Holiday Conundrum

This week, we got mixed messages on the state of mind of the US consumer. Earlier in the week, consumer confidence from the Conference Board was the best in seven years, and while it continues to trail the recovery of the stock market, there seems to be a full wind in its sails. 

Then yesterday, third quarter (Q3) GDP showed a marked slowdown for consumers with business and government spending picking up the slack. Spending wasn't a disaster, but clearly hints at caution on Main Street.

Backing up that GDP data this morning, we discovered that while personal income climbed in September, spending declined and savings edged up to 5.6% matching July of this year, but still lower than the highest level of 10.5% in December 2012.

Still, for me, the most intriguing news came from Visa (V) which posted huge earnings results, which showed a spike in Americans using credit cards. I mentioned it in yesterday's commentary, but most recently underscores that the Federal Reserve and the Federal government want you to spend the money you have and the money you don't have.

Debit card volume in the last quarter was up 6.7%, but credit card volume soared 12.7%.

United StatesPayment VolumeBillion USD	Credit	Change	Debit	Change
	$327	+12.7%	$429	+6.7%

So, going into the holiday spending period, Americans seem very cautious...they need to step up, and maybe gasoline prices at a four-year low will do the trick since it won't be higher wages.

BOJ Pulls Another Rabbit

This morning the Bank of Japan (BOJ) shocked the world (these are the headlines and talking heads, but I can remember hearing there would be a big stimulus from there and from China) as its governors voted 5-4 to buy more Japanese government bonds, to triple purchase of ETF and REITs, and double purchases of domestic stocks (note our central bank doesn't buy all that stuff).

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I find the positive reaction in our market a little curious, but people should understand: Japan is what we don't want to be. It’s lumped in with those aging European nations that lost their way now drowning in a tidal wave of expensive social programs and entitlements that work against human nature and the core principle of capitalism: get up and change your own life.