CONSENSUS SENTIMENT INDICATOR: NEGATIVE (Bull Market Indicator)

Dry Cleaners: The New Economic Measuring Stick? Posted By:Jane Wells

Out in La-La Land, when the going gets tough, the tough quit dry cleaning. I've created the CNBC Dry Cleaner Economic Index. After all, what's the first thing you stop spending money on when you need to cut back on expenses? And in Southern California, a lot of people are having to cut back.

First, there's the writers' strike, going into its seventh week. Michael Shader, who runs Milt & Edie's Dry Cleaner in Burbank, says not only have writers stopped coming in, but also some actors. During our interview, he realized, "As we're talking, I'm starting to think, 'Hmmmm, I haven't seen him, I haven't seen her.'" (On the upside, the strike may be good for doctors and chiropractors, as I hear writers are complaining of a new writer's cramp--sore wrists from holding picket signs.)

The situation is much more dire up in Thousand Oaks, where Mark Adler runs North Ranch Cleaners. He says business is off as much as 12 percent due to layoffs at Amgen, Countrywide, and all the realtors who've gone under. "The only thing I've got left in full force is police, fire, and military," says Adler, who's concerned that clientele might disappear as well, if governments cut back due to lower tax receipts.

BUT HERE'S THE KICKER
Business is dropping as costs are rising for things like plastic (Adler gets his petroleum-based plastic covers from Korea and says they're costing 4 percent more this year), and hangers. Yes, hangers! Turns out there is no longer any domestic hanger production! Most hangers now come from China, and Adler says the U.S. is slapping on a 13 percent tariff on Chinese hangers. Dry cleaning held hostage by a hanger trade war! WHO KNEW?

I'd say rising costs plus falling business put the "dry" in dry cleaner.

"I know business is down when competitors start walking by to see what we're doing, see how much clothes are on the rack and everything else," says Adler. I asked him if that is starting to happen. "Oh yeah."

Consensus Watch’s Take: Sounds a bit over the top and a bit on the extreme side. The reality is that people are starting to hurt and this notion that the troubles of housing are contained and confined and will have little relevance to the domestic U.S. and global economies is ridiculous. I’ve said this before; When the housing market was surging, the Consensus was lauding how it was a big factor in the growth of the stock market, but now that the tables are turned, the relevance is muted. People are feeling the pain. The jobs side is trending up. Oil prices are still trending upward. Consumers are filling the malls, but they are browsing for goods they will buy after Christmas when prices will be 50% cheaper. The noose is tightening and with that come buying opportunities. The best cross-border shopping deals right now are in the stock market, however a Sage-Investor will not gorge immediately but will take small positions and accumulate. The financials, which the Consensus is loathe to a passion, are extremely enticing, however I personally have only bought a handful of shares (ETF’s like the XLF’s) and will accumulate more as more skeletons come out of the closet and there are a lot of them coming. In addition based on the anecodotal evidence above, I will probably look at trying to get a piece out of the coat-hanger market.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull market indicator)

U.S. consumer sentiment soured for a third month in December as a housing recession and
expensive gasoline left consumers at their gloomiest since the aftermath of Hurricane Katrina, a report showed Friday.

The Reuters/University of Michigan index of confidence fell to 74.5 so far this month, slightly below analysts' median forecast for a slip to 75.0 and down from 76.1 in November.

Excluding a post-Katrina reading in October 2005, this was the worst reading in 15 years.

The U.S. economy has been plagued by a housing crisis that has spread to mortgage-linked financial assets and crippled the credit system, threatening growth.

Reuters/UMich found perceptions of current conditions improved modestly, but expectations about the future deteriorated to their lowest since 1992.

The survey's index of current economic conditions edged up to 92.1 in early December from 91.5 in November while its reading of consumer expectations slipped to 63.2 from 66.2.

CONSENSUS SENTIMENT: NEGATIVE (Bull market indicator)

(Source: Bloomberg) DON’T be too upset by the stock market’s recent decline. It may have been painful, but it’s probably just a stumble by a bull market that still has room to run.

That, at least, is the message that comes from contrarian analysis of investor sentiment — an approach to market timing that relies on the propensity of the average investor to get the market’s near-term direction dead wrong most of the time.

When stocks are really about to decline, for example, and the profitable course of action would be to sell some of the stock in a portfolio and hold cash, the typical investor tends to remain stubbornly optimistic, treating the decline as a buying opportunity.

On the other hand, when the stock market is experiencing a mere correction, and the optimal response would be to load up on stocks, investors generally believe that the decline is just the beginning of something far worse.

