Sentiment Issues

Friday, August 18, 2006 | 12:12 PM

There are several aspects to recent sentiment readings that are worth exploring.

The University of Michigan Consumer Sentiment Index revealed this morn that U.S. consumers are worried about inflation, pressing consumer sentiment index down to 78.7 in August -- a greater than expected drop from the prior reading of 84.7 in July.

Why don't someone tell these dang fools that there is no inflation!  I think its high time the  consumer focuses their consumption only on the products in the core  -- where it belongs -- and where prices are nice and calm (kinda like the eye on a hurricane). The sentiment readings are down because these silly consumers foolishly insist on buying non-core items. That must stop right away.

Don't these people know what the Fed likes to focus on? Whatsthematterwith these people anyway? Why doesn't the American public pay more attention to what matters the most to what economists choose to econometrically model?


Back in the real world, here's yet another ominous tell to ponder: the gap between current and future sentiment measures. We learn today that Portales Partners observed the spread between current conditions and future expectations in the Michigan consumer sentiment survey is now at levels previously seen prior to the ‘80-‘81 and and ’90-’91 recessions.

What does this tell us? At the very least, these sentiment readings reveal the utter absurdity of the core.

We know Greenspan cut rates too low, and then compounded the initial mistake by leaving them there too long; The Fed has now exacerbated the public with this blasphemy called the core rate of inflation.

The American consumer has figured out the truth about inflation. They have stopped buying the snake oil. The 70% of the economy that shops in stores, malls, gas stations, doctor's offices and big box retailers every day is none too happy with what is a massive fraud.

No one likes to be scammed, talked down to, cheated, treated as if they were stupid. When the Fed states inflation is contained, the public knows it is a hoax; when academics argue for the Boskin PCE deflator, the public smells the deceit;  when Wall Street Economists cheer a misleading PPI, there may be no public outcry -- but they know the swindle when they see one.

They are aware of the entire racket, and it all adds up to decreasing confidence in Congress, the White House, and even Colleges. These deceptions come home to roost in Sentiment Surveys such as this one. You can only fool all of the people for so long . . .

Smug arrogance does not win a whole lot of friends amongst those who live beyond the beltway, where – Core rate be damned – real families must buy food and energy.

Friday, August 18, 2006 | 12:12 PM | Permalink | Comments (50) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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Whats wrong with these people? Dont they know anything? Barry Ritholtz at The Big Picture today: The University of Michigan Consumer Sentiment Index revealed this morn that U.S. consumers are worried about inflation, pressing consumer se... [Read More]

Tracked on Aug 18, 2006 5:03:08 PM


"Real families" don't even know who Ben Bernanke is let alone what "CPI" stands for. All they know is that gas prices are high and it costs more to live. If there's a scam it's being played upon the fed and investment community as the academics calculate away reality. The actual pain of inflation just does as it does, picking away at main street's quality of life.

Posted by: jm | Aug 18, 2006 12:28:15 PM

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