The Consumption Bust

There is no end to the indicators showing the consumer is up against it. Negative home-equity, incomes, layoffs, food inflation – oh, this is tale of woe. And so, the plaintive cry: “Is this the bottom?” That seems doubtful, actually impossible, given the math.

There will be no addition or subtraction here, but an observation. The bottom – for stocks and people – does not follow a panic. An example is the stock market bottom in March 2009. After a panic (stocks) or a spree (spending), a long period of lethargy and revulsion follow. Then the juices flow again.

The government preempted this cycle after the Internet crash, mortgage bust, and with its stock market boost in March 2009. From there, the S&P 500 doubled. That was fun for some, but it defied nature. Wither QE3?, is the question of the hour. For those who are hopeful the Fed will leave us alone, there are signs the cycle is drifting towards recovery. That is – the requisite period of lethargy is upon us.

The following comes by way of my youngest sister, last seen playing Old Maid at the age of four (Playing Old Maid); now, doing her part to keep America alive, by shopping.

She called me after leaving Target, a go get’em retail chain fulfilling its patriotic duty: It sold $67 billion of paraphernalia last year. My sister’s exit conversation follows:

Target cashier: “Did you find everything you wanted?”

Sister: “No.”

Target Cashier: “That’s OK. You saved some money.”

About Frederick Sheehan 53 Articles

Frederick Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009). He is the co-author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve.

Mr. Sheehan was Director of Asset Allocation Services at John Hancock Financial Services in Boston. In this capacity, he set investment policy and asset allocation for institutional pension plans. For more than a decade, Mr. Sheehan wrote the monthly "Market Outlook" and quarterly "Market Review" for clients.

He is a frequent contributor to Marc Faber's "Gloom, Boom & Doom Report." He also has written articles for "Whiskey & Gunpowder" and the Prudent Bear website, among others. He currently serves as an advisor to an investment firm and a non-profit foundation.

A Chartered Financial Analyst, Mr. Sheehan is a graduate of Columbia Business School.

Visit: Frederick Sheehan's Website

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