It is difficult to measure the sentiment of all investors accurately, so practitioners of contrarian analysis often focus on the opinions of a group of people whose views are broadly representative of investors as a whole, and whose moods are easily quantified. Investment newsletter editors meet these conditions nicely.

Research conducted by the Hulbert Financial Digest over the last two decades shows that the stock market generally has fallen when newsletter editors have jumped on the bullish bandwagon, and the market has risen when the newsletters have been most bleak. Investment newsletters have been quite gloomy lately, reacting to stock market weakness by hastily moving to cash. From a contrarian point of view, this is a strong bullish indicator. It certainly does not fit the model of what typically happens before the onset of a bear market, when newsletters tend to be bullish.

Consider the average recommended exposure to the stock market among the short-term market timing newsletters tracked by the Hulbert Financial Digest. By Monday, that average had fallen by 63 percentage points since the Standard & Poor’s 500-stock index hit its high in early October, from 50 percent then to minus 13 percent early this week. This meant that the editor of the average short-term market timing newsletter was recommending that his clients allocate 13 percent of their equity portfolios to actually shorting the stock market — an aggressive bet that the market will go down. By Thursday’s close, that average had climbed back into slightly positive territory at 8 percent. Even with that bounce, however, the average newsletter was extremely pessimistic.

To put the newsletters’ retreat into an historical perspective, consider how they reacted in the weeks after the S.& P. 500 hit its top in March 2000. At the time, of course, no one could have known for sure that the Internet bubble was bursting and that the decline beginning that month would last for more than two and a half years and lead to a halving in the average share price.

What is clear is that the short-term market-timing newsletters, on average, were not particularly concerned about the prospects for the market. They did not use that decline to reduce the recommended equity exposure of their portfolios. On the contrary, they considered it a buying opportunity. During the first three months after that market top, the newsletters actually increased their average recommended exposure to stocks.

In contrast to the happy-go-lucky attitude that prevailed then, the majority of newsletter editors this time around have fallen over themselves to jump off the bullish bandwagon. Their behavior bodes well for the stock market’s near-term direction, since in the past they have regularly gotten it wrong. To bet that stocks are about to enter a bear market, you would need to bet that these Wrong-Way Corrigans will get it right this time. Based on past performance, that’s not very likely.

IT is worth noting that contrarian analysis is helpful only for timing the markets’ shorter term gyrations. Over periods of one year or longer, for example, it sheds little light.

In suggesting that the final top of the recent bull market has not yet been reached, therefore, contrarian analysis does not hazard a guess as to when that top will arrive or how much higher the stock market will be then compared with today. But it does suggest that stocks’ path of least resistance over the next few months will be up.

Contrarians are fond of saying that bull markets like to climb a wall of worry. It would appear that for now, that wall is very much intact.

Consensus Watch’s Take: When so many people are so sure something is going to happen, it tends to not happen and vice versa. The Newsletter Consensus has clearly been bearish of late. That bearishness if you followed it, would have led to you missing out on the recent gains the last few weeks. Gauging the Consensus in this case can lead to short term buying and selling opportunities. Over the long term (and this is what interests a Sage Investor greatly), the fundamentals in the US economy do not look appealing. The same themes are still in effect; a real estate market that is in shambles, tepid job growth, falling consumer and business confidence, surging commodity inflation, a public and private balance sheet that is of junk status, and a nation that has prided itself as free market and capitalist-centric, adopting socialist policy to bail out bad investment decisions. All of which are priced into the currency. As the noose tightens, opportunities for some cross-border shopping have and will continue to present themselves. So if the Newsletter Consensus continues to remain bearish, it will likely represent a green light to start building positions in great wealth creating companies.

AKR

CONSENSUS SENTIMENT INDICATOR: POSITIVE (Bear Market Indicator)

Trump, Armani Refuel the `Dubai Bubble' Debate (Exerpt): William Pesek

By William Pesek

Nov. 28 (Bloomberg) -- Even amid a skyline jammed with massive construction projects, the Burj Dubai is a standout.

In September, it beat the 31-year-old record held by the CN Tower in Toronto to become the world's tallest free-standing structure. When it's completed in 2008, Dubai's tower will be the tallest building in every category and home to one of Giorgio Armani's first hotels.

This is kind of a Dubai obsession -- having the biggest this, grandest that, most ostentatious the other thing. Developers have designs on the biggest shopping mall, the largest theme park, the first submerged luxury hotel and an artificial archipelago that is expected to be visible from outer space.

