Consumer Sentiment Disaster

Michael Zuber (0:00)

Well, it looks like the disaster of consumer sentiment is finally getting a look from other large financial institutions. This time Goldman Sachs. But let's step back for a minute and ask ourselves, why is consumer sentiment at a 52 week low?

Especially when the following are true. We learned in the last seven days that we now have the lowest poverty rate on record. Yes, lowest poverty rate on record. We learned that the median household income is now over $81,000. In fact, total household wealth has never been higher. Also, in the last year or so, we have created 1 million private sector jobs. Now, we have obviously had loss of jobs in government, but nonetheless, a million more jobs in the private sector. And dare I forget that it's still currently, the S&P 500 is up double digits, 12% for the fourth year in a row.

Again, last week, we heard from Kevin Warsh talking about needing to tackle inflation to help those with the least, the bottom end of the K. Well, what is going on? Well, Goldman Sachs has finally gotten off their butt and started to ask some serious questions. Goldman Sachs was digging into consumer sentiment, trying to figure out why it's in the dumps. And this was their line.

Lower happiness. Now, I am not even sure what lower happiness means.

But lower happiness in all of society was what Goldman Sachs came to. So I have been sitting on this for a couple of days. And again, I love having conversations with you, because you, yes, you help me get through these. You guys leave comments. You help highlight my blind spots. But when Goldman Sachs says, we, society at large, have lower happiness today than, say, the 1980s, the 2000s, you know, the 60s.

I wonder why that is. And when I think about what's come about this decade that wasn't around before, you got to go to social media. And social media has social media and their algorithms. We can't forget their algorithms. Their algorithms are probably the thing that makes it so. Because what we find ourselves in is we find ourselves in echo chambers, in doom loops.

These algorithms are really good. They find what you want to watch and they feed it to you. They're not saying, is this good for you? Should you watch this? It is making no judgment on the content. It's just saying, hey, he clicked on car crashes, let's give him more car crashes. Instead of, hey, he's depressed, let's give him some puppies.

So has social media and their algorithms, because it is a one-two punch, created an epidemic of lower happiness. Because again, the economic numbers really aren't that bad. The economic numbers at the total, now again, of course, at the margin, there's always people struggling. But at the macro level, it's hard to look at the economy and go, why is everybody so upset?

It's because of social media, the Doom Loops, the comparison that, hey, Bobby or Mary is doing better than me.

I'm, you know, I'm fat and poor and whatever, because everybody else is giving us their highlight reels.

I don't know. Why do you think Goldman Sachs highlighted lower happiness in society as the reason for consumer sentiment weakness? Pretty interesting to think about. Well, we are heading into a brand new business week starting tomorrow. Let's talk about the economic news and the things that will move the market starting on Tuesday. We get our first Fed speech. Now, the Fed speech has been in their quiet period. I think it lasts for 48 hours after Wednesday. So technically, they could have been talking this weekend. I did not see any. So Tuesday might be their first opportunity for market moving statements, if you will. So we get one on Tuesday. Wednesday, we're going to get flash surveys about our manufacturing and service sectors. Thursday, we'll get weekly jobless claims. And again, remember, last week was 196 We're talking 50 year low, tied for a 50 year low. New home sales and another Fed speech. And then finally on Friday, we will get durable goods and consumer survey. So again, very interesting stuff. Good old Gunlock, Jeffrey Gunlock's out saying, we're living in backwards land, backwards land. Man, these talking heads on TV are coming out with some stuff that are making me scratch my head. All right, Jeffrey, what's backwards land? Well, Jeffrey believes that in the next recession, the long end will go up, not down.

Now, that is backwards land. If you remember the last several recessions, if you've been around for 10 or 15 years, you've seen a couple. What did the Fed do? The Fed took rates to zero, and the long end collapsed. You want to know why people have two, three, four percent mortgages? Because the long end collapse. Jeffrey Gunlock says, buckle up, buttercup. Backwards land means that the long end will go up. Why? Because of the debt crisis. Basically, saying, it ain't gonna matter if we have a recession. The Fed's out of tricks. The Fed's 40 trillion and growing debt is, or actually, the US government's 40, not the Fed, the US government's 40 trillion in debt, is gonna make the long end go up. Because, why? Because people will be afraid we won't pay them back, which frankly is very logical. If you go into a recession, you have less receipts. And, yeah, your bondholders might get a little nervous. So again, gun lock warns, get ready for backwards land. JPMorgan's had enough of the oil market, had enough of President Trump, Iran, that this is on, this is off, yada, yada, yada. JPMorgan has given up forecasting oil.