There has been a lot of talk about China and their shaky markets. A lot of attention has been about the Chinese consumer. I am not too concerned with that. I think a lot of analysts are trying to fit the US consumer peg into the Chinese hole. The Chinese consumer is not the US consumer. Looking to the World Bank for some statistical guidance, we see this. They define Household Consumption as:
Household final consumption expenditure (formerly private consumption) is the market value of all goods and services, including durable products (such as cars, washing machines, and home computers), purchased by households. It excludes purchases of dwellings but includes imputed rent for owner-occupied dwellings. It also includes payments and fees to governments to obtain permits and licenses. Here, household consumption expenditure includes the expenditures of nonprofit institutions serving households, even when reported separately by the country. This item also includes any statistical discrepancy in the use of resources relative to the supply of resources.
Here is a very telling graphic:
In fact, Chinese household consumption accounts for just 36% of GDP where the US is 68.5% in 2013. So, today's news was a bit concerning for me. I would rather trust a company whose entire business depends on the reliability of its reports versus a government set on supporting their agenda. According to Gallup,
"July was the third month in a row in which the average American spent less than they did in the same month a year ago, confirming that the US economy is if not in a recession then certainly no longer growing."
"Gallup's daily spending measure asks Americans to estimate the total amount they spent "yesterday" in restaurants, gas stations, stores or online -- not counting home, vehicle or other major purchases, or normal monthly bills -- to provide an indication of Americans' discretionary spending. The July 2015 average is based on Gallup Daily tracking interviews with more than 15,000 U.S. adults."
There have been 7 months so far this year. Five of those 7 months are now posting year on year declines in consumer spending. If household consumption drives 70% of GDP in the US, where do you think the 2.5% growth estimate ends up at the end of the year? Is anyone taking the over? Give me a call if you are. Yep, better get those rate hikes going soon too!
Trade well and follow the trend, not the perma-bull OR perma-bear "experts."
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
The major averages shifted up and down throughout the session. While the DJI continues to be weak off the 200 day moving averages, the Nasdaq Composite continues to find support at the 50 day moving average. While the DJI continued lower for the session, the COMP continued to bounce back and forth. With the markets...
Buy low...sell high. That's the key to trading right? It's not that easy in reality though. This is especially true with options trading specifically when you are trading implied volatility. Our students often ask if we should sell high implied volatility and buy low implied volatility. Our answer is: how do you know what is high IV...
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