Dubai seems a unique amalgam of Hong Kong, Riyadh and Las Vegas. No doubt this latter quality -- giant themed hotels and countless construction sites cropping out of the desert -- explains Donald Trump's interest. The Trump Organization's 48- story tower will include about 660 hotel rooms and condominium apartments.

It's no wonder economists are buzzing about the ``Dubai Bubble,' especially with crude-oil prices near $100 a barrel.

Actually, they have been talking about Dubai's property markets imploding for years -- to no avail. As oil prices rise and Dubai, one of seven sheikdoms of the United Arab Emirates, diversifies its economy, it continues to confound the skeptics.

Bright Future

``Just look around this place,' Faisel Hoodbhoy, a managing director at Dubai International Financial Exchange, said at an Institutional Investor conference last week. ``The future for Dubai is very, very bright.'

Of course, doomsayers may have some ammunition in the ``skyscraper curse.'

There's an old saying in journalism that if you have a good story, write it from time to time. We all have a couple of favorite issues, causes or quirky lenses through which to view complex problems. One of mine is the uncanny correlation between tallest-building projects and financial crises.

It happened in Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel. A bizarre coincidence perhaps, yet humankind's propensity for architectural overreach has been a reliable omen of meltdowns.

Taiwan, which in 2004 became home to the tallest building, was arguably affected. Its economy didn't implode, so much as it's disappearing. China has done a masterful job marginalizing an island it sees as a breakaway province. Now, among Taiwan's main allies are Kiribati, Swaziland and the Holy See. An economic crisis? You decide.

Development Miracle

The thing about record-breaking skyscrapers is that they can say as much about hubris as wealth, ambition and technology. Is Dubai a development miracle? Or is it the center of an Arabian asset bubble tied to surging oil prices?

At least for the moment, it would appear to be the former.

The rise in oil prices may prove more secular than cyclical. Demand from China and India alone almost ensures it. Officials point out that oil revenue accounts for just 6 percent of Dubai's gross domestic product. Even so, it's not clear its banking and tourism industries would offset an oil crash. Luckily for Dubai, oil prices are likely to stay high.

Also, much of the oil proceeds are being invested at home. Dubai's boom isn't being financed with debt the way previous ones were in Asia and the West; it's being financed with something closer to equity, if you will -- shares in Dubai Inc.

Boom and Bust

Yet oil booms have an erratic track record; just about every one has been followed by a painful bust.

The outlook for energy is cloudy as Venezuelan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad try to use oil as a weapon against the U.S., and as concerns mount that the dollar will collapse or that the U.S. might attack Iran. Also, inflation in the U.A.E. rose a record 9.3 percent last year amid surging property prices.

To sustain the boom, Dubai needs to beat the system, so to speak; it has to overcome the skyscraper curse. Trouble is, few economies have done so.

CONSENSUS WATCH’S TAKE: I guess the adage, “The bigger they are, the harder they fall,” could be applied to this happen-stance. It seems when society reaches a point of sheer gluttony, it is perhaps time to take a few chips off the table. This might be the case with the oil and commodity assets. The recent surge has been more attributable to the falling US dollar and sheer speculation. Funny how no-one talks about the Terrorist Premium in oil these days? If the Gulf State has the moxy to reprice oil to Euro’s, it might be the death signal for oil, as you will see the Mother of All Conservation programs and every single dollar will be pumped into alternative energy sources. Long-term if prices remain at this level, buildings will grow but profits will shrink as the higher capital costs make it difficult to generate positive excess returns on invested capital. The oil sector has been the best wealth creating sector, but in this new environment, it becomes more of a risk play. These symbols of excess are often indicators of a future fall.

AKR

CONSENSUS SENTIMENT: POSITIVE (Bear Market Indicator)

Google branches into energy; Internet giant will fund research into lower-cost renewable power source

Tyler Hamilton
Toronto Star

   Search-engine titan Google Inc., which has built a cash-rich Internet empire by providing easy access to Web content and online advertising, now wants to do the same for renewable energy technologies such as solar and geothermal.

   The company, whose corporate motto is "Don't Be Evil," yesterday announced plans to spend hundreds of millions of dollars on renewable energy projects that generate emission-free electricity more affordably than coal plants.

   It's calling the project Renewable Energy Cheaper Than Coal, and plans to spend "tens of millions" in 2008 alone on research and development, beginning with the hiring of scientists and engineers who can lead the effort.

   Clean energy advocates and environmentalists widely applauded the initiative.

