Sentiment Data `Puzzling’

Richard DeKaser Calls Consumer Sentiment Data `Puzzling’



U.S. Consumer Sentiment Decreases to 28-Year Low
Shobhana Chandra
Bloomberg, May 16 2008

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  1. Mike G commented on May 26

    This can only be good news for Republicans. The Bush Boom continues!!

  2. VennData commented on May 26

    Richard DeKaser admits, in the midst of his non-plussed analysis, “…Inequality which makes these aggregate numbers not representative of the population as a whole…”

    Doctor to patient: “On average, your organs are working fine, but…”

    So Mr. DeKaser knows: Sotheby’s $86 million sale ‘1976 Triptych’ does not tell you a whole lot about the economy, nor does Prince Bandar’s Aspen home sale.

    When American’s lose the fantasy that they can become rich, they get nasty.

    Good luck to all those CEO comp packages when their firms don’t have customers that can afford their products. Good luck to the “We need even more tax cuts on top marginal rates,” no estate taxes, lower capital gains and dividend taxes, and the biggest canard, that Bush’s tax cuts “worked.”

    Hello to the politician(s) who can articulate why cuts in Social Security taxes are good for average people, good for the businesses that pay half, and that all that Social Security money that we’ve collected has been used to cover the general Federal deficit every year since Reagan cooked up his Social Security tax hikes and screwed the average worker (then gave us Greenspan.)

  3. i delete my cookies often commented on May 26

    I think that Diane Swonk @ Mesirow has one of the most realistic and non-truthiness world-views of the mainstream media economists.

    She had a 20 min+ interview on Bloomberg Radio with Tom Keene last week (terrific as always as the 20 minute format allows much better exploration of issues and Tom Keene knows his economics).

    Last week had a particularly great guest roster.

  4. CrispE commented on May 26

    He’s confused because he doesn’t seem to understand the problem. Fine example of an economist who shills for his company.

    So here’s the scoop, Mr. Economist:

    Inflation isn’t 4%, it’s 10%.
    Consumer Debt isn’t a slight problem, it’s massive in light of inflation eating away at the average Joe’s ability to pay his “today bills” as well as “yesterdays” which he charged.

    Tomorrow isn’t going to be anybody’s “good day” either.

    That’s what consumer sentiment is telling you.

    And now a comment from our President: “On this Memorial Day, skip the parades, go to the mall and spend, spend, spend. Otherwise, the REAL ECONOMISTS win!”

  5. Owner Earnings commented on May 26

    Holyshit this guy has no clue.

    To top that, I don’t think anyone at Nat City has a clue.

    I guess if you’re a bull you would think just like this guy?

    Why Is Consumer Sentiment So Low?

    Interest rates are near record lows.

    Inflation, measured by the CPI, is near record lows.

    The employment rate is near record lows.

    The answer:

    Maybe, just maybe, the CPI at 4% is not a good indicator of how consumers see inflation. Especially if the value of their house has dropped, their mortgage payment has remained the same or increased (principle plus interest, not just interest anymore), and their consumption costs (food and energy) have gone up.

  6. Fredex commented on May 26

    The economy and reaction to it does not seem understandable because MSM and reality have diverged. We will see the flip side if the election blesses (MSM view, not mine) this country with a Democratic President. MSM will doff their earth tone colored glasses for rose colored glasses and the whole world will change like throwing a switch.

    The honeymoon should be tradeable until March.

  7. Tom Bergman commented on May 26

    It is difficult to get a man to understand something when his job depends on not understanding it. – Upton Sinclair

  8. rww commented on May 26

    Chief economist for Opa City.

  9. bluestatedon commented on May 26

    Hey, if you’re DeKaser, what’s not to like about this economy? You get paid a bucketload of money each month, you’ve got a nice big home, two or three new cars, send your kids to the best private schools or most exclusive colleges, have a membership at the country club, have a vacation home up north, go skiing out west every year, and your wife looks great in her new boobs. And the best thing is, all your friends and co-workers do too! If all those whiny unemployed people would just realize that cleaning his house and mowing his lawn is really fulfilling, it’d be a win-win!

  10. ZackAttack commented on May 26

    As the author said, his paycheck *depends* on his not having a clue.

  11. DownSouth commented on May 26

    Argentina’s president Nestor Kirchner in 2005 said something that has proven prophetic. In talking about the devastating effects the impositon of classical liberal economics–it’s “blind faith” in the market and free trade at the exclusion of any sort of government intervention or regulation–had had upon countries in Latin America, he stated that this is a “death trap, a trap that first traps and affects the weak, but that later, in one way or another, finally ends up coming home to the powerful.”

