Let's take a look at the consumer data we got from the Fed today:
"WASHINGTON (MarketWatch) -U.S. consumers shed some of their debt for the fourth month in a row in May, the Federal Reserve reported Thursday. Total seasonally adjusted consumer debt fell $9.15 billion, or a 4.5% annualized rate, in May to $2.42 trillion. Economists expected a decline. The series is very volatile. April consumer credit was revised sharply lower to a decline of $14.86 billion compared with the initial estimate of a gain of $1 billion. The decline in May was led by revolving credit-card debt, which fell $7.32 billion or 10.5%. This is the 20th straight monthly decline in credit card balances. Non-revolving debt such as auto loans, personal loans and student loans, fell $1.82 billion or 1.4%. Since the collapse of Lehman Brothers in September 2008, consumer credit has declined in 18 out of 20 months."
Wow this is one incredible recovery we are seeing!(sarcasm off). Folks, we are a consumer driven economy which means if we aren't spending then the economy isn't growing.
Without the countries credit card we would be back in a recession right now. The only way we are avoiding a double dip is because The Fed is throwing money out of helicopters.
Of course, it's only a matter of time before the GDP numbers go negative again which will then officially give us our double dip. This is inevitable because no country has a credit card that doesn't have a spending limit.
We are rapidly reaching the point where our national credit card "maxes out" and starts getting declined.
The consumer has already maxed out their own personal credit cards. We have seen 20 straight months of declining credit card balances. This is a highly deflationary signal. It's also a good thing. I believe people are beginning to get tired of being debt slaves.
Of course as this change in spending behaviour continues it's only going to increase the risk of a deflationary death spiral. Americans are famous for spending like drunken sailors. Nothing lasts forever though folks and times have changed as seen above.
Our consumer is now either tapped out or is starting to hoard cash as the economy continues to fall off a cliff.
How do the talking heads in Washington DC believe we are seeing economic growth when the consumer is in the process of contracting like this?
The spin machine in our capitol is now obviously in full gear. Look at the credit revisions for April. Credit was revised to minus 14.86 billion versus an expected gain of $1 billion.
How on earth can you be that far off on your initial estimates? The answer in my book is you can't be unless you are trying to hide something. I can't wait to see what the May revisions look like.
The Bottom Line
The whole economic recovery story is nothing but pure spin. The numbers coming out of Washington are a complete joke and cannot be trusted until you see the revisions or are able to weed through their spin.
Take the unemployment numbers for example:
How in the heck do you tell the people in this country that the unemployment rate dropped to 9.5% when 600,000 people lost their benefits and have essentially disappeared off of the labor statistics.
This spin process drives me nuts!
When are we going to start hearing the truth? The economic reports have turned into nothing but a bag of lies.
The fact that the market rose on a day after reports like this is really amazing when you think about it. I am not surprised because I was expecting a rally since we are still oversold.
One thing is clear: The market has it's head in the sand. It doesn't wanna hear the truth. It doesn't want to trade off of fundamentals. IMO it's morphed into a speculative casino that's gamed by day traders and the large trading desks on Wall St.
How anyone trusts their life savings in stocks is beyond me. You have been slaughtered if you bought and held since 1999. S&P now sits at 1067 after sitting at close to 1500 back in 2000 as seen below:
It doesn't take a math teacher to figure out the math in terms of performance over the last 10 years.
You also don't need to be a technical chartist when you look at the chart above to see where the market is now headed following the furious rally that was triggered by the "government spending bubble".
I plan on using this bounce to sell a few longs that I have owned for a long time because I think we are going to see a nasty plunge as the government teet begins to run dry.
Let's get real here before I finish up:
The data above tells you that the private sector has not only not recovered...It's contracting and so is the real economy IMO.
The politicians in DC need to start stashing some money into their pockets while they can still borrow from the world so they have the ability to take care of the masses when this borrowing game ends. The situation is rapidly becoming hopeless based on the most recent set of numbers that are coming out of Washington.
Let's hope the last bailout is for the people instead of Wall St.
Disclosure: No new positions at the time of publication.