   "It's fantastic," said Mark Lutes, a climate change analyst with the David Suzuki Foundation. "If you have a company like Google with significant resources and enthusiasm, it can move things along more quickly."

   But the announcement also left some market watchers wondering whether Google, a company that gets 99 per cent of its revenues from online advertising, is losing its focus and potentially hurting shareholders in the process.

   The company has in the past been criticized for its "what sticks" approach to growth, which involves a regular stream of new service launches or ambitious initiatives that typically go nowhere or don't contribute to revenue. Energy, more than any other area, has no obvious link to Google's core business.

   "What the heck are they doing? It boggles the mind," said Jordan Rohan, an analyst at RBC Capital Markets in New York. "This makes me worry about Google's priorities."

   Google founders Larry Page and Sergey Brin have made no secret of their commitment to "green energy," having formed a philanthropic arm called Google. org that's dedicated to the cause.

   The Mountain View, Calif.-based company powers a portion of its headquarters with solar electricity, has invested in the development of plug-in cars that run on electricity instead of gasoline, and has spearheaded efforts to make the power-hungry data centres that form the backbone of the Internet more energy efficient.

   Page and Brin have also made multi-million-dollar investments in clean technology companies, including electric car maker Tesla Motors and thin-film solar company Nanosolar Inc.

   Page wrote on his blog yesterday that the company's goal under its latest initiative is to see construction of 1,000 megawatts of renewable energy capacity that's competitive today with coal, which supplies 40 per cent of the world's electricity and is a major source of greenhouse gases known to influence climate change.

   Generation of 1,000 megawatts is roughly what's needed to power a city the size of Ottawa.

   "We are optimistic this can be done within years, not decades," wrote Page, who has a personal interest in power technologies and is a fan of Nikola Tesla, inventor of the modern-day electricity system.

   "If we succeed, it would likely provide a path to replacing a substantial portion of the world's electricity needs with renewable energy sources."

   Two California companies Google is already helping are eSolar Inc., which designs large-scale solar power plants using the sun's energy to generate electricity-producing steam, and Makani Power Inc., a developer of technology that can capture the wind's energy at high altitudes.

   The company said it plans a "significant effort" in advancing solar thermal technologies that generate electricity, but will also devote resources to enhanced geothermal technologies that tap heat deep within the earth.

   Paul Bradley, managing director of PJB Energy Solutions in Toronto and former vice-president of generation procurement for the Ontario Power Authority, said Google's financial commitment to renewable energy is part of a trend that's seeing large pools of private capital attempting to tackle climate change.

   "An entrepreneur or somebody who has built up a lot of wealth, such as a Bill Gates or the founders of Google, if they pool their resources properly, they have more firepower than any government has," Bradley said.

   "Some of this concentrated wealth has to go somewhere."

   It's also no coincidence that many of these new energy leaders are coming out of the technology sector and companies that have already played a role in shaping the world, said Cherise Burda, a policy analyst at the Pembina Institute, an energy think tank.

   She said the move toward "smart grids" and distributed energy systems like wind, solar and ocean energy won't happen unless software and two-way networks are developed to support and manage the flow of this renewable electricity.

CONSENSUS WATCH’S TAKE: Kudos to Google for being strong corporate citizens. The reality is they are a software company not an energy company. The scarce capital they have been entrusted with should be allocated to projects in which it has the expertise. It is the best of breed in search engine technology, not in alternative energy development. The gesture is noble. The reality is that this is a classic diworsification. Companies that become bigger than they are, often start trying to step outside their strength, mostly out of ego and often it comes back to bite them in a big way. Diworsification firms are to be avoided in a big way. Google stock is already priced for perfection and overvalued. Actions like this lay the seeds for a severe pullback. It is showing that they have way too much cash to find any worthwhile projects to develop and that leads to bad investment decisions.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

Recession Signs Grow as Winnebago Leads First RV Dip Since 2001

Nov. 27 (Bloomberg) -- For the past three decades, deliveries of motor homes and travel trailers have dropped before each decline in the U.S. economy, giving the $15 billion industry a reputation as a bellwether. As the U.S. housing slump worsens, gasoline prices rise and consumer confidence wanes, RV sales are forecast to slide this year and next.

Recreational vehicles ``are at the swing end of discretionary spending because no one needs an RV, and certainly no one needs a new RV,' said Ron Muhlenkamp, whose Muhlenkamp & Co. fund manages about $1.8 billion including shares of Winnebago, the biggest motor-home maker, and Thor, the maker of Airstream trailers. Muhlenkamp started unloading shares in 2006.

