Michael Lombardi: This morning we learned sales for this year’s Black Friday weekend declined for the first time since 2009. I have been warning my readers for months that falling consumer confidence would result in a pullback in consumer spending—and that’s exactly what’s happening this holiday shopping season.
According to the National Retail Federation, consumers spent an average of $407.02 from Thursday through Sunday, down about four percent from what they spent last year. (Source: National Retail Federation press release, December 1, 2013.)
The first decline in holiday spending since 2009 does not bode well for the economy, and as far as I’m concerned, it is an early indication of a weakening economy going into 2014.
But there is one place people are spending. In fact, you can say they’re spending so much here, they’re borrowing to buy more!
Investors have borrowed more money to buy stocks than at any other time in history!
The chart below shows the use of margin debt on the New York Stock Exchange (NYSE). It stands at the record-high level.
Yes, NYSE margin debt stands above the level it stood at just before the peak in stock prices in 2007 and much higher than it was when the Tech Boom bubble burst in the year 2000. The risk with margin debt is that it can turn a minor stock market sell-off into a major one for key stock indices as investor loans are called.
And while investors are borrowing like crazy to buy stocks, earnings of companies that trade in key stock indices are anemic. In the third quarter of this year, the “surprise” rate for the S&P 500 companies that reported as of November 22 was 1.7%. This rate is 54% lower than the average surprise rate of the last four quarters. If this remains the “surprise” rate for the third quarter, it will be the lowest since the fourth quarter 2008 rate in key stock indices. (Source: FactSet, November 22, 2013.)
But back to the consumer…
The Consumer Confidence Index, tracked by the Conference Board, declined in November to a seven-month low! The index declined to 70.4 in November from 72.4 in October. (Source: Conference Board, November 26, 2013.)
To recap: retailers had a weak Thanksgiving sales weekend; corporate earnings are soft and getting softer; and consumer confidence is at a seven-month low. But investors have borrowed a record amount of money to buy stocks and key stock indices keep hitting new record-highs. Sounds like a recipe for disaster to me.(...)Click here to continue reading the original ETFDailyNews.com article: Investors Are Borrowing Like Crazy To Buy StocksYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here