NOT VERY CONFIDENT

the consumer confidence report was a rude awakening for many forecasters and economists. the latest reading was 64, down 14.8 points from january's 78.8 reading, a level not seen since october 1993. the present situation reading came in at 61.6 and the expectations reading came in at 65.6, both equally as bad, showing very large drops from january and reaching levels not seen for a very long time. reasons for the drop were easy to find after the fact and included lack of jobs, fear of war and terrorism and rising energy costs. so why was the drop so surprising and unexpected? the pundits had no explainations for why this wasnt forecasted but were quick to forgive the analysts for there lack of accuracy and even quicker to brush the report aside as a result of the looming war. once the shock wore off, almost every commentator and analyst used the traditional rebuttal of, "dont watch what they say, watch what they do" and the housing report held ample data for this theory as it hit another record level. thus, after a sharp sell-off, the market rallied strongly as traders/investors put their chips on the hope that "what they do" will be better than "what they said".

what will really be a shocker is if "they do what they said" and stop spending money like they have been. as has been widely reported, the consumer(that would be you and i) has been the pillar of strength during the past 2 1/2 years. we have collectively been buying new homes at a record pace, new cars at a record pace, furniture for our new homes, clothing, cd's, computers, cellphones, and anything else walmart sells at a discount. we've also been eating out like we dont have stoves in our new homes. if that continues it will be the first time in our country's history that the consumer hasnt curbed its spending habits during an economic slowdown and a war.

most people are optimists and look to the future with hope and excitement. yet, thats a bit harder to do with an orange terror alert and a new press conference everyday discussing the plans for war. shopping does ease some of the pain of our currnet situation, but at some point we will all have to pay for the stuff we have been buying, charging and getting for no money down with 0% financing. and since interest rates have been low for so long, we cannot get stimulated anymore with cheap money. so unless we get some new job growth and we resolve the war quickly, look for further weakness in confidence and possibly weakness in spending patterns.

its no surprise that confidence is so low. we have no money left and we are worried about losing our jobs. if that happens, how will we pay back the 0% money we borrowed?

have a grateful day!

larry