A University of Michigan forecast for the RV industry in June predicted 2008 sales would rise 3.5 percent; a revised version of the forecast today swung to a 4.8 percent decline. The revised 2008 outlook comes during the industry's largest trade show, which begins today in Louisville, Kentucky.

None of the five largest recreational-vehicle makers has posted a 2007 stock gain. Riverside, California-based Fleetwood Enterprises Inc. declined 27 percent before today, and Coachmen Industries Inc. of Elkhart, Indiana, fell 47 percent. Coburg, Oregon-based Monaco Coach Corp. dropped 38 percent, while Winnebago declined 37 percent. Thor, which hasn't had an annual loss since it was formed in 1986, slid 20 percent.

Consensus Watch’s Take: That’s what $90/barrel can do to an industry. I also assume that Winnebago’s take the premium gas also so that adds further to the costs. The common claim from the Oil Consensus is that the economy doesn’t need as much oil to power society and it’s probably true about most things…except Winnebago’s! Maybe this is the turning point we have been looking for and history has shown it to be a strong if not quirky indicator. It also helps that we are into serious tax-loss selling season and the overall malaise in consumer confidence, financial bad debt confessionals are firmly taking shape. As a result, I continue to maintain that opportunities for taking small positions in good, solid, wealth-creating companies are at hand.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

Top headlines from the Bloomberg newswire today at lunch hour:

Fed's Kroszner Says `Rough Patch' Won't Warrant Further Interest Rate Cuts

Fannie Mae Heads for Biggest Two-Day Decline Since 1987 on Loss Accounting

FedEx cuts Forecasts on Higher Fuel Costs, Slowing Freight; Shares Decline

Goldman Sees Risk of Recession as Subprime Reduces Lending by $2 Trillion

U.S. Industrial Output Unexpectedly Falls On Slowing Auto, Appliance Sales

Consensus Watch’s Take: To sum up the state of U.S. economy, it would be; Interest rates are staying pretty much where they are, the mortgage market is on the road to catastrophe, it’s costing more to ship parcels (which are fewer), and the demand for durable goods is falling. If you didn’t know this and the flicked on CNBC one day, you would think the economy is tickety-boo. Now if the world according to CNBC was that all was well, then the above course of events would normally be; interest rates creeping upward on strong credit demand, housing market improving, FedEx output at multi-year highs, and industrial output surging on strong auto, durable good demand.

The Consensus is getting pretty ticked off and beaten down. It’s not on the floor yet, but it’s getting closer and closer. As the U.S. economy’s knees start to buckle under, the time for taking on small positions in strong wealth creating companies that are and will be selling at an extreme discount, thanks to deflating currency are on the horizon. Banks may never be as cheap as they are about to become. We’re talking about long-term multi-year investments, not day trading.

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

NEW YORK — A key barometer of consumer sentiment dropped to its lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after hurricanes Katrina and Rita pummelled the Gulf Coast. Analysts had expected 99.5.

The report heightens worries for retailers, who are already bracing for a challenging holiday shopping season after a disappointing fall. The results also rattled investors, sending Dow Jones industrial average down 62.75, or 0.45 per cent, to 13,807.51.

“Further weakening in business conditions has, yet again, tempered consumers' assessment of current-day conditions and may very well be a prelude to lacklustre job growth in the months ahead,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year.

The Present Situation Index, which measures how shoppers feel now about the economy, declined to 118.8 in October from 121.2 in the prior month. The Expectations Index, which measures shoppers' outlook over the next six months, declined to 80.1 from 85.0.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

With Christmas just about eight weeks away, shoppers are contending with a slew of problems: higher food and gas prices, a deepening housing slump and tighter credit, among them.

And while the Federal Reserve is expected to cut interest rates on Wednesday to boost the economy and lure more investors into the troubled credit markets, economists say the move is probably too late to aid the holiday season, which accounts for up to 40 per cent of retailers' annual revenue.

A report on U.S. home prices Tuesday offered little hope that housing prices will recover soon. According to the S&P/Case-Shiller index, U.S. home prices fell nationwide in August for the eighth consecutive month.

For those who watch the economy, the big concern is that the lower home prices, declining consumer sentiment and rising prices for food and fuel will undermine what has been, until now, a healthy jobs market. The Labor Department is expected to show an increase of 80,000 jobs in October when it releases its monthly report on Friday. Unemployment is expected to remain steady at 4.7 per cent.

