Thursday, August 27, 2009

Bifurcated Sentiments

Lurking just below the Conference Board's headlines about August consumer confidence is clear evidence of the time-shift schizophrenia that has gripped Americans, going on several months now.

Here are the relevant charts (via Market Harmonics), for yet another month:
  • The headline number jumped a healthy +6.7 points to 54.1. Not a stellar reading by any means, but a whole lot better than the abysmal 20's reached earlier in the year.
  • ..but it came about, as it has for several months now, only because the forward-looking Expectations part of the index has been rising sharply. It is now back to 73.5; in August alone this sub-index jumped +10.1 points. Yes, that's what hope looks like in chart form.
  • Meanwhile, Americans' view of their present situation (you know, that pesky reality?) is refusing to budge much from the bottom.

We thus have a bifurcated citizenry, one that views their present situation as bleak - and how could they not, with unemployment and home foreclosures at highs not seen in decades? - but at the same time views the future as shiny and bright.

Of course, expectations historically lead reality and a close study of the above charts will show this. For example, the Expectations index bottomed out in the Spring of 2003 around 60 and then jumped 30 points, even as the Present index stayed put. This 50% rise was, however, understandable given the "victory" in Iraq. Remember the powerful images of the (staged for TV) toppling of Saddam's statue in Baghdad, which worked as a powerful psychological release.

Today's situation, however, looks entirely different to me. The Expectations index has tripled, all right, but based on what? On the wholly religious belief that the Fed and the government hold magical and instantaneous powers to arrest and reverse a disease that has been eating away at the foundation of the U.S. economy for many, many years. The symptoms are well known: huge debt, bubble asset markets, stagnant earned income, zero saving rate, a devastated manufacturing sector..

I don't know what name psychiatrists should give to this syndrome of opinion bifurcation, particularly if it persists for a long time. Perma-optimism, chronic delusion, The Eternal Hope of A Befuddled Mind, Waiting For Godot? But I do know what sentiments will rise if this very strong hope does not soon materialize into the tangible reality of a robust economy: frustration and anger.


  1. Do you really want an EXPERT to confidently announce the name of the "disease", to use a word that we collectively, no national boundaries pertaining, trot out every 20-30 years or so ?
    Polling as temperature taking. The hypocondriac society is spending MORE time looking at the temperature charts than trying to figure out what's going on its own "social" body. The danger of this kind of "tool" is that it ultimately usurps what it is intended to measure.
    Just how much social, national esteem are we going to garner from being the world's policemen, the champions of democracy and freedom (lol) when we can no longer put food on our own tables, or afford a roof over our heads ?...

  2. But What do I Know?August 27, 2009 at 8:34 AM

    It is said that men are willing to erect Gods and worship them, but only as long as they "work." When they stop working they tear them down and find new ones.

    The destruction of the old Gods is a traumatic process fraught with peril.

  3. The consumer sees reality on the ground. All the while the MSM speaks to green shoots and the USG charts its bogus numbers.

    This is a classic case of cognitive dissonance.

    Joe M.

  4. Masses will need a distraction when the ocean of malaise becomes a tsunami of anger. War usually works, but we already have two.


  5. Hellasious writes: Perma optimism ? The eternal hope of a befuddled mind ?...

    Perhaps Polyanna syndrome ?

  6. sc,

    When we get a market crash in Sept/Oct, here are my picks.

    Israeli strike on Iran or Swine Flu or both.

    Joe M.

  7. Where does the anger go? It goes to teabagger protests, already filled with poor people who have been tricked into screaming against their own interests.

    I expect to see a lot more random nut-with-a-gun style violence, more school shootings, more clinic bombings, more lashing out at anybody but the real culprits. It's what Americans do, we are a most belligerent nation, heavily armed, easily manipulated, and openly hostile to whatever "other" is presented.

    We've already seen the teabaggers show up to Presidential events toting AR-15s -- guns designed specifically to shoot people -- practically daring law enforcement to start something. They want a shooting, and eventually they'll get one.

    We've seen this movie before.

  8. The guy waiting for Godot feels like me as the stock market zooms up 80% (and AIG up 275%) and I sit on cash wondering if things will or won't get worse.

  9. Aw, shucks, and there I was getting all misty eyed reading Pollyanna again last week.
    It really is an EXCELLENT story.
    Not so much for boys who like erector sets though, which rules out the vast majority of the people reading this blog (except... Jennifer, of course...).
    Really you guys should go back and read Polyanna. It has some pertinent lessons for our cynical times.

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  11. I think it is called BLIND HOPE.

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