Warning: This is research, not investment advice. You invest at your own risk.
Via: Chart of the Day This is apparently month-end data to July, as the producers say the ratio has dropped to 129 from a high of 144. It would take almost a 50 percent pull-back with earnings constant just to get back into the channel… or a doubling of earnings, prices constant.
Data monthly to July. Consumption spending is collapsing and will continue to be under pressure from housing and wage deflation and unemployment, increased saving, and at some point, taxes. Given the public’s distrust of Washington and New York, it is doubtful that a big honking second fiscal stimulus is coming. (Can you see the effect of the first one?) I wouldn’t support it anyway—we’ve seen that government “solutions” (viz., the financial bailouts) merely validate the current highly unequal income distribution. Plus ça change, plus c'est la même chose. And even if our current account deficit is down and we don’t (seem to) need the Chinese as much as before, we are hardly going to turn into an export-led economy… unless, of course, the dollar tanks dramatically soon. America is still the world’s foremost manufacturing power, a fact that recent media coverage of manufacturing has chosen to ignore. With the government increasingly hogging the debt markets, it’s hard to see how a domestic investment boom is going to get going.
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