The Consumer Confidence report — derived from responses through Oct. 23 — showed a weakening of confidence in the job market, however.

Those saying jobs are “hard to get” increased to 22.6 per cent from 22.4 per cent. Those claiming jobs are “plentiful” decreased to 24.1 per cent from 25.6 per cent in September.

The outlook for the labour market was also less optimistic. The percentage of consumers expecting more jobs in the months ahead was unchanged at 13.5, but those anticipating fewer jobs increased to 20.1 per cent from 18.7 per cent.

UPDATE: U-MICHIGAN NOVEMBER CONSUMER CONFIDENCE LOWEST IN 5 YEARS

U.S. consumer sentiment posted a surprisingly sharp fall in early November, hitting its lowest in two years as high energy costs and falling home prices pummelled confidence, a survey released Friday showed. The Reuters/University of Michigan Surveys of Consumers said its gauge of consumer sentiment fell to 75.0 from October's final result of 80.9.

Consensus Watch’s Take: In the eyes of the neurotic Market Consensus, this is yesterday’s news, especially considering that several days after, the US government released some very flattering data on US jobs and GDP that made the Goldilocks Consensus come out of the woodwork again. The reality is….the reality. Gas prices have hit $3/gallon. Homeowner’s ETF machines are empty. Their homes are depreciating in value. Mortgage payments are resetting to the upside. The crashing US dollar will make those Asian imports that consumers are addicted to even more expensive. The American standard of living is being paid with a credit card. Banks are sitting on a mountain of paper that has no tangible value. It’s almost a big bang theory is coming into effect. So factoring all these “real” facts, it becomes comical when the government says lighten up. If everything is OK, then why is the Fed cutting interest rates? Its actions appear to be delaying the inevitable. The ingredients are there for a major shock or crystallization to the downside. We’ve had 2 shocks this year and the third time is always a charm. Once lucky three hits then we’ll be jumping in again to pick up the pieces. The financials look to be one of the main casualties, but judging by the bleeding experienced at Merril Lynch and CitiGroup, we’re in the early days. As Sage Investors take a long term view of the market, the reality is the financials are getting very cheap so it is not improper to take a very small position through an ETF like the XLF as I have just done recently. One thing about banks and financial services is that even in their weakest hour, they’re still printing money and you can count on the banker to work on the next generation of products that will suck the retail investor in.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

Six in 10 US Consumers Think Recession is Likely (By Reuters)

Six in 10 U.S. consumers say a recession is likely in the next three to six months, a new survey on holiday spending said November 7, 2007.

In the telephone survey for Reuters by America's Research Group, 45.7 percent of 1,000 respondents said a recession was "somewhat likely" and 14.3 percent said "very likely." Forty percent said a recession was "not likely."

The interviews were conducted on Nov. 1-4. The error factor is plus or minus 4.3 percent.

Recession fears ahead of the holiday shopping season have been kindled by concerns about jobs and the U.S. housing meltdown.

Still, even with questions about the strength of the economy, the wealthy seem intent on spending for the holidays no matter what.

For those who said they would spend more than $1,000 this holiday season, 46.8 percent said nothing could make them spend less than they planned for Christmas.

Consensus Watch’s Take: Other than those who are living on 5^th Avenue, the US Consumer Consensus is feeling faint. It hasn’t fallen over yet, but it’s starting to see stars; rising gas prices, excess debt, houses that don’t function as ATM machines anymore, and a currency that is losing its purchasing power by the hour. Probably a good time to start bailing out and the market has shown that it is very close to heading for the exits. The Fed bailout in September has not worked. It has abandoned the Greenback. Import inflation is on the rise. Well if you are over here in Canada, with it’s newly found Super Loonie, the Consumer Consensus sees things a bit differently. The surge in the loonie, combined with upcoming tax relief may create some short-term opportunities to do some cross-border shopping in the equity market. The banks, while currently in its confessional, are starting to become cheap when you factor in the exchange rate. Gold can be had for a slight discount. At some point the Loonie is going to come out of its hysteria and come back to earth and that itself will create a nice return.

AKR

CONSENSUS SENTIMENT: Negative (Bull Market Indiciator)

Some clippings from the foreign newswires that point to an increasing negative sentiment by the Business Consensus:

Munich (dpa) - German business confidence chalked up its fifth consecutive monthly fall in October, a key survey to be released Thursday is forecast to show, as growth in Europe's biggest economy loses momentum.

