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Summertime, and the consumer spending ain't easy

Jeff Brown, Special to CNBC.com
Monday, 5 Aug 2013 | 4:58 PM ET
Adam Jeffery | CNBC

Recapping the day's news and newsmakers through the lens of CNBC.

So-so reading on the American consumer

Notes:

The American consumer is not doing his part to help prop up the overall rosy picture of the U.S. economy, a picture for which the positive data points keep coming in and coloring economic glasses. Consider growth in the U.S. service sector: it accelerated in July to the highest level in five months. The Institute of Supply Management said its services index rose to 56, handily beating expectations for 53. June's level was 52.2. A reading over 50 means the sector is expanding.

But consumer spending has stayed flat for the last three months. A Gallup poll said "self-reported" daily consumer spending was $89 in July, virtually unchanged from the $90 reported in May and June.

Consumer spending has strengthened considerably since the depths of the Great Recession but still trails pre-crisis levels.

The consumer and the retail investor seem to have something in common when it comes to not wanting to step up and buy. Signs of skittishness surfaced in a proprietary study by TD Ameritrade showing that retail investor sentiment was at its lowest point since January.

That means retail investors, as opposed to institutions, were net sellers of stocks. The TD gauge, covering six million accounts, gives higher weight to active traders over buy-and-hold types, for a view of how sentiment will affect investor behavior going forward.

The high level of profit taking the survey found is not typical investor behavior when the market is hitting record highs, and may reflect worries about the Federal Reserve ending the bond-buying program that has helped to keep interest rates low.

Quotes:

"Consumer spending has remained basically at that ($90-a-day) level ... in the face of what are normally positive seasonal factors such as warmer weather, home improvement projects, and spring and summer travel."
—Gallup poll

"I think it's taper fears. The investing public is not stupid. They know it's coming and this is probably a point that if you've seen appreciable gains, you should start taking them off the table."
—Steve Quirk, senior vice president of TD Ameritrade's Trader Group

Main and Wall: different drummers

Notes:

Here are some figures that blow straight past any spending slowdown or stock skittishness and may simply startle.

The economy has grown by $1.3 trillion since March 2009. OK, we know that's not enough, but it sounds like real money. But get this: In the same period, stock market wealth has grown by $12 trillion!

Yes, we all know that the real economy and stock market aren't always in sync. The economy exists in the present, and stocks are a bet on the future. But this is a stunning disconnect. What's going on?

For Michael Hartnett, chief investment strategist at Bank of America, it boils down to three "Ps". First is policy, involving the central bank's acquisition of $6 trillion in assets over seven years. Then Positioning. With the economy deleveraging, money has moved into the financial markets, boosting stocks. Finally, there are Profits. Corporate austerity has pushed earnings to records.

Quotes:

"Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances … if the U.S economy does not significantly accelerate in coming quarters, it likely never will. Our base case is that economic growth will pick up, and thus favor assets (e.g. equities), sectors (e.g. banks) and markets (e.g. Europe) that have lagged in the "high liquidity-low growth" world of recent years."
—Bank of America investment strategist Michael Hartnett

A new form of suburban angst

Notes:

It seems like a given: You get married, have kids and move from the city to the burbs to get more space and better schools.

Don't expect the suburbs to shrivel overnight, but more and more people are finding that suburban life isn't better. A new book from Leigh Gallagher, an assistant managing editor at Fortune, "The End of the Suburbs," highlights crazy commutes, smaller families, an aging population's need for nearby health care and the shrinking role of the "Leave it to Beaver" lifestyle as major contributors to the suburban era's end.

The alternative? Cities. Many young people are not making the traditional trek from the city to the suburbs, while empty nesters and others are moving back to cities for livelier, more convenient lifestyles. Builders have taken note, as the McMansion just doesn't appeal to as many buyers as it used to.

Quote:

"The traditional family structure ... is really the minority now. ... We've just spread ourselves so far apart. ... I talked to a lot of people who haven't gotten to know their neighbors while living in the suburbs."
—Leigh Gallagher

MBA.com: Online degrees getting big, and expensive

Notes:

Online MBA programs like the one at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill are getting bigger, and more expensive.

Back when the UNC school launched its program two years ago, tuition initially cost $89,000—the same as if students attended the old-fashioned way.

Perhaps that was a bit of a bargain. Now, the degree costs $93,500—a 5 percent increase.

Yet the steep price tag of taking online MBA classes isn't discouraging enrollment.

The reasoning? Students can stay in their hometowns and keep full-time jobs, while employers help foot the bill for the degree.

Take Carlo Pedrazzini, who lives in California and works for Lockheed Martin. A recent graduate of the UNC online MBA program, he hopes the degree will help him think more like an executive and open doors in his career. Apparently, so do many others.

Quote:

"I think we all saw the risk that an online MBA, a new program, poses. This was something that the world never saw before … but I think that it is absolutely worth it."
—Carlo Pedrazzini, graduate of the online MBA program at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill

Bigger than Amazon and eBay

Notes:

Every Nov. 11 in China is Singles' Day, designated as a day to celebrate being unmarried. Last year on the holiday, online sales reached $4 billion—far surpassing, for example, the $1.5 billion in sales on Cyber Monday in the U.S.

The growth in online sales growth is driven by an expanding Chinese middle class buying apparel, accessories and electronics, but a larger question may be—who turned Singles' Day into a shopping juggernaut?

The answer is Internet giant Alibaba, which in 2009 used Singles' Day as a way to create Cyber Monday-like consumer hysteria in China.

This year, China is poised to pass the U.S. to become the world's largest e-commerce market. Last year, Alibaba—already China's largest online sales platform—generated $173 billion in sales. That is more than eBay and Amazon combined, in a country where only 40 percent of the population is online. (Amazon has gained less than 1 percent market share through a joint venture after eight years in the country.)

Quote:

"The notion of having discretionary money to spend is a new phenomenon in China. These are people who want to differentiate themselves and are brand-conscious."
—Homi Kharas, senior fellow at the Brooking Institute

—By Jeff Brown, Special to CNBC.com

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