Confusing Sentiment Data

I’m trying to make sense of several conflicting data points regarding consumer sentiment, political attitudes, spending habits, and the outlook of the average American.

I am scratching my head over some of the data. To call it confusing is quite the understatement.

Last week, we saw Consumer Sentiment spike above consensus:
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Source: Barron’s Online

This was the strongest reading in some time, and the only positive sentiment data we came across. Perhaps we shouldn’t read too much into this. As a friend reminds us, this is a survey of "250 people who aren’t smart enough to let the answering machine pick-up."

The next poll is where we start to see the confusion: Americans are generally in a funk. The War, lack of progress in protexcting the country from a future attack, and the anemic economy are all taking their toll. A USA Today/CNN/Gallup Poll reveals that "while fewer Americans fear a terrorist attack on the USA in the next several weeks than at any time since 9/11, the public has lost confidence in the Bush administration’s ability to protect the nation from terrorist attacks. Overall, 35% say another attack is likely soon, down from 39% in
January and a high of 85% in October 2001, a month after the Sept. 11
terrorist attacks. Satisfaction with the way things are going in the war on terrorism is at a new low: 52%, down from 75% in September 2002."

Trying to explain this data, USA Today quotes Georgetown University political scientist prof Stephen Wayne:

"On one hand, we have been lulled by the fact that there hasn’t been an attack here since 2001. But on the other, we’re generally in a funk about a lot of things — the economy and the war — and these numbers reflect it."

The lack of any attack since 9/11 is a positive sentiment factor; On the other hand, the uptick in travel over the past 2 years has exposed more and more people to the absurdity that is Homeland Security. Anyone who has had nail clippers confiscated or watched an 80 year old woman have to remove their shoes might have a sneaking suspicion that Homeland Security is a farce. Longer term, the lack of significant progress has the potential for deadly consequences. How is the country doing with our Port Security four years after 9/11? How about protecting Chemical plants and infrastructure? Food and Water Supply? Nuclear plants? What’s our preparation like for a Biological attack? 

In light of these issues, its no surprise the public ghas a dim view of Congressional priorities (Filibusters, the Schaivo debacle, etc.). Americans are not stupid — we may have short attention spans and eat too much junk food, but we are not dumb. I suspect that many people have said too themselves, "Is this the most important issue facing the nation right now?"  The answer is obviously "No."  Only 37% of people in the latest poll who approve of the way Congress is doing its job, a 6 year low. As Mark Twain said,"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself."  That view has become fairly widespread.

Its not only the Legislative ranch, however: Approval for the White House occupant is at an all time low:


Recent Approval Ratings:
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The Washington Post drills even further into the details:
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Washington Post

Drilling more specifically into the War in Iraq, we see yet another significant shift amongst Americans. The latest Harris Poll on Iraq reveals a major attitudes towards keeping  U.S.  troops in Iraq have decayed:

Americans’ Views on U.S. Troops in Iraq:
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Source: Harris, WSJ On-Line

The online WSJ gives the details: 

Since October 2003, Harris has asked "Do you favor keeping a large number of U.S. troops in Iraq until there is a stable government there or bringing most of our troops home in the next year?"

The telephone poll from June 7-12, 2005, shows a clear 63% majority now favors bringing troops home in the next year, the highest percentage since Harris began asking the question. And 33% now favor keeping troops there until a stable Iraqi government is established, down from 50% in November 2004.

What should investors make of all these recent polls?  Have we reached such a low that its a rearward looking, contrary indicator? We may not be there yet.

I am old enough to recall the 1970s — and remember Watergate, Viet Nam, the Oil Crisis, and Inflation. Today, we’re not remotely in that degree of misery. Real Estate has some lift to it, and people light up when they talk about it. Then, there’s the cocooning factor: Its not a surprise that Best Buy cannot keep enough big screens in stock. Unhappy with politics, war and the economy, the population is turning inward to family and hearth.

For investors, this line of data is one very much worth observing. The purchase of equities is primarily a function of Sentiment; Buyers are tacitly acknowledging that the future holds promise, and that things (war, economy, terror) will get better.

Its not a coincidence that the 1970′s saw both a laundry list of political and economic disasters, and was a decade of horrific stock performance. The risk is that any and all of these present potential miserables can spiral out of control, leading to yet another 70′s like malaise.

If you think the 2000 crash as no fun, try living thru a decade and a half of negative returns (No thank you).

This bears watching closely . . .


Poll shows Americans ‘generally in a funk’
Richard Benedetto and Judy Keen
USA TODAY Tue Jun 21, 7:10 AM ET

Bush’s Support on Major Issues Tumbles in Poll
NYT, June 17, 2005

Poll Finds Dimmer View of Iraq War,  52% Say U.S. Has Not Become Safer
By Dana Milbank and Claudia Deane
Washington Post, June 8, 2005; Page A01

Washington Post – ABC News Poll
Poll data on the Iraq war, citizens’ rights and the president’s priorities dyn/content/graphic/2005/06/08/GR2005060800301.html

President Bush’s Approval Ratings
Track President Bush’s job approval rating over the course of his presidency dyn/content/graphic/2005/04/25/GR2005042500945.html

USA TODAY/CNN/Gallup Poll results

Americans’ Views on U.S. Troops in Iraq (Harris Poll)

Congress’ approval rating on the slide
Andrea Stone
USA TODAY, 3/14/2005 9:34 PM

Congress Job Approval at 35%, Lowest in Eight Years


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