The Munich-based ifo economic institute's monthly index of 7,000 German executives will show business confidence skidding down to 103.7 points this month compared to 104.2 September, economists predict as the country's economy grapples with a surging euro, record oil prices and the fallout from the global credit crunch.

The release of the closely watched ifo survey follows the publication this week of major surveys from Italy and Belgium sending out mixed economic messages about sentiment in the 13-member eurozone following the global uncertainty triggered by the US housing market crisis.

While business confidence in Italy posted a surprise rise in October, consumer confidence in the eurozone's third biggest economy was unchanged in October. Business confidence in Belgium, often considered by economists as a bellwether of the eurozone economy, slipped back in October.

After four consecutive falls, a key German indicator gauging the mood among investors held steady earlier this month helping to ease worries about the fallout from the credit squeeze.

However, business confidence in France is forecast to have edged down in October, a survey also to be published Thursday is forecast to say.

Either way economists have been revising down their economic growth forecasts for Germany and the eurozone. German growth is expected to slip to two per cent next year from about 2.6 per cent 2007 after expanding by a perky 2.9 per cent in 2006. dpa amc sc

Seoul (dpa) - South Korea's economy grew slower than expected in the third quarter amid slowing export growth, the Bank of Korea said.

Consensus Sentiment: NEGATIVE (Bull Market Indicator)

REITs See Biggest Drop Since 1998 as U.S. Rout Grows

By Dan Levy and Hui-yong Yu

Oct. 25 (Bloomberg) -- U.S. real estate investment trusts are poised for their biggest decline in almost a decade as higher borrowing costs curb takeovers and reduce property values.

After outperforming the Standard & Poor's 500 Index every year from 2000 to 2006, REIT stocks may drop as much as 20 percent in the next 12 months, according to University of California economist Kenneth Rosen.

``REITs are overvalued by 25 to 40 percent relative to stocks and bonds,' and cash flow yields are too low, said Rosen, who also runs a $480 million hedge fund from Berkeley, California, that invests in real estate securities.

Property trusts that own office buildings, apartment complexes, hotels and shopping centers are losing value as banks and investors shun bonds and loans backed by subprime and commercial mortgages. That's going to drive down REIT prices, said American Century Investments fund manager Jeffrey Tyler. Morgan Stanley analysts said last month that REIT returns could decline 10 percent.

The Chicago-based National Association of Realtors said yesterday that sales of previously owned U.S. homes fell more than economists forecast in September as higher mortgage rates made it more difficult for potential buyers to get financing. Sales were down 19 percent from September 2006 and the median home price dropped.

Index Slumps

The 128-member Bloomberg REIT Index returned 78 percent with dividends in the two years prior to its Feb. 8 peak, the day before New York-based Blackstone Group LP bought Equity Office Properties Trust for $23 billion, or $39 billion including debt, the real estate industry's biggest leveraged buyout.

Since then, the index has fallen 16.5 percent after dividends as commercial mortgage rates climbed as much as 2 percentage points above the 10-year Treasury note. The last time the REIT index declined more than 10 percent in total return was in 1998 when investors were diverting funds to high-flying Internet stocks.

International Returns

REITs outside the U.S. also declined. The 40-company Tokyo Stock Exchange REIT Index, led by Nippon Building Fund Inc. and Japan Real Estate Investment Corp., is down 28 percent from its high last May. The 14-member Bloomberg Europe Real Estate Index, led by Unibail-Rodamco SA, is down 33 percent from its February peak.

Warehouse and industrial REITs are the only group in the Bloomberg U.S. index that hasn't lost value this year, gaining 11.5 percent as U.S. imports of raw materials and consumer products increased. Public storage REITs dropped the most, down 19 percent. Apartment REITs decreased 13 percent and office stocks declined 12 percent. All returns include dividends.

American Century, the Kansas City, Missouri-based money management firm with about $100 billion of assets, sold about 40 percent of its REIT holdings in May 2006 because prices, driven up by hedge funds and takeovers, ``exceeded the underlying fundamentals,' Tyler said. Now, with rents flattening and vacancies rising, ``the picture isn't getting better,' he said.

The U.S. office vacancy rate increased to 9.8 percent at the end of September from 9.7 percent in the second quarter, and rents in Manhattan and San Francisco climbed at the slowest pace in more than a year in the third quarter, according to real estate brokers Cushman & Wakefield Inc. and Studley Inc. in New York and Chicago-based Grubb & Ellis Co.

`More Shakeout'

``There is plenty more shakeout to go in the REIT market,' Tyler said. ``Property values are going to be under pressure, and by extension that will move to REITs.'

