• The latest consumer confidence and small business confidence readings continue a steady increase since summer. The latest readings have risen almost all the way to the average level seen in recessions.  Outstanding! 
    • Last week had an update on consumer credit. As has been the case for most of 2011, the headline reads ” Consumer credit expanded $7.7B in October”. OK, read a little further. All of that credit expansion was federal government assisted student loans. Take that out of the equation, and you see that consumer credit contracted.  Again.  (This is a balance sheet recession that is about to enter year 5 of a 7-10 year recession. Credit contracts in a balance sheet recession.)  
    • Last Thursday saw the release of the Fed Flow of Funds report — to little fanfare. I’ll talk about it in more detail in the year-end letter. The summary is: credit contraction continues in the broadest sense, and the remaining wedge of homeowner equity is resuming a downward path (as predicted).  
    • Last week’s unemployment data was a decidedly positive move. Unfortunately, the impact of seasonal hiring and seasonal adjustments were very large, so it is difficult to have a lot of confidence in it.  
    • The stream of lowered earnings expectations for next season (begins in mid January) is as bad as its been in a decade or so. Either we’re looking at the biggest sand-bag effort (and yes, Wall St is filled with sand-baggers), or earnings are going to disappoint significantly. Any earnings disappointment can be painful if record earnings are the expectation.
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