In the 1930s and 1970s stocks stayed down for a decade. That is happening to the US markets again now. According to The Wall Street Journal, "The current market turmoil suggests that we may be in another lost decade." At this point, the S&P 500 is below where it was in 1999.

The stock market is now under-performing investments such as bonds and even real estate, and that adds more fuel to a potential deep recession.

As prices continue to rise rapidly for items like gas and food, the consumer might have been able to turn to his home for equity. Now that home prices are down 15% to 20% in some markets, that does not work anymore. The other pocket in the consumer's pants was the investments he had in mutual funds, stocks, and his IRA. His gains in those instruments is clearly going up in smoke.

Consumer spending has driven GDP growth for years now. The consumer has less to spend now, and that could go to even less than that.

Douglas A. McIntyre is an editor at 247wallst.com.

A bear market as bad as the 1930s? originally appeared on BloggingStocks on Wed, 26 Mar 2008 10:48:00 EST. Please see our terms for use of feeds.

The strong back-to-school sales figures reported by Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT) and Saks Inc. (NYSE: SKS), the biggest gains in worker productivity in nearly two years and better-than-expected growth in the service sector may undercut the argument that a Federal Reserve interest rate cut is needed.

This data indicates that despite a lousy housing sector and shaky consumer confidence that the underlying economy remains rather strong. Fed Chairman Ben Bernanke seems to espouse the "if it's not broke don't fix it" philosophy and has thus far resisted calls from Wall Street to cut interest rates.

In an interview with Bloomberg News, Peter Kretzmer, a senior economist at Banc of America summed up the situation well: ``It's still early, but the indications are that for all the slowdowns we're seeing in financial markets and real estate, we're getting good compensating growth in other industries. For the Fed, there may be a presumption that more weakness may be coming, but for now I think the economy is showing a lot of resilience.''

The data released yesterday in the Beige Book provided no clear signal that a rate cut is coming. Bernanke's speech at the recent Fed conference didn't either. Yet, market pundits keep blathering that an interest rate is a foregone conclusion.

Even if a rate cut does come, there's no guarantee that it will be as large as investors expect or have the calming impact on the market that Wall Street wants.

Bernanke has said that he's monitoring the situation closely which has provided some comfort to investors. He doesn't want the Fed to play the role of a well-meaning dad who bails out the market whenever things go sour. Eventually kids need to grow up and learn how to solve their own problems.

Do strong retail sales undercut case for Fed rate cut? originally appeared on BloggingStocks on Thu, 06 Sep 2007 12:34:00 EST. Please see our terms for use of feeds.

Bernanke using mind control as he tames inflation originally appeared on BloggingStocks on Wed, 08 Aug 2007 12:05:00 EST. Please see our terms for use of feeds.

Federal Reserve Chairman Ben Bernanke gave his mid-year economic report to Capitol Hill today. He emphasized that the economy should strengthen going into 2008 but that overall growth for this year would be slower than expected. The Fed expects the economy to grow between 2.25% and 2.5% in 2007. The economy should expand between 2.50% and 2.75% in 2008. He mentioned that the housing situation could get worse and remains a threat to consumer spending.

Nevertheless, the Fed's primary concern was still inflation despite the slowdown in core inflation. This was also supported by the CPI data released this morning and the PPI data released yesterday which indicated gas prices falling at least in the short term. The Fed Chairman indicated his belief that energy and commodity prices can continue to rise.

Based upon this testimony, the Fed is expected to continue its current monetary policy and leave interest rates unchanged. There was relatively little new information in the testimony.

Continue reading The Bernanke testimony: The Chinese water torture continues!

The Bernanke testimony: The Chinese water torture continues! originally appeared on BloggingStocks on Wed, 18 Jul 2007 16:35:00 EST. Please see our terms for use of feeds.

Recent economic news seems to be pointing to the ultimate "soft landing" with the economy slowing to a low level of growth but not falling into a recession. Core inflation, although at the high end of the Federal Reserve's desired range, does not now seem to be pointing toward a rate increase in the near future.

Recent ISM data, including the ISM Non-Manufacturing report released this morning, indicate that the economy could be picking up from a short-term bottom. Fed Chairman Ben Bernanke seems to emphasize this economic strength in his remarks this morning.

What was the result of all this good news? The market was down. Only on Wall Street could good news be bad news. Why? These events seem to be latest information destroying Wall Street's hope for a rate cut by the Fed.

Remember that the Fed has been saying that a rate cut is not on the agenda for quite some time. It remains open to this option if the economy weakens substantially. However, the data shows very little indication that this is happening.

This is very similar to the mid to late 1990's in some ways. Several said then that it was just a matter of time before the economy collapsed into a recession. Those who exited the stock market in the mid 1990's had to wait several years for the recession and missed some pretty solid returns in the stock market.

Bernanke has given every indication that he will address severe economic weakness if and when it occurs. In the meantime, look at what the economic picture actually is, not what you believe it should be. It is a much more profitable venture!

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

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Economic Data & the Fed: When Good News is Bad News! originally appeared on BloggingStocks on Tue, 05 Jun 2007 13:00:00 EST. Please see our terms for use of feeds.

He paints you a pretty economic picture. Well, I guess that's what we pay him to do. Give me three minutes in a locked room with him. Actually, I would only need two. Because if I could talk with the man and separate him from his deeply rose colored glasses for a moment or two, he would quickly notice ten thousand former members of the UAW had come with me to speak to him also.

Fed Chief Bernanke needs to get off his ivory tower and mix with the masses for a while. It's not so pretty down here in the trenches Mr. Federal Reserve. Or have you forgotten that it's our economy too? "Leading economic indicators," what a load of trash. Skewed graphs and optimistic projections based on numbers which can't be verified until it's too late to say oops! Give Mr. Bernanke an optimistic projection of the home mortgages that will go belly up in the next two years. Then send him back to Middle America to count unemployment filings. I dare say he'd have some explaining to do.

If you simply base your economic picture upon the total of dollars that move and the stock values of companies which would flee your homeland at the slightest profitable whim, then you're just a bit short sighted and I have one other thing to remind you of:

The Federal Reserve doesn't give a rat's ass whether you get your next meal or not. But don't count on Mr. Bernanke to tell you that.

Give me three minutes with Bernanke... originally appeared on BloggingStocks on Wed, 14 Feb 2007 14:45:00 EST. Please see our terms for use of feeds.