    And so what goes around comes around. The sad reality is that the people of the Untied States allowed this bed to be made and, as long as it was others that had to sleep in it, they showed callous indifference. But now, as Kirchner foresaw, the time has come when the vast majority of Americans must also lay in the bed that they made. How naive they were to think they could escape the insatiable greed of the ruling class of the United States.

  12. Steve Barry commented on May 26

    Never trust anybody who says “To be sure” so many times

  13. Danny commented on May 26


    It was not classical liberalism that has put us into the situation that we’re in today. As a whole, our economy is much more ‘planned’ than free. And we have that most socialistic of institutions which sets the value of our money, the Federal Reserve.

    And how funny you quote Kirchner. If you think things are bad here, wait until you see what he and his wife have cooked up in Argentina. They have pawned off their socialist/populist nonsense, and it is going to get very ugly there, very soon.

  14. Ed commented on May 26

    This guy’s pathetic…his interview serves as a great example of the whole sub-prime meltdown- from ignorance, self-interest, denial, truth aversion, etc…someone so wholly divoriced from reality doesn’t deserve the title he’s annointed with…but then again, we need stupid people like this to take the other side and create opportunity.

  15. Random commented on May 26

    Well, at least he said inequality. That’s a step forward for the clueless.

    Wage increase = 0-1%
    Energy increase = 10-20%
    Food increase = 10-20%
    Clothing, electronics, etc = 5% decrease

    At the median income more goes to food and energy, so the areas where prices are declining represents a decreasing percentage of the expenditure basket.

    Hedonic substitution in reverse!

  16. DownSouth commented on May 26


    I wish that some of you high priests of classical liberal economics could be forced to live in a society that actually practices the Wild West lawlessness that you preach.

    The people of the United States, with the de facto deregulation of the banking system and its subsequent melt down, have only gotten a small dose of what the economic royalists have in store for you. I wished you lived in Mexico, where banks are allowed to charge up to 50% or 60% annual interest on credit card debt. Or how would you like to have, unbeknownst to you, some crafty theif steal the funds from your bank account, due to bank negligence, only to find out that the bank is not liable because there is no regulatory body, no consumer protections in place, to protect you from the bank’s negligence?

    How would you like to have your national telephone company privatized, sold off in a country where there is no regulatory framework–no Federal Communications Commission, no Texas Public Utilities Commision–in place to restrain monopolistic or predatory practices? Here in Mexico we pay four or five times what you pay in the United States for telephone services. For the same 5-minute cell phone call that you pay 10 cents for in the U.S., we pay 50 cents. I suppose the phone company has to charge so much to pay for the huge wages they pay Mexican workers. Ha! Ha!

    Meanwhile, while the average Mexican has to bend over and take the big up the rear every day, the guy who bought the phone comapany becomes one of the three richest men on the planet. His welath represents 14% of Mexico’s GNP. Bill Gate’s or Warren Buffett’s wealth, conversely, represents less than one-half of one percent of U.S. GNP.

    And while we’re talking utilities, the “socialism” that you bemoan serves many poor people quite well. The classic socialist pricing scheme is to deliver a “life-line” amount of, let’s say electricity, at less than cost. So maybe for the first 150 KWH the cost is 6 cents per KWH, for the next 100 KWH it is 10 cents and for anything over that 22 cents per KWH. If you are a “high-use” consumer, perhaps you pay a penalty rate of 30 cents per KWH.

    Of course such a pricing scheme is anathema to private enterprise where price is geared to production cost–where prices operate in inverse to consumption–where the more you use, the less the unit cost becomes. And what happens to poor people–as has happened all too frequently in Latin America under the Washington Consensus being stiff-armed by the United States–when a private company buys the government-owned electric company and imposes “market” pricing? The poor family, which may not make but a few dollars a day, suddenly sees its electric bill go from $10 to $30 per month.

    So this panacea of free markets and free trade and laissez-faire exists soley in the minds of free-market zealots like yourself, completely disconnected from any real world reality.

  17. AGG commented on May 26

    You are right and you are realistic. However, that won’t change the Dannys of this world who can’t see past their private property paranoia. All these labels concerning economic systems are just dodges for up front, in your face, selfishness and ego worship. It gets worse. These ego apologists actually celebrate the impoverishment of most people through frozen wages or decreasing wages (inflation) because the kings of the hill uber-capitalists can get more of the pie while they attend news conferences to mark some act of “philanthropy”. When people die or starve to death, it’s their own fault because the winners are the tough, cold blooded, unscrupulous, “it’s all about me” power people. Welcome to the jungle. True Capitalism and Civilization are opposite ends of the spectrum. Without the euphimisms that economists and Madison avenue constantly dream up to keep the rubes confused and the Social Darwinists supplied with happy catch phrases, the pure and unadulturated greed and sefishness of these society killers would perculate our air as if we were in the vicinity of a large, open air latrine.

