Sebastian - where does most of the earnings growth come from if 70% of US GDP is consumer spending? And last I checked, earnings growth posted so far is based on history. Guidance is what matters, and you'll be watching more of it get scaled back soon.

Sebastian - where does most of the earnings growth come from if 70% of US GDP is consumer spending?

I think it's up to 72% now.

Since housing market is dead where the money is coming from with such bad savings ? obviously from the stock market for me.
Q1 was amazing for stocks but now things get tight.

FWIW, I am hearing and seeing things that look like the commercial loan market might be busting at the bottom.

I'm beginning to have 80's nightmares.

Sebastian, much of the reported profits are coming from light inventory stocking. This is really noticeable in the stores now, and can only continue for so long. In other words, the profits are coming from sell-off and non-replacement of quantities of retail inventory.

I noticed this late last year in rural chain stores (Target, Walmart) and then this spring it began to be noticeable in the more built-up areas.

Also, watch the casual dining restaurant chains. They are a superb leading indicator on consumer spending.

One indicator I am seeing locally is that sales items at the local grocery stores are frequently out of stock. When you walk down the isle and you can tell which items are on sales because there nothing left, somebody has to be on a tight budget. I did not see this happening last year.

More 'means nothing' anecdotal evidence...

I was at Home Depot today to get some painting supplies... as I walked in the door there was a line of stainless steel gas bbqs. Long line too, ran outside the store into the parking lot. Looked like a WWII armada readying for an invasion.

Again - realize this is July 1st in Minnesota - Hell, I'm already thinking about snow blowers not looking to add to my summer stuff.

My guess is half of them don't sell unless HD gives them away... maybe give them away free with a snowblower... I might go for that.

CR, thanks for your input on casual dining. I always feel as if I'm on the right track if you are watching something too. It has seemed to me that consumer spending has been inversely related to gas prices over the last year and a half. I don't see where all the analysts are getting their optimism on consumer spending.

Dryfly, you cracked me up yet again. The Chinese armada of BBQ grills, defeated by the Divine Wind of Consumer Conservatism!!!

All: I was talking to a contact who lives in the NE tonight. An engineer, makes well over $100,000 K a year, no debt (even has his house paid off). He commented that since his property taxes were due and he was prepaying his heating oil contract in July, he wouldn't have much money to spend for the next two months. I was surprised that his property taxes were so low, but the two bills together came to over 5 grand. He works for a large company and his company is in the process of cutting back, and they haven't received word on raises yet (which were supposed to come in June, I believe).

So then I called a contact in the DC area. A scientist. Same deal (I know this one also makes over $100,000 a year), no debt at all. Tons of money in the bank. I didn't mention the first conversation, but I did ask what the economy looked like and he responded that his company was doing well but he was living very conservatively and putting money back.

It kind of struck me that the higher cost of day-to-day living may be causing a generalized caution. People may have absorbed the idea that prices are just going to keep increasing. Or maybe the spending fad is over? Mass psychology is a real thing. I am pretty sure that both of these men could go out and just pay cash for a new house. I am dead sure they could pay cash for a new car from ready cash. But they don't really NEED either, and at this time it seems they like the idea of more money in the bank. Neither are positive on the stock markets either.

Or maybe it's a techy thing. But what sticks with me is that if those who aren't chocked up with debt aren't spending, in this environment it's unlikely that those with a lot of debt are going to keep spending. The housing ATM does seem to be reluctant to pay out much lately.

"Mass psychology is a real thing."

It's not just a real thing; in so many ways it's the only thing.

I think that's why many economists don't get it.

The one reason we have an economy is because people want to get up in the morning because they believe they have an opportunity to earn dollars that are worth something. The structural aspects are essential, but entirely secondary to the psychological aspects.

Easy money jeopardizes economic integrity from both ends.

BTW, I'm officially going on a hunger strike until my iPhone begins to work.

So I may not be around for much longer.

Have a great weekend.

"It has seemed to me that consumer spending has been inversely related to gas prices over the last year and a half. I don't see where all the analysts are getting their optimism on consumer spending." [MOM]

That's what I've been wondering as well...

They find that optimisim anywhere the can, or they don't get a paycheck.

The structural aspects are essential, but entirely secondary to the psychological aspects.

Well, I'm going to disagree (again)... there are two factors in 'demand'... and both are equally important:

1) the desire to buy (psychology)

2) the ability to buy (structural)

The two are NOT additive, rather they are multiplicative. If one goes to 'zed' the other doesn't matter, the demand (product of the two) is also 'zed'.

Most econ folks take for granted that the DESIRE to buy is always there and focus almost entirely on the ability to buy - especially income & ability to finance consumption. Most of the time that is correct.

However, when 'the market' (that would be us) gets spooked, all bets are off as to whether the desire is there... or if there maybe 'deferred'.

That to a great extent is what is happening in Asian societies - no SS, few pensions, no safety net and a long history of hardship... so even though incomes are increasing the population never quite feels safe enough to open the wallet very wide at all.

I think we, here, are a long way from being that spooked... but that's not to say it can't happen. The 1000 mile journey begins with a few small steps.

So then I called a contact in the DC area. A scientist. Same deal (I know this one also makes over $100,000 a year) It might be a techie thing. For a lot of us, post Y2K were lean times. Now we are back to well over $100K but drive 2 '97 vehicles, three adults living in the $200K house and we are paying down the dot.bust and real estate debt to the tune of $5K/month.

"Earnings growth is too strong for this to be anything more than a brief and minor slowdown"

hhhmmmmm. Beginning to look like you may fail the Turing Test.

I have started to notice quite a few commercial real estate "for lease" signs. They are large and easily noticable and in higher and lower rent parts of town. Still building though, so I guess it is all good.

bear investor's -
"In light of the Funds' circumstances, this process is more time-consuming than in prior periods,"

what prior period would that be??

it's gotta be the first time ever theytried to come with a value for something that's is "Priceless"

"on or before July 16,"

any bet's on how "off" that date will be...

just between friends

time to get back into aug 155p bsc???

mp and MOM -- I'll concur. My casual dining clients are in trouble. Despite my telling them last fall that they would be in such shape right about now, they are still surprised.

that reminds me.. did'nt PE swoop on part of HD's supplier biz...hmmm

Indeed they did for $10b, and most of that money likely went to share repurchases(likely of the execs). If you can't grow it, reduce the float and get rich that way.

Oddly enough, the HD Supply in Phoenix is closing, and if I didn't know better it seems as if they're going to be a virtual supply house.