Consumer Confidence Remains Low

The New York Times shares the latest reading on the state of the consumer:

Consumer Confidence Declines in the U.S.

Retail holiday sales numbers will be very interesting to watch, will the consumer really keep spending low to match their mood.

Small Business Owners Rate Economy

Here is the latest sentiment numbers from Discover's Small Business Watch:

55 percent of small business owners rate the economy as poor, up from 53 percent in September and 48 percent in August; 36 percent rate it as fair and only 8 percent say it is excellent or good.

For small business owners only 8% say the economy is good or excellent in October, when will this group start to feel the recovery. For more information go to the Small Business Watch survey.

From Joseph Kalish, a senior macro strategist at Ned Davis Research, the institutional research firm. Quote from Mark Hubert's article at MarketWatch, link below:

Kalish provided several reasons to expect inflation risks to be low over the intermediate term of less than five years:

• Excess capacity. Kalish says that any of a number of factors point to high levels of excess capacity in the economy right now -- everything from the unemployment rate to industrial capacity utilization rates to commercial real-estate vacancy rates. Those factors put "downward pressure on the inflation rate," he points out.

• Cyclical factors. Kalish points out that "following every recession in the postwar period, the inflation rate has fallen."

• Slower debt growth. The federal government's total debt may have mushroomed over the last couple of years, but this has been more than counterbalanced by deleveraging in the private sector. "Historically," Kalish points out, "when debt growth has been below trend, the inflation rate has declined."

• High real interest rates. Nominal interest rates may be low, but real interest rates (the difference between long-term Treasury yields and the consumer price index) are at abnormally high levels right now, according to Kalish. High real interest rates "tend to discourage the use of debt and, therefore, excess consumption and investment, which puts downward pressure on the inflation rate."

Based on this analysis we should expect to see inflation in 2012-2013. I would add to these points rents will remain constrained in the near term, putting further downward pressure on CPI.

Why inflation could stay low for awhile Mark Hulbert

Gundlach: Dollar Rally Coming

Videos from TCW CIO Jeffrey Gundlach on Morningstar:

Gundlach: Dollar Rally Coming

Deflation the Clear and Present Danger

Gundlach: Back Side of the Hurricane Coming

Is he early? Do we have a slight sell off then one last push to 1200-1300 level on the S&P 500 before going back lower.

The Great Rebound

Barry Ritholtz gives us a picture of how investors/traders are justifying this rally:

Link 1: Buoyant Market

Link 2: Most Hated Rally in Wall Street History

I take issue with the fact that returning to the pre-Lehman bailout level is a given. Assuming a 20% correction was the natural level for the market, was the market forecasting unemployment going to 9.8%? Is it just me or should the market be below the pre-Lehman level to adjust for the negative impact the Lehman bankruptcy had on the economy. The bigger challenge for investors who see a correction coming is trying to determine what pushes the market back down; until we know what will shift psychology this market countinues higher. At some point the technicals will reverse course and we will learn what level fundamental or value investors are willing to pay for this market. This is not 1982!

Great Bear Market Indicator

When the top 1% of Americans earn 20% of the country's income, it seems like it is time to exit from the market or at least get conservative with one's investments. I recently found these articles and charts. Each time we crossed the 20% line 1928 (Indicator for Great Depression) and 2006 and 2007 (Indicator for Great Recession) it showed us it was time to become a conservative investor.

Small Businesses Feeling the Credit Crunch

Meredith Whitney has an interesting Op Ed piece this morning in the WSJ discussing continued problems in our credit markets, how they impact small businesses, and how that ultimately impacts the economy. Here is the link:

Meredith Whitney: The Credit Crunch Continues