dose of cynicism.