A Forex View From Afar

"The glass remains half empty"

Written by A Forex View From Afar on Tuesday, April 29, 2008

Back to www.thelfb.com

Two important news items were released recently that should have given markets a cold shower...things are still uncertain. We should ask how deep and prolong the slowdown period will be.

First, it was the Case-Shiller Index to remind us that the housing sector is still in a downturn. The Index recorded the lowest read in the last 20 years, a 12.7 fall year over year. From 20 major areas measured, only one didn't record a fall in prices in the last year, Charlotte, with a 1.5% gain. From the rest of 19 major areas, the most affected were Las Vegas, Miami and Phoenix with an average of 20% drop from last year.

February, the month for which the Index was released, marked the 6th consecutive month with declining prices. The Chairman of the Index Committee concluded there is no sign of bottom in this numbers.

The other news release that should open some eyes was the Consumer Confidence, measured by the Conference Board. The released numbers, 62.3, matched analyst expectations, 62.0. A revision was also available for last month's release, but truly, nothing big. To sum up the Consumer Confidence Release:

"This month's decline in Consumer Confidence was the result of yet another sharp decline in the Present Situation Index. This continued weakening suggests that not only has the feeble level of growth in the first quarter spilled over into the second quarter, but that economic conditions may have slowed even further. And, not only are lackluster business and job conditions eroding confidence, but rising gasoline prices are undoubtedly heightening concerns. Consumers' inflation expectations continue to rise and this measure now matches the all-time high reached in the aftermath of Hurricane Katrina. The percentage of respondents intending to take a vacation over the next six months has fallen to a 30-year low, another sign of consumers turning more cost conscious. Looking ahead, consumers' outlook for the economy, the job market and their income prospects remains quite pessimistic and little changed from last month. Or, in other words, the glass remains half empty."
Says Lynn Franco, Director of The Conference Board Consumer Research Center

Around these parts there is a saying: you don't get drunk with cold water. Maybe the Fed stopped its cutting cycle, but those lower rates still haven't reached consumers...We may find out if the cycle has reach its bottom, with the FOMC meeting. Even if the bottom was reached in Fed Funds recently, it doesn't mean the Fed will start raising rates at the next meeting.

This week the Rebate Tax will hit the "markets" and just in time the mighty Wal-Mart has announce it will cash the checks for free. What an offer...hurry up, it may be limited

Sources:
CNN: Wal-Mart To Cash Economic Stimulus Checks At No Charge