Consensus Watch’s Take: The earthquake in residential housing appears to have now spread to the commercial market, U.S. and globally. The new found “wealth” in the global economy has forced petro-countries and emerging economies to pump their extra cash into something and that something is rental properties. Looks like the party is over. Like the home market, the damage will be felt for a while yet and with that presents some very interesting buying opportunities to pick up sold REITS on the cheap.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

As I was thumbing through the financial pages at the start of the week, these type of headlines started jumping out:

“Bernanke Spooks Investors With Market Outlook”

“Pimco’s Gross: Rate Cut Coming, But Not In October”

“Paulson: Housing Remains Drag on Economy, Markets”

“Hovnanian: Housing Slump to Last Another Year”

“Wells Fargo, Other Banks’ Earnings Hit By Housing”

Consensus Watch’s Take: Doesn’t exactly give you warm, fuzzy feelings. Despite all the prognostications of the return of Goldilocks in version 3.0, there are many red flags circling the global economy. You’d think that the Fed bailout would magically wave all the housing, credit, asset and trade imbalances to pixy dust, but there is still an underlying fear element that is permeating the landscape. What’s missing is a shock. We’ve had 2 shocks this year and I think we’ll see a third shock that will truly rattle the nerves of the market. They say everything comes in three’s. The Fed only has so much pixy dust in its bag so it’s a matter of time. The previous 2 shocks have created short term buying opportunities. I suspect the next shock will create similar buying opportunities but they will take longer to realize value.

AKR

CONSENSUS SENTIMENT: POSITIVE (Bear Market Indicator)

Mutual funds higher again in September

Monday, October 15, 2007

CONSENSUS SENTIMENT: NEGATIVE (Bull market indicator)

Among the more obscure measures, analysts at research firm Liscio are looking at "bibliometrics," or the number of times a word is mentioned in newspaper articles.

A rise in the frequency of the use of the word recession "has an excellent history of calling downturns in near real-time," they say, and there has been a dramatic spike in September.

Consensus Watch’s Take: The Biblio Consensus is feeling gloomy on the prospects for a recession. My take is that we are in the midst of a slowdown, otherwise why would the Fed cut a half-point? Interest rates are cut when the economy is slowing down. What’s interesting is that a year ago, you couldn’t even hear the word recession…anywhere. The result, being several warning shots across the bow that has left some portfolios reeling. Now that recession is coming into the mainstream vernacular, we may be entering a possible buying point. As people get more pessimistic, stocks become cheaper and opportunities to buy solid, wealth-creating companies on the cheap as long-term investments will abound.

AKR

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

CONSENSUS SENTIMENT: POSITIVE (Bear Market Indicator)

In one of the most eagerly awaited economic non-events in the past 6 weeks, Benny and the Fed, surprises the Consensus and pushes the envelop by cutting interest rates 50bp and discount rate by an additional 50bp.

Consensus Watch’s Take: While the cut was not a surprise, the aggressive move to cut 50bp was. At the end the move crystallized several concepts:

• The Fed has admitted that the U.S. economy is weak if not in recession.
• The greenback is on it’s own. Inflation is no longer the prime focus.
• It’s OK to make bad investment decisions because you will get a “get out of jail free” card.

The gut reaction with the rate cut was a surge in stock prices. The reality is that the lowering of rates officially means the dollar is going to tank, and subsequently gold and oil will start moving fast. It also takes a year for Fed actions to be felt, so if the economy is in recession right now, it will likely continue for a while. The cut was the coup de grace in getting the Canadian dollar to parity. The lowering of rates will also provide less incentive for foreign creditors (namely China, Japan, and the petro-countries) to hold US bonds. Why bother when you can get a better rate in Euroland, Canada, or New Zealand. This is why we find it hard to believe that the Fed can actually lower rates. The U.S. is not in a fiscal position to provide cheap money. Ultimately the lower dollar is going to make their exports cheaper, but it will make the cheap imports it is addicted to, more expensive. Consequently long-term rates will have to trend up to attract the capital it desperately needs to fund its current account deficit, which will unfortunately, extend the housing market and economic malaise. It just doesn’t get any better. So yes, the rate-cut will smooth things over for a while, but long-term, Gentle Ben has delayed the hard medicine. What to do? Well gold is looking better and better. From a Canadian perspective, the biggest and best run US companies will be going on sale. As this adjustment progresses, opportunities to take small positions will abound. So if you are planning to do some cross-border shopping this weekend, save a few loonies for some good quality American stocks as they will likely be on sale.

AKR