Is Consumer Confidence Still a Gauge Worth Considering?
This morning was a fantastic rollercoaster ride for the markets as optimism beat out logic. As the S&P/Case-Shiller housing price index dropped 18.7% and North Korea committed nuclear attention like an ignored child, the markets were set to start the inevitable correction. Stop the presses. All of a sudden the markets make a miraculous turn-around all in the name of a surge in consumer confidence. I think we should take this with a bit of caution as other factors present possibly make consumer confidence part of a self fulfilling black hole. The average consumer, as important as they are, are not very reliable when it comes to their relative grasp of the economy. So, I think it's fair to say that gauging whether or not someone is confident about something they don't know about, is futile at best. A few years back it was the consumer that thought they had enough money to buy houses three times greater than they could afford, and they did so because they were confident that the US economy was an unstoppable growth machine(of course irresponsible banks actually gave out the loans). They were also confident that the prices of their homes would continue to appreciate indefinitely and that they had an eternal asset source(their home) to pay for all of their additional consumerism. The recent recipe for confidence seems to be a bear market rally in the stock market with a generous helping of media telling everyone that the stock market will lead us out of the recession. Unfortunately these reports don't come out with disclaimers that outline the lack of corporate earnings to support forward growth, nor the lack of jobs to actually allow the consumer to buy us out of a recession. We are dealing with a history making recession of a kind never before seen with a crisis trifecta of housing, financial, and global trade. Of course we will come out of this recession at some point, but it will take a lot more than just pure optimism. There is a stark difference between being confident and being real. On top of the economic skyscraper, confidence makes you believe you can fly and being real stops you from jumping.
Copyright: Dominic Mazzone, Regent Global Funds 2009
This article was written by Dominic Mazzone, Managing Partner and Fund Manager of Regent Global Funds. This article and other like it can be viewed at Investingsymposium.com which is part of the Regent Global Funds Network.
Regent Global Funds, Rgfunds.com, is an alternative investment fund that offers its participating investors and asset backed investment through asset based lending.
The Fund Managers of Regent Global Funds have an expertise in commercial real estate lending and have created a successful alternative investment vehicle that is diversified through this structure. They separate themselves from other fund mangers by personally investing their own money side-by-side with their investors in the fund, creating an absolute structure of accountability.
Dominic Mazzone has written about the need for this type of accountability in an article titled "Fund Managers Need to be Accessible and Personally Invested."
About the Author:
As a Managing Partner of Regent Global Funds, a private equity and debt fund, Dominic Mazzone brings a track record of success and innovation to his current position as a fund manager with his experience in the real estate and lending business. His experience in real estate led him to being responsible for maximizing revenue through strategic best-use practices, as well as property rehabilitation in a portfolio of investment properties within the U.S. Dominic has been involved with development projects throughout the U.S. including California, Arizona, Florida, Kansas, and Hawaii, and is currently part of a consortium of investors in Scottsdale, AZ, developing an 80-acre site for an exclusive enclave of luxury homes overlooking the Estancia Golf Course. Dominic had his start in the lending business underwriting loans in Canada on properties that were precluded from conventional financing. This led to similar lending opportunities in the U.S. and the eventual formation of Regent Global Funds in Chicago. Formal education includes Mesa College in San Diego and the University of Southern California in Los Angeles. Dominic is a general partner of Scottsdale Partners LLP, which is involved in real estate development in Scottsdale, AZ, as well as Waikoloa Partners LLP, a syndicate of real estate investors in Hawaii. Dominic sits on the advisory boards for the technology companies Voice Cloud and Nile Source Outsourcing.