  18. engineer al commented on May 26

    95% of us are employed and inflation is a meager 4%? The folks are only depressed because they’re listening too much to the liberal, drive by media and not paying enough attention to the statistical realities?

    Housing is still cheap as a percent of GDP and gasoline is still cheaper than bottled water or their Starbuck’s latte. The people will only feel better with “tax cuts”.

    This guy would make a “good” Kudlow guest. Mr. K could build a whole show around him.

  19. wunsacon commented on May 26

    >> I wish that some of you high priests of classical liberal economics could be forced to live in a society that actually practices the Wild West lawlessness that you preach.

    They do! Yet, after liberalized banking laws and lax regulation led to this housing bubble/bust, the market fundamentalists think further liberalization will lead them to the promised land. As though the 1920’s were a failure because of regulation.

    Market fundamentalists are still in search of the regulation WMD. If the WMD wasn’t there, they mve on to a new excuse: it was the WMD program that was the problem. The idea that corporations like NCC could’ve at any time tightened credit on their own? Bah! Personal responsibility is for the poor.

  20. Francois commented on May 26


    Excellent post! When I was a med student, I went for a 3 weeks stint in Peru.

    After seeing how ordinary and poor people live there, it is impossible to wonder why “socialism” ( as in “How about having a referee that make sure we get a tad of fairness in wealth distribution?”) is so attractive to people. The examples you alluded to are just a small sample of how bad it can get.

    How ugly? How about seeing a 20 years old pregnant woman let to die in an emergency room “because no money no treatment”. And No! it was NOT an isolated case…nice try Ayn Rand’s disciples out there) I don’t know about you readers, but this kind of event should temper anyone’s impulses to be an unfettered apologist for the “free market”, a.k.a. social darwinism.*

    And for those who STILL have a problem with that, ask yourself this simple question: Do you live to make money, or do you make money to live?

    * My apologies to Darwin, since he understood very well that animals are not intrinsically mean, nor do they find justifications for anything good or bad that happens to them.

  21. Francois commented on May 26

    The only puzzling thing about this whole interview is that it took place to begin with.

    I mean, who wants to look like a clueless moron so bad, that he has to go in front of a camera to prove it to everyone beyond a reasonable doubt?

  22. Jim commented on May 26

    Let me second Francois’s praise. Excellent post, DownSouth.

    The Scaife’s of our world have spent untold millions on academics to invent intellectual garments to give a fashionable flair to their brutal natures.

    In this way, the free market ideology functions as a secular version of religion.

    In our society, people with brutal natures usually turn to the Bible, especially the Old Testament, in order to to find divine approval of their brutality.

    Those who are less religiously inclined turn to the Chicago School.

  23. alex commented on May 26

    I have heard this person speak before. His views on the housing market as of last April: NO PROBLEM! So clearly, what he is doing here is desperately diverting attention from this terrible call, by seeking out any other possible explanation for terrible sentiment numbers.

    I would point out that his illustrious institution is about to go down the tubes, so their views in many things are likely suspect.

  24. John F. commented on May 26

    Even if you discount tumbling house prices and election-year chicanery, what’s so puzzling about high gas prices? I recall seeing a chart (perhaps on this blog) showing how Presidential approval ratings track gas prices (inverse) like a heat-seeking missile. The correlation to consumer sentiment must be pretty tight. Combine this with the fact that we’ve become a nation of soft, whiny bitches…

  25. wunsacon commented on May 26

    >> approval ratings track gas prices (inverse) like a heat-seeking missile.

    It’s a good thing, too. Although other government numbers don’t add up and thus result in negative real interest rates, at least the rot in the system is showing up somewhere: in higher commodity prices.

    It turns out that tax-cut induced federal deficits and creating bad debt instruments actually matter.

    In commodities I have trusted…

  26. Matt commented on May 26


    You make some good points, but I think many of your critcisms of free markets are largely misplaced. Many of the supposed free market failures in Mexico cannot be blamed on attempts at a free market approach to capitalism.

    For example, given that the phone companies in Mexico charge so much and there are so many international telecom companies in the world with the technology and capital to enter the Mexican market to take advantage of the hugely profitable opportunities that must exists given how much current costumers are charged to used the phone. Why don’t they do that? Is it possible that there are some barriers put in place… possibly with the aid of the government that keep competitors out? If so then we clearly aren’t talking about true free market capitalism are we? If not, then why aren’t competitors popping up to help drive down prices?

