Pent-up consumer demand key to growth
After years of holding back on purchases, the newly hired are keeping the domestic economy humming.
There's no doubt in my mind that the real place to be in this fourth quarter is in international companies. We have the possibility of real tailwinds coming out of Europe now that we have multiple stronger economies and, yes, a stronger currency (all perfect timing, given how lean our companies are over there). China is coming back in a way that is stealthy, through targeted infrastructure, and we can see that it has drawn down a lot steel, coal, iron and, as of some just-released figures, copper. (We started buying back Joy Global (JOY) Thursday because almost everyone has downgraded it and China is now opening a new coal plant every 10 days.)
But the biggest surprises this week have been domestic. The car sale story, as talked about as it is, still doesn't get enough attention. I think 17 million cars could be more like it. I don't like the housing theme and I think it hit a wall, but it isn't a wall that moves housing back to where it was. It just retains it at current levels.
Mortgage rates are elevated, but we didn't see a big drop in applications this time. Some analysts were trying to say that's because rates dropped a tad. I would like to believe that as a housing bear. But I think what really happened is that rates stabilized and buyers came back.
Plus, we got still one more great number from a retailer skewed to hard goods, with Costco (COST) confirming, again, that the consumer's spending, but just not on apparel.
I think this is a sign that we have simply misjudged the pent-up demand from the unemployed going to the employed. We just got it wrong. When these people come back into the workforce, they buy tangible goods. Or when they get a second job they go buy a new car. Rates for cars, by the way, haven't gone up. They've gone down, something that's as stupendous as the inversion where higher mortgages get lower interest rates.
It's just a fact that this pent-up demand was far bigger than any of the prognosticators figured because it hadn't snapped back yet from the Great Recession. That's because, we are now learning, it snaps back only with job growth and we are getting that growth in the U.S. economy.
What's helping it, by the way, is the recognition that if you have the ability to get to Texas or North Dakota and some parts of Colorado and Wyoming, jobs await you. That was quite evident from an interview Home Depot (HD) CEO Frank Blake gave to CNBC Thursday where he said that they just opened a new Home Depot in Williston, N.D. because the Bakken formation is creating so many new jobs and so much construction. These jobs are coming fast and furiously now as the Bakken, the Niobrara, the Delaware Basin in the Permian and Eagle Ford are showing to have much more oil than thought as recently as two years ago.
So we are discovering day by day that the demand is exceeding forecasts simply because the people getting jobs look to have been buying nothing and doing nothing for the five years intervening since the recession.
That's why people keep getting the numbers wrong. They stopped counting these people. They are back. They are buying. And they are keeping the domestic economy humming in a nation where 10-year rates have almost doubled in a few months. It was really never about the rate of credit with these people anyway. It was about getting credit at all. When they left the workforce, rates were much higher anyway. This might turn out to be the theme for the last part of the year.
Bulls should hope people keep misjudging it. That's how the domestic stocks can go higher. That's how Ford (F) and General Motors (GM) break out to unheard-of levels and it is how the regional banks regain strength as demand comes back in all sorts of places that we had just plain forgotten about.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long COST, F, and JOY.
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Pent up demand? Sorry, just not seeing it. Durable goods orders are down. Let's look at auto sales. There's no pent up demand - there's just a bunch of necessity. There are tons of people who are holding onto cars longer than ever, and we're reaching the point where they have no choice but to get another one. This goes for contractors and builders too - there are tons of them, hanging on by a thread, working out of 13 year old trucks that have 300k miles on them. Ordinarily, they would have bought a new truck 4 years and 100k miles ago. But they didn't because the economy was in the tank. Just because they are buying now isn't an indication of some great improvement, it's an indication that their truck is worn out and they have no choice but to get another one.
Home Depot is building another store in ND? No kidding - maybe because that's the one place where there's tons of high paying jobs. I challenge anyone to walk into their local Lowe's or Home Depot at 7AM and head on over to the lumber department. A few years ago, these places were buzzing at this time of the morning. Trucks were lined up outside waiting to pull up to get their order. There were groups of "undocumented" workers standing in the parking lot, waiting to be picked up for work. Contractors were standing in line with purchase orders and on their phones telling their crews where to go. There were about 4 guys driving forklifts to get the materials off the shelves and outside to a waiting truck. Go to one of these places now and tell me what you see.
My grandparents had lived through the Depression, and they really never spent money on anything except for necessities, even when their financial situation improved considerably.
I know this is going to sound counterintuitive and draw
down lots of "no" votes, but I will send the refrain nonetheless..
Its time to re-evaluate the chronic problems resulting from
ineffective wages and how families are living on the margins
due to the 1 percent needing the 90 percent and leaving the
remainder to fight amongst the scraps.
CON-gress, raise the minimum wage !!! Do it NOW!!!
IF you all want more spending to re-trigger capital flows,
give the little guy a buck an hour more and see the money
fly into the economy. Tens of Millions spending an extra
buck will mean so much more than a couple of hundred
hoarding the excess. (and whining about how tax regs
are 'killing their profitability" - Ha ha)
Yes, laughing to keep from crying. OBAMA I am talking
to you....Make a motion to stay on our side of the Ocean
and RAISE THE MINIMUM WAGE, or maybe its just time
for you to switch to the Republican party banner, since
you are always trying to outdo their folly.
That is all! LOM Dispatch out... and have a fine weekend.
Note: This doesn't apply to Mr. Fat Cat or STD :P
I came into the World naked....I'll probably go out that way, showing my bare azz to Fatty Cakes..
Here comes that Moon Shot, boy..
"The President will address the nation on Tuesday"
For the record, it looks like a game of chicken to see who attacks who first. It's reckless insanity based on the premise that you can defend. For what purpose?
Four straight days of Bernanke pumping fiat money into markets with inept business platforms and seniors reaping the spoils, not anyone who comprises an economy. That's terrorism and you allowed it. That's not politics, it's crime.
The nation and economy have been destroyed by hollow Hubris built on clique technology. It doesn't get any dumber or more ignorant.
FIVE YEARS WITHOUT ANY MEANINGFUL EMPLOYMENT FOR ENTIRE GENERATIONS WITH ACTUAL SKILLS. KOOL AID IS NOT A SKILL SET NOR DOES IT SUSTAIN. College degrees committing human atrocities just because YOU let them isn't good or right.
Quit today, let common sense address us Tuesday with the recovery plan that actually recovers people. Change-- what 90 million of us got was planned condemnation not reality.
You know what you can do with your Twitter.
of course there is a lot of pent-up demand out there. Over 70 million Americans now make on average less than $16,843 a year. They need food on the table, clothes, cars to drive them to work, homes that have costs in line with what they make homes selling for $60K or less.
With the revised job grow of June and july revised down by 79,000 jobs each month this means the job growth has not even been keeping up with new people turning job age.
Look our entire economic system is set for self destruction folks. Hmmm the Federal Reserve is printing money to keep asset prices higher than they were before the crisis, wages have been falling by 8 percent a year adjusting for real inflation. This is not a situation that spells long term happiness for anybody either rich nor poor.
The economy is totally dysfunctional. We are still in the mist of a Death Spiral of Lost Jobs and an ever weaker and weaker economy.
To hear that one of the most profitable companies in the history of the world would not be able to make profits if they paid their workers $2 an hour more. Heck they could fire everyone at Walmart making over $250,000 a year and be able to pay their workers $10 an hour more and double their profits. LOL
What Nixon said about the doomed is true.
Well CGT......Are the "scumbags" buying ??
Did you guys get the order to increase or step up or shut up...?
Pretty wild swing on the DOW....
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