Daily Commentary by Larry Baer: Consumer
spending got off to a relatively strong start in the third-quarter, posting a
0.4% gain in July after a flat reading in June.
Personal Income grew by 0.3% during the reporting period - an indication
that a part of the uptick in spending is currently being fueled by a reduction
in savings and/or an increase in credit card use. In either case, the data suggests the surge
in spending will not likely last long without a notable pick-up in household
cash flow from rising incomes. The
government's report show inflation at the consumer level has increased a very
modest 1.3% on a year-over-year basis - the slowest pace of inflation since October
2009.
In a separate report, the Labor Department
said the number of Americans standing in line to file first-time claims for
jobless benefits did not change from the prior week.
Today's economic news headlines were not
strong enough to prevent the Fed from launching "QE3" by
mid-September if they so choose.
The market spotlight is now focused
exclusively on Fed Chairman Bernanke who is scheduled to make a key-note
address Friday morning at 10:00 a.m. ET at the Kansas City Fed's Economic
Symposium in Jackson Hole,
Wyoming. There is a growing sense that too many market
participants may be expecting too much from Mr. Bernanke's speech. Allen Sinai, chief executive office of
Decision Economics Inc. says Bernanke will make it "crystal clear"
that the Fed is poised to take action if necessary - but from there his talk
will likely be about possible options and otherwise very short on timing
indications. When I think about it --
there is really no reason for Mr. Bernanke to do anything other than describe
all the tools still available in the Fed's fiscal and monetary policy arsenal
should they choose to use them - but to defer any meaningful action at least
until after the next big national employment report due on Friday, September 7th.
If Mr. Bernanke provides any hint in his
address the Fed is "on-go" to launch "QE3" before the end
of September --mortgage interest rates will likely slide notably lower even as
the stock markets soar. On the other
hand, if no such hint is forthcoming and/or if Mr. Bernanke indicates such a
move would be premature in front of pending Congressional action, or lack
thereof, to avert the looming "fiscal cliff" -- stock prices will
likely march lower while mortgage interest rates move nervously sideways to fractionally
higher.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
