Tag: Natural Gas - 24/7 Investor

Never Underestimate the American Consumer

*****You may recall I have repeated the phrase "never underestimate the American consumer." Consumer spending almost always exceeds expectations as the U.S. economy emerges from recession.

This time appears to be no different.

Retail stocks have been performing extremely well over the last six months as consumer spending and retail sales numbers have exceeded expectations.

And economists expect that consumer spending in the 1^st Quarter may have risen by as much as 4%, which greatly exceeds earlier estimates.

What’s more, individual investors seem to be discounting the potential for spending to rebound while unemployment is high. Consumer sentiment surveys continue to point to weakness in spending.

Front-Running the Fed

The Fed is playing an interesting game. One the one hand, rates must remain low to fight deflation, encourage borrowing and keep the economy moving slowly forward. On the other hand, rates must eventually rise, but the Fed is also terrified about a steep sell-off in the stock market. Not only would a sell-off undermine consumer confidence, lower stock prices might leave banks in a precarious position due to toxic assets still on their balance sheets.

We’ve talked in the past about how confidence is critical for economic growth. Fed Chief Bernanke and the current administration are both well aware of this. And they are doing their level best to keep confidence high…

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Home Construction Rises

Home construction rises, commercial real estate, and natural gas stocks

Earnings Risk

How high do we think the Dow can run? I’m sure we’d all like to see recent losses reversed. But that fact is, our banking system has changed in ways we don’t yet understand, we’re in the early stages of a global recession that could send American unemployment through the roof, and given recent earnings estimate adjustments, the S&P 500 trades at a not-so-cheap-anymore 17X earnings.

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