    I also think you are slightly mistaken in connecting the idea of lawlessness with free market capitalism. Quite the contrary, success in a free market system needs to rely heavily on the rule of law to ensure a freely functioning market place free of illegal practicies (bribery, fraud, theft, etc…). Even very extreme theories on free markets such as Anarcho Capitalism view the rule of law as an essential part of a free market system. Anarcho Capitalism takes an extreme view (that I don’t agree with) that the creation of laws and enforcement of them should take place through privately funded competitors. I don’t mean to stray simply to point out that even the most extreme forms of free market capitalism believe in rule of law.

    Lawlessness, or use of law for purposes of corruption have existed in every implementation of government throughout history and to associate it with free market capitalism shows a failure to recognize the favoritism, corruption, and suppression of the poor that has existed in many other systems including the socialist system that you seem to favor.

    The main problem in our country and throughout the world right now in my opinion is corruption and not some ideological spread of capitalism, socialism, or any other system depending on your views. Corruption is and always has been a HUGE problem in any system.

    With all that said, I’m a firm believer in free markets as I don’t see any other method for determining prices for goods and services other than the market mechanism. Take your example on power costs. How does the central planning board determine the costs for the various layers of pricing you discussed? If prices aren’t set properly and adjusted to reflect changes in the tastes of consumers need for energy then shortfalls or malinvestment (leading to shortfalls in other areas) is bound to occur. I think socialism is a great idea in theory, but I have little faith that central planning can ever have any success in planning an economic system. Economic systems are, in my opinion, the most complex systems in the world. To pretend a group of individuals can determine the best course for the allocation of capital across an entire system is naive. To think the group in charge won’t bend the rules to favor themselves is even more so.

    Finally, to blame the admitted failures of a free market approach that was somewhat forced onto many LA countries on free markets is misplaced as well. Imagine for a second that the government of one of the LA countries (take your pick) is a boat that is rather poorly constructed. The builders of the boat decide to hire a builder from the private sector of the market to improve upon one area of the boat. No concern is given for whether that improvement will do any good in the light of other shortcomings in the current design or even make things worse due to unintended consequences the new improved component in the boat may have in exposing other poorly designed componens of the boat. I think blaming free market capitlism is somewhat similar to blaming the private ship builder on the inevitable failure of some part of the boat regardless of the actual cause.

    As I said, I think you are confusing corruption with free markets which history shows is not a problem only with capitalism. Sure its a huge problem in many supposedly free market countries but it’s a huge problem elseware as well. My belief in free markets comes about from my having not seen any believable arguement for how any system can work without the pricing mechanism of the marketplace.

    Like they say, capitalism is a terrible system, except for all of those other ones we’ve already tried.

  27. DownSouth commented on May 26


    The best rebuttal to you is to give an example of how telecom regulation, or any regulation as far as that is concerned, should work.

    The priests of classical liberal economics posit that any and all regulation is bad. Accordingly, nirvana is what Mexico has when it comes to telecom regulation, which is essentially none. I have already pointed out where that leads, but you argue that that is better than a “group of individuals” who are empowered to “determine the best course for the allocation of capital across an entire system,” who will “bend the rules to favor themselves.” Actually we have a situation here in Mexico not too unlike what you describe. It’s called Pemex, the government-owned oil company. And you are absolutely right, it’s a nightmare.

    But I am no advocate of the Pemex, or what it embodies, no more than I am of Telmex/Telcel, the Mexican telephone conglomerate.

    The example of how things should be done is not found in either one of these nightmare scenarios. Instead, it can be found in the manner in which the AT&T monopoly was broken up in the United States back in 1983. It was law and regulation at its finest hour.

    The story can be found here…

    It’s pretty self-explanatory, but I do want to point out what is the defining difference between how things were done in the United States vs. how they were done here in Mexico:

    “Judge Greene held that as long as the RBOCs have a monopoly in the local loop
    they WILL BE REGULATED (emphasis mine). Bypass was a far lesser threat than the RBOCs claimed. During Greene’s court tenure he cited voluminous evidence to prove a local loop bottleneck. The millions of miles of cable that make up the local loop are too expensive to duplicate unless some new technology made wires obsolete: ‘objective economic conditions entirely preclude the provision of local distribution functions at a lower or equal economic cost than could the local exchange carrier’.”

    This is of course the antithesis of what happened in Mexico, where the local loop provider was not regulated. It cuts to the heart of why we pay five times for telecom services in Mexico than what you pay in the U.S.

