The Blame Game For The Economy

bad weather stocksAs we continue to kick of 2010, many are still patiently tapping their feet waiting for this so called recovery that many promised would begin early this year. February clearly slowed the anticipation of a quick rebound as most economic data came in well below expectations. As an attempt to calm the nerves of anxious investors, the government, as well as other analysts, are pointing fingers in every direction to try and assign blame to the delay in the recovery. If investors begin to realize that indeed our economy is just not recovering at this time, we would most likely see yet another strong leg down in markets. For this reason, government officials are staying busy trying to come up with new why's.

The newest to be put on the blame list is the weather. No doubt this past winter has been a record setting one for many parts of the country. Going into the stormy seasons, we new we were heading into another anticipated "El Nino" winter, which usually brings significantly more rain and snow. Analysts are stating that much of the recent sluggish economic numbers can be largely blamed on the bad weather. Home sales, consumer confidence, retail sales, and unemployment. Really? Sure, we can assign the weather some portion of blame for certain dragging indicators, but it is hard for me to see how a few bad storms can effect businesses from hiring new employees. Lets just call a spade a spade and realize that the recovery song may have been sung a bit too soon.

In regards to the housing market, the fact that remains is that there is just too much bank owned inventory to bring up prices. Refinance rates are at record lows and even with a massive increase in home mortgage refinancing, foreclosures are still rising. As the Fed looks to increase interest rates, the ability to refinance will not be as easy. Thus, bringing more obstacles to home buyers.

One severe contradiction to the assumption of the weather bringing down the economy is found when we look back in history. In the mid 1990's, we experienced an "El Nino" winter, which amounted to record amounts of rainfall and snow throughout the entire country. Floods damaged cities, hurricanes destroyed homes, and people were snowed in for days. All during this time, the economy was experiencing extreme strides in growth. Job growth was blossoming, retail sales remained strong, as did home sales. What made this weather nightmare such a delight for investors.

As for now, the blame game seems to be working, for the moment, as March has been all green thus far. Investors are already looking forward, hoping that the blip in February blows aways with the storms. As for me, I don't think it will be that simple. Consumers are experiencing a continual drop in confidence, which is making it very hard for retailers to sell through dragging inventories. As a result, blowout sale prices are the majority of goods being sold at this point, which is not enough for retailers to make it at this point. This is main reason why we are continuing to see an increase in jobless claims.

Thus far, much of the bailout and relief programs have been focused on banks and temporary relief to big company's balance sheets. However, not much has been given back to the consumer. Without consumer relief, a change in direction for our economy is distant. Our economy has always been driven by the consumer. The government can try to take the wheel for a time, but without the consumer, the growth is not sustainable. We can be sure that eventually that will become evident in the markets. Happy Trading


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