E Tuesday Talk: The Old Slide And Glide

But here's the kicker as Upfina sees it...

"Back in the last expansion, we discussed how the bottom 50% didn’t own stocks. That changed in 2020, but it might not have been a good shift. New investors bought risky stocks, treating the market like a casino. Of course, the term risky is subjective. However, most sober minds believe thousands of percent gains in unprofitable businesses with no catalysts are probably not sustainable. Many new gamblers will retort that they know it’s not sustainable. However, the crowd always gets hurt when bubbles implode. This will be a net negative for the bottom 50% when the euphoria dies down."

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TalkMarkets contributor Jeffrey Snider is concerned about sentiment forecasting vs actual conditions on the ground which are topics he covers and charts in his article Being Unsentimental About Economic Meteorology.

"The Federal Reserve's Chicago branch is piling on the downside. According to its National Activity Index, national activity in February 2021 might’ve been decidedly awful. How bad? A huge miss, down at -1.09. Even considering the cold spell in Texas, and its ice-cold electrical spillovers, analysts were still thinking the headline might only dip moderately from January’s rather hot “stimulus” overheated +0.75.

After all, -1.09 is in rare territory which is why it has our attention at the moment; going back to the beginning of the index, apart from January 1978 you don’t see anything below -1 outside of recession.

Of course, the US and the rest of the global economy is already in one, so it might seem like splitting hairs."

Snider follows-up on this comment by showing us German and Japanese sentiment charts showing that those economies are on the verge of taking off. But are they and is ours?

"Even in Japan, sentiment right now is severely outpacing that situation. While nowhere near as over-hyped as they are in German finance, Japan’s “leading” sentiment index has at least rebounded substantially. Very much like Germany, the same survey panel’s assessment of the current Japanese situation remains very different from indicated forward optimism; and that difference is growing...Right now in 2021 is when that faith is supposed to be paying off, not in the next set of forward-looking distant hopes...Sentiment is great for DSGE models and media stories, but it hasn’t kept the economy warm enough when it’s really been needed."

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William K. 1 month ago Member's comment

Well written and informative, and interesting beside. And it is becoming more and more obvious that the federal reserve is either a bunch of doddering old fools or a team of arch- villians bent on destruction to benefit their "friends" in that top 1%, knowing exactly what damage they are causing.

And the worst part is that the course is set and any rescue is unlikely, since Superman has left the area.

David Marshall 1 month ago Contributor's comment

Thank you for the comments. As for Superman, can't hurt to keep an eye on the sky...

William K. 1 month ago Member's comment

One more thought is that it is not that"bottom 50% that are now investing, but mostly that middle 50%. The bottom quarter of the population still does not have enough to be able to invest. The lucky one have upgraded from "Broke" to Poor.