Thursday, April 08, 2010

Sanity is a good thing

Part of yesterday's market weakness was attributed by many in our incessant business news flow to the significant contraction in consumer credit in February. The fear was that this was a precursor to a decline in consumer spending. Why is the decline in consumer credit not good? Wasn't a key element of our debacle too much leverage everywhere. If short term worries about pressure on spending are there, so be it. It's something that needs to be experienced to get to the other side of this. Today it looks as if retail spending has not been impacted in any material way. Could consumers actually be spending out of earnings now, and reducing their debt levels. This is all good.

It's similar to those months when the news is that housing starts are down and the market sells off. Oh no, less construction work and less sales of appliances, drywall, carpets, and all that stuff. We have a glut of unsold new houses and condos still on the market and it's bad news that we don't continue to grow new supply? No, it's good news of course. We need to take some medicine if we are going to get well.

Today there's concern as new jobless claims were modestly higher than expected in the week before the religious holiday week. Is that a bad thing? Holiday weeks are often stretched weeks from an employee point of view due to vacations and in a jobs market that obviously has plenty of supply, why would employers rush out and hire new workers just before a week in which processing and training new folks would put a strain on their existing work force. No rush, they can wait a week or two and there will still be workers standing in line to hired. Doesn't that make sense and seem to be the right way to run a business.

A perspective longer than a t.v. sitcom can be worthwhile.


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