Given the low market volume these days, one should not read much into the up or the down movement. Given that, yes, but the Market Volatility Index (VIX) is another story. That downward movement is impressive, as this indicator marks near-term market fear; the lower it goes, the more it suggests upward pressure. Today, it is flirting with the magic level of 20. As a comparison, back in 2008, the VIX rose to almost 70. I suspect there is good reason for the “fear gauge” going lower – economic fundamentals here in the U.S. continue to get better, and despite the nabobs on Europe, things there are moving toward resolution, albeit one inch at a time. For the moment, though, let’s just stick with the U.S. economic fundamentals.
- New claims for unemployment benefits dropped last week to its lowest in more than 3-1/2 years, suggesting the labor market recovery was gaining speed.
- Autos are reviving with carmakers reporting in November their highest sales pace in more than two years.
- Housing may be nearing a bottom as record-low mortgage rates tempt more buyers into the market and confidence among homebuilders climbs to the highest since May 2010.
Now, I am not the only one who likes the numbers coming out about the U.S. economy. Someone far more important than I has spoken on this, and, in my humble opinion, there is no voice more important on the subject of the U.S economy. The U.S. consumer feels much better about the U.S. economy. Consumer sentiment is higher than it has been in six months. The consumer is not just talking; the consumer is spending, and that is what counts, ultimately.
In addition, someone is listening and watching the consumer spend. As consumers spend, businesses expand, and to do that, they usually borrow money. Unfortunately, banks are not lending. Oh, wait! That is wrong, you say. I am mistaken? Well, la de da, I guess I am.
- Banks are starting to put more of their money to work, expanding commercial and industrial loans last quarter by the most since Lehman Brothers Holdings Inc. went bankrupt in September 2008.
- At a time when the popular narrative centers on how tight-fisted banks are getting with their lending, end-of-year data for syndicated loans tell a different story. Corporations use syndicated loans for longer-term financing. So far, in 2011, syndicated loan volume has increased a whopping 56 percent compared to 2010. The total of $1.76 trillion is the highest single-year sum since 2007.
One reason businesses are borrowing money is that the unexpected turn in consumer spending has depleted inventories to a larger than expected degree. This suggests a stronger replenishment cycle, which means the first part of next year should be strong as manufacturers ramp up, thus hiring more folks, and so on.
Looking back, I am reminded that just a few short months ago, the pundits and analysts with the loudest voices predicted a double-dip recession, as well as the collapse of the Eurozone and the euro. Now, it is possible the latter could happen, but, as to the former, the likelihood of an economic recession is now a bit further away, thanks to the big dog on the block – the consumer.
Trade in the day – Invest in your life …
