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Mark910 (< 20)

Buen’ Dia’ Aug 4, GDP it is now up to the Consumer

Recs

21

August 04, 2009 – Comments (10)

It seems as if predicting the markets daily direction lately is as simple as looking at the dollar.  It’s up today, so that usually means Europe, oil, gold, and futures are down and as I survey the landscape that’s exactly what I see.  I am not a day trader but based on what I have outlined here and in my previous updates a day trader should be having an easy time of it lately.  With the earnings season winding down and the euphoria of the second quarter GDP now in the past the market will be looking for new direction.  For an in depth look at how the previous quarters changes that were made affected the recent quarter see yesterdays blog  [more].

Today lets look at what has to happen to maintain the positive outlook in the GDP.  It is really rather simple.  The consumer makes up 70% of the number, the govt., about 20%.  The Govt. share has expanded at an unsustainable rate and cannot continue.  The consumer will have to step up here and I am not sure how this can happen.  Cash for clunkers will go away, DR Hortons dollars of new houses built is down over 30%, The unemployment rate continues to grow.  The Economy is quite fragile and counting on the Consumer and frankly I’m not sure he is up to the task.

10 Comments – Post Your Own

#1) On August 04, 2009 at 8:40 AM, Mark910 (< 20) wrote:

GDP consumer vs Govt

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#2) On August 04, 2009 at 8:48 AM, binve (< 20) wrote:

Mark, nice post man!.

At some point though the simple inverse correlation between the dollar and equities (weak dollar driving the equity rally currently) will end, and both the dollar and equities will drop together. It has happened many times in the past, most recently in 2007-2008 and I believe will happen again soon, when this overdone rally is, well, done and there is another crisis in confidence of the dollar.

I know I am preaching to the choir here, but just saying it because it needs to be said :)

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#3) On August 04, 2009 at 8:50 AM, binve (< 20) wrote:

Very nice chart by the way, it visually shows what you, me, and so many others have been talking about for months.

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#4) On August 04, 2009 at 8:53 AM, Mark910 (< 20) wrote:

Binve  Thank you for adding that.  Yes I totally agree.  The status quo correllation cannot go on forever.

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#5) On August 04, 2009 at 9:33 AM, innerflame (< 20) wrote:

Thanks for the updates Mark- good to get the day started- no caffeine needed.

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#6) On August 04, 2009 at 10:07 AM, cthomas1017 (37.40) wrote:

Mark,

+2 Rec :)

Quick question about the very informative chart so I don't have to research myself.  What's the source of those numbers and are they the "before or after" GPD numbers that were adjusted last week?

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#7) On August 04, 2009 at 10:39 AM, Mark910 (< 20) wrote:

Thomas, they are after the recent adjustment and from the Govt, "BEA" site.

any questions about the shape the consumer is in..this may help

GMAC Financial posts wider 2Q loss of $3.9 billion

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#8) On August 04, 2009 at 4:08 PM, DaretothREdux (54.27) wrote:

Great post! This is a gov't fueled rally no doubt, and its unsustainable.

Dare

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#9) On August 04, 2009 at 7:10 PM, goldminingXpert (30.87) wrote:

GDP will be positive, most likely, for Q3 this year due to massive government deficit spending. What a joke.

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#10) On August 04, 2009 at 7:14 PM, Mark910 (< 20) wrote:

At some point they will not be able to keep it up or the dollar will suffer...or both.

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