October 4, 2006 –
Here is the graph for the Consumer Confidence Index in the U.S. (Source: Conference Board). Basically the CCI takes a representative sample of 5,000 households in the United States (which by the way, is an enormously tiny sample for a population of 300 million) and asks them how they feel about the state of the economy, with a particular emphasis on the job market and business conditions. Furthermore, the index is weighted more heavily (60%) regarding future expectations than current conditions (40%). I’m actually going to keep my blog today quite short because I think that the CCI is basically worthless, but since the media pays so much attention to it, and markets likewise inexplicably seem to be moved on the subjective opinions of a miniscule, microscopic sample of a nation’s population, I’ll give you my two cents about it.
The main reason most analysts believe that consumer confidence shot up in September was due to falling gas prices. If you read my blog entry dated September 25th here, you’ll see that I believe that falling gas prices were artificially manufactured by Goldman Sachs (by the way, five days after my post, the New York Times also ran a story on September 30th addressing the points I had raised in my September 25th blog). So if consumer confidence rises on artificially induced manipulation of gas prices and the unleaded gas markets, what do they mean? Absolutely nothing. In fact, if the Conference Board interviewed me, my answers regarding my future expectations would be so negative and so low that they wouldn’t even show up on the scale of the above chart.
