Let’s just go to the charts!
1. Growth in capital expenditures has turned negative.
Bloomberg, Business Insider
2. Small Business Optimism remains below recent highs and well below long-term trends.
3. Export growth is on the verge of going negative.
4. Even exports to China are about to go negative.
5. That’s causing layoffs at US industrials.
6. Corporate hiring plans are deteriorating significantly, according to a Morgan Stanley survey.
CEOs Run Out of Costs To Cut And US Domestic Demand Is In Decline As Customers Are Increasingly Wary About Spending!!
From Reuters: The list of companies’ reasons for weak performance has expanded, with some citing a decline in demand in the United States...
“Once we start to see earnings miss – when expectations have been pushed down and they still miss – that is when you’ll see the market start to fall apart,” Springer said.
CNBC: A compounding lack of confidence in the future has kept American companies from investing in their businesses and is leading the country back into recession, real estate mogul Sam Zell told CNBC.
Sam ZellThe CEO of Equity Group Investments, which holds multiple publicly traded companies primarily in the real estate space, said a lack of leadership in Washington is keeping the $2 trillion or so of cash on company balance sheets on the sidelines.
That’s happening even as the Federal Reserve continues pumping liquidity, which Zell said is being used only to prop up the stock market.
“Nobody wants to make commitments beyond tomorrow,” Zell said during a”Squawk Box” interview. “One of these (recession) triggers is when enterprise projects start getting delayed. We’re heading for a recession and that’s exactly what you’re looking at now. You’re looking at capital expenditures across the board being deferred for a reason: There’s no confidence.”
“Based on the fiscal cliff and all of the headwinds, the stock market should be at 9,000 and not 14,000,” Zell said.
Nevertheless, a combination of Fed stimulus and widespread business uncertainty has investors chasing a limited number of stocks, thus sending the Dow higher than where it should be.
“We are beginning to see the excess flow of capital; we’re seeing too much capital chasing too few opportunities,” Zell noted. “We’re creating artificial numbers.”
The sovereign credit rating of the U.S. will be cut as “fiscal theater” plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s largest bond fund.
“The U.S. will get downgraded, it’s a question of when,”Scott Mather, Pimco’s head of global portfolio management, said today in Wellington. “It depends on what the end of the year looks like, but it could be fairly soon after that.”
The Congressional Budget Office has warned the U.S. economy will fall into recession if $600 billion of government spending cuts and tax increases take place at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said.
In a “base case” of President Barack Obama being re- elected and Congress becoming more Republican, there is a high likelihood an agreement “doesn’t happen in a nice way, and we have disruption in the marketplace,” he said.
Policy makers probably will agree on cutbacks that would lower economic growth by about 1.5 percentage points next year, Mather said. They may roil markets by discussing scenarios that would lead to a 4.5 percentage-point fiscal drag, he said.
Pessimism rose to its highest level since last June as optimism fell for the fourth consecutive week in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.9 percentage points to 28.7%. This is the lowest level of optimism registered by the survey since July 26, 2012. It is also the eighth consecutive week and the 28th out of the last 29 weeks that bullish sentiment is below its historical average of 39%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.8 percentage points to 26.8%. This ties June 7, 2012, for the lowest reading of 2012. The historical average is 31%.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped up 5.7 percentage points to 44.5%. This is the highest pessimism has been since June 7, 2012. It is also the eighth consecutive week and the 24th out of the last 28 weeks that bearish sentiment has been above its historical average of 30%.
Earlier: Negative sentiment is adding up.
Google is down over 8% as it reported earnings early and surprised to the downside…
- *GOOGLE 3Q REV. EX TAC $11.33B, EST. $11.83B :GOOG US
- *GOOGLE 3Q ADJ. EPS $9.03, EST. $10.65 :GOOG US
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