Record high oil prices and a warning about inflation
from the Federal Reserve smacked sobriety into
investors in US shares yesterday. Oil traded at $135
a barrel, and the minutes from the Fed’s late April
policy meeting implied that further interest rate
cuts are unlikely due to rising prices for goods and
services.

For the past few weeks, stock prices were merrily
marching higher. Investors were ignoring the
continuing demise of the housing market, weak
retail sales, paltry consumer confidence readings
and pitiful numbers from the labor market. Now,
global inflation is handcuffing the Fed’s ability to
deliver monetary stimulus to the economy.

Consumption (some would add “mindless” to this
term) drives this nation. By most estimates, it
accounts for approximately 70 percent of overall
economic activity. For years, consumers borrowed
heavily against their homes, or just outright, in
order to fill their lives with shiny things. Now, their
homes are no longer assets from which to borrow,
but liabilities from which to run. And, despite the
Fed’s feverish interest rate cuts, credit is getting
harder to come by.

Now inflation is gathering steam. Oil and food prices
are reaching record high levels, leaving consumers
with less money to spend at malls and food courts.
A vicious cycle is developing. Higher prices lead to
lower spending, which reduces profits and employment-
and this drives spending lower still.

Wall Street may finally be realizing what is really
happening on Main Street. But, the party could
easily last several months longer- with the final
round of drinks to be served this fall.

©Greg Strid 2008

The stock market was rumbling ahead on a wave of
delusion induