Thursday, August 18, 2011

This is starting to get serious

Today was shaping up to be a fairly weak day in the markets but no one was prepared for the Philly Fed data which pulled the proverbial rug out from under us.

There are so many data points that hit the market every month it's hard to keep track of them all but this is an important bit of data and it wasn't just bad, it was off the charts bad. The last time the number missed expectations like this was over a decade ago. The Philly Fed survey measures business activity in NJ, PA and Delaware. A positive number indicates growth and a negative number indicates contraction. The expectation was for a relatively flat reading but the number reported was -30.7. Since 1960 the Philly Fed number has hit -30 eight times and each time it has forecast the US entering a recession.

This number was such an outlier that I think there may be other factors at play. During the survey period the debt debacle in Washington was fresh in business owners minds and I think that overhang may have skewed the results. Things are looking bleak but I'm not sure they are just that bleak --- yet.

This is another telling chart of the day. You'll have to excuse the sizing - I can never get these google trend charts to size properly - but the blue line represents searches on Google for "Food Stamps" while the red line represents searches for "pawn shop".

Note that both have spiked in the past 2 months.

My quote of the day courtesy of Carl Sagan published in 1995:

"Science is more than a body of knowledge; it is a way of thinking.

I have a foreboding of an America in my children’s or grandchildren’s time — when the United States is a service and information economy;

when nearly all the key manufacturing industries have slipped away to other countries;

when awesome technological powers are in the hands of a very few, and no one representing the public interest can even grasp the issues;

when the people have lost the ability to set their own agendas or knowledgeably question those in authority;

when, clutching our crystals and nervously consulting our horoscopes, our critical faculties in decline, unable to distinguish between what feels good and what’s true, we slide, almost without noticing, back into superstition and darkness."

Wow, talk about having a vision of the future of America. Sagan hit the nail on a head in 16 years ago.

Cheers! We all need a strong beverage tonight.

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