Friday Charts: Beer, Earnings, Recessions and Peak Oil Nonsense
Break out the bubbly because it’s Friday in the Wall Street Daily Nation!
For the newbies in the group, once a week I embrace the adage that a picture is worth a thousand words. And I select a handful of graphics to convey important economic or investment insights.
This week, I’m debunking the summer ritual of warning about another U.S. recession.
I’m sharing the latest (bizarre) economic indicator.
I’m setting the record straight on Peak Oil.
And I’m issuing a warning of my own about premature earnings evaluations.
So let’s get to it…
Consumers Are “Swiping” Away Recession Fears
It’s summer, and the fear mongering has begun about the U.S. economy heading for another nasty recession. It’s like 2010 and 2011 all over again.
The only problem is the data doesn’t exactly jive with those fears. Case in point: consumer credit.
The latest data from the Federal Reserve shows that revolving consumer credit (i.e. – credit card balances) increased by $8 billion in May, bringing the total to $870.2 billion outstanding.
That means consumers are spending again, which supports the argument for a recovery, not an imminent recession.
Not to mention, $870.2 billion in credit debt is a far cry from the $1.01 trillion hit before the last recession. In fact, at the current rate of expansion, it would take another 17 months to top the 2008 high.
Bottom line: Let’s not argue over whether or not spending money we don’t have is a bad idea. Let’s just agree that the U.S. consumer is the engine that powers the economy. And it looks like they might be getting back to their (deficit) spending habits.
Can or Bottle?
Speaking of recessions, here’s an interesting observation: When the economy hits the skids, beer drinkers hit the cans!
Bloomberg’s Ilan Kolet found that almost 53% of beer consumed in 2011 was served in aluminum cans. In the years leading up to the recession, though, the majority of consumers preferred bottles.
Bottom line: Cost consciousness as a result of the Great Recession spurred a comeback for the can. So, if you want an off-the-wall indicator of the next recession, be on the lookout for too many Americans consuming beer in a bottle.
Peak Oil Nonsense!
“We’re running out of oil! We’re running out of oil! We’re running out of oil!” says the energy-conscious Chicken Littles of the world.
The latest annual Statistical Energy Review from BP plc (NYSE: BP) shows that proved reserves are headed in only one direction: up!
Bottom line: Just like decoupling, the concept of Peak Oil grabs headlines. But it’s completely false. Or, as BP says, “The world is not structurally short of hydrocarbon resources – as our data on proved reserves confirms year after year.”
Beware of Premature Earnings Stats
Second-quarter earnings reporting only began on Monday. Yet that hasn’t stopped some pundits from sounding the alarms over the negative results.
They’re quick to trumpet the fact that out of 16 companies that reported results, 12 have missed estimates. And only one company has beaten estimates.
Last quarter, you’ll recall that the results were super strong out of the gates. But then they took a turn for the worse – fast. So, once again, I think we’re best served to wait.
Especially since the earnings reporting activity doesn’t really heat up until the week of July 23. The trend could quickly turn.
Bottom line: Instead of making premature conclusions based on a minute sample size, let’s wait to cast judgment about second-quarter earnings a tad longer.
I’m sure I’ve angered somebody today. But spare me the vitriol. Instead, send me a well-informed and articulated response about why I’m wrong.
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Ahead of the tape,