Consumer confidence is on the decline, employment growth has turned down, the Government is broke, the Dollar is going down the tubes, and government is broken. And that’s the good news. Greece is defaulting on its debt, Ireland wants to be next, and the grandaddy of all encumbered beggars, the US seems helpless to mend its ways. Japan is on the verge of sliding into the sea, the Mideast is one protest away from exploding into oil burning conflagration. The unmitigated glee of doomsayers and alarmists is beginning to annoy me. It’s amazing how people can hold themselves out as prognosticators of doom on every downturn. Let’s check the facts:
Myth 1: The stock market is a bad place to be
In the last twelve months equity markets as measured by the S&P 500 are up 25%
Myth 2: The job market is bad
Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, healthcare, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.
Myth 3. Inflation is taking hold
Although the CPI index has moved up every month this year through May levels are not off the chart compared to any period in the last ten years. Dampening consumer expectations and lower oil prices will most likely cause June numbers to be lower.
Myth 4. The US Government is broke and will have a hard time finding a way out of its debt crisis.
I’m not going to get involved in a political discussion about this but generally when someone’s credit deteriorates, the first sign is lenders requesting higher rates or the actual inability to borrow money. Neither of these have happened to the U.S. Government so far. In fact the opposite trends are in place, lower yields and plenty of money to borrow.
Consumer confidence continues to be stifled by declining home values, high unemployment, high consumer debt loads, rising inflation, and government gridlock. The pace of the recovery from the recession has definitely turned down. The market is on pace to erase all of its gains for the year. The headlines are atrocious. But successful investing is never accompanied by herd behavior. You can’t make money in the market if you are too afraid of losing it. I’m not going to post as much the next couple of days as I will be busy shopping for bargains.