Poor Economic Data Plus Poor Financial Stock Charts Raise the Question of Further Bond Rally

Please consider clicking to this linked chart of Bank of America (BAC).

This defines ugly.

Meanwhile the administration's Recovery Summer is panning out as follows.

Gallup reports U.S. Consumers' September Spending Matches 2010 Low:

Americans' self-reported spending in stores, restaurants, gas stations, and online averaged $59 per day during the first four weeks of September. Consumer spending is down from August ($63) and July ($68), and now matches its lowest level of 2010. Current spending is lower than that of a year ago and far below spending in September 2008, at the start of the financial collapse.

Click on graphic to enlarge.

Discretionary spending completely stinks. The country is getting poorer. These data are not adjusted for the obvious rise in consumer prices going back to early 2008. Thus they are worse than they appear, and they appear dismal.

Well, did small business participate in Recovery Summer?

Rasmussen on behalf of Discover(R) has an answer, having released its September survey data of small business, results of which include:

-Forty-six percent of small business owners report having cash flow issues this month, down from 53 percent in August; 50 percent said they do not have cash flow issues and 5 percent aren't sure.

-Despite this, a record 68 percent of small business owners rate the economy poor, up from 62 percent in August; 26 percent rate it fair, 4 percent rate it good and only 2 percent rate it excellent.

-In September, intentions for spending on business development in the next six months produced two record numbers. A record low 16 percent of small business owners plan to increase spending, down a percentage point from last month's then record low of 17 percent. Fifty-seven percent of small business owners report plans to decrease spending, the highest in the history of the Watch, while 24 percent report no changes to their spending plans and 3 percent aren't sure.

-55 percent of small business owners report economic conditions are getting worse for their businesses, equaling the record high percentage from last month; 23 percent expect them to stay the same and 20 percent see them getting better.

So, in addition to the widely reported U. of Michigan consumer confidence surveys, the ABC weekly confidence survey and so on, current data are ugly. This rich country is getting poorer.
Meanwhile the financial leaders at the Fed prattle on about the desirability of 2% price rises--for a country where money on deposit in the bank yields next to nothing, where except for giveaways from the government Social Security recipients receive no cost of living increases, and where the rate of price increases is systematically understated.

Almost everyone I know understands that the stock market is fully divorced from the economic reality of themselves and their friends and family. Thus, the lack of palpable economic progress and no major foreign policy successes all but ensure a major rebalancing swat on the nose to the Dems in the election.

The low expectations of the public of the Republicans they may well grant control of the nation's pursestrings to might just allow for upside surprises in the financial markets. Since the federal deficit has now moved to #1 in national concern in at least one recent poll, we might just see the pols here do the same sort of deficit reduction that the Brits achieved with their new coalition government this year. There is, after all, nothing so persuasive to a pol than a poll. Might the unthinkable happen, and the 10 year Treasury revisit its 2008 post-Lehman panic low around 2.10% in the next few months?

If anything can do that, the combination of troubles at BofA, as the chart suggests; further economic weakness (double dip or no almost does not matter) and deficit reduction measures could be a trifecta that accomplishes that while restoring some faith in and strength to the benighted U. S. dollar.

Copyright (C) Long Lake LLC 2010