    I also want to point out how Reagan and his liberal economics zealots tried to shipwreck the legal efforts to break up AT&T. The legal case began in 1974, but was not concluded until 1983, by which time Reagan had occupied the White House. These quotes give some of the flavor:

    “Within the Department of Justice a succession of antitrust chiefs handled the case until 1981 (Thomas Kauper, John Shenefield, Sanford Litvack, and William Baxter). The Attorney General in 1981 was William French Smith who was recused from the AT&T case because he was a past Board Member of Pacific Telephone. Reagan’s designated number-two man at DOJ, Deputy Attorney General Edward Schmults, was also recused because of law firm dealings with AT&T. This made the then newly appointed Antitrust Chief, William Baxter, the top ranking Government official directing the case.

    William Baxter was an eccentric Stanford University Law Professor who had not
    addressed a court in session for about 20 years. Baxter considered himself an economist although he had no formal training as such. Baxter’s nomination and the disqualification of his superiors created an ironic situation. Baxter had publicly argued that no one company should be able to integrate regulated and unregulated divisions of its business
    because it could use the “safe” profits from its regulated side to subsidize the price of unregulated products (a cross-subsidy). Reagan’s closest advisors including William French Smith, Edwin Meese (Counselor), Malcolm Baldridge (Commerce Secretary), and Casper Weinberger (Defense Secretary) believed unequivocally that the DOJ’s case against AT&T should be dismissed. This created a situation that if AT&T sympathizers in the Reagan inner circle were going to intervene, they would have to quickly go through or around Baxter. Baxter would have none of this and stated before a press conference
    staged to announce the case, “The case is perfectly sound…and I intend to litigate it to the eyeballs.”


    “Many considered that AT&T was too complex, too powerful (in a legal and financial sense), and too influential to prosecute in an antitrust case. A commission appointed by then-President Carter reported that large complex antitrust legislation cases
    were being hopelessly mismanaged by the federal courts and that unless judges
    developed new, innovative methods to expedite such cases, the danger existed that large companies would ignore antitrust laws as unenforceable. Greene was determined to push the AT&T case to trial and to use new, expeditious methods. Greene staked his reputation on the AT&T case, his first case as a federal judge. Never again could anybody say that certain cases are too big to be tried.”

  28. DownSouth commented on May 26

    I want to add, Matt, that if the Reaganites would have gotten their way, the U.S. telecom landscape would be much different than it is today.

    Here’s a link to a consumer advocate web page that describes what a boon to American consumers Judge Greene’s ruling has been:

    “It was 20 years ago that AT&T, the once-mighty ‘Ma Bell,’ was broken up on the order of Judge Harold H. Greene of the U.S. District Court in Washington, D.C.”

    “Since the break-up, consumers have had a staggering array of choices for local and long-distance phone service, they’ve been able to buy their own telephones, hook up fax machines, modems and other devices and they’ve been presented with a multitude of new services, including cellular service, DSL and even Internet and cable-based telephony.”

    “All this choice is no doubt what Judge Greene, who died four years ago, would have wanted. His ruling, after all, was based on a finding that AT&T had such a stranglehold on all aspects of the telephone business that newcomers like MCI weren’t able to compete on a ‘level playing field,’ a phrase that has since become a standard verse in every lobbyists’ litany.”

  29. Mike in NOLA commented on May 27

    Don’t know if it’s the same National City, but he may just be following his institution’s philosophy.

    In late 1929, Charles Mitchell who headed the National City Bank, announced soon after the crash that the trouble was ‘purely technical’ and that ‘the fundamentals remained unimpaired’.

  30. mark mchugh commented on May 27

    My only question for Mr DeKaser is, “Do you find the consumer sentiment data more or less
    “puzzling” than a one year chart of NCC.

    Venn Data – “When American’s lose the fantasy that they can become rich, they get nasty.”

    Great quote. That’s a thought I’ve been trying to put into words for a while. I swear I see fear and anger on so many faces shopping at Wal-mart that just wasn’t there a year ago. I’ve also had the experience of working in some areas where hope has been abandoned, and you’re right, people get nasty. Parts of suburbia are getting that ghetto vibe (how will that affect prices?). Guys like DeKaser epitomize the Wall Street-Main Street disconnect.

  31. wunsacon commented on May 27

    DownSouth, I was tempted to respond on your behalf, in case you didn’t revisit this page to reply. But, I’m sure glad I didn’t.

    Good conversation, Matt and DownSouth. Reminds me of the dialogue on the old Yahoo message boards. (Har-har…Kidding.) ;-)

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