Consumer confidence came out this morning. The figure at 105, down from 111.9 in July but up from August 2006. Of course the doom and gloom headlines to quote “Consumer Confidence Falls To Lowest Level in a Year”, I mean come on, expectations were for 104.5 so how come the headline does not say “consumer confidence comes in much better than expected.” Listen to the media as an investor and you will be sure to go broke. That I can GUARANTEE you!

What I can tell you is,,,,,,,, 105 is a far cry from a recession (so far), considering the consumer is 1/3 of GDP, wages are another component and wages are growing at 4% and corporate profits are expected to be in the low double digits so I think the chances of a recession are slim, unless the consumer confidence number falls another 35 points. What this does show is the resiliency of the American consumer in wake of the so called “subprime crisis” or mortgage meltdown or any other name the media has created. Gas prices are still high although a lot lower than the highs, food costs increasing and mortgage rates have ticked up a bit. So IMO, I think the number is strong considering the environment.

The biggest worry for the number is that it was not worse and may be a reason for the stock sell off. Obviously over the next month or so this number could be dramatically lower and with back to school coming we will see if the retail sales numbers are any indication. But as always the media plays a big role in consumer sentiment so we will see how they spin the recession talk and what effect this has on the number going into the coming months.

The 10 year note is trading off its highs up .25bps and less effected is the 6% mortgage backed securities trading up .6bps and seems to be hitting a ceiling of resistance at 100.16. Bond prices have been on a tear since the end of July and rates have came down nicely but may be running out of steam.

At 2pm ET today the Fed will release the Minutes from the August 7th meeting. It will be interesting to get the Fed’s views on the credit crunch, since it was just beginning to unfold at the time they met. The Fed Fund Futures are currently showing a 72% probability of a .25% cut at the September 18th meeting, with some predicting a chance of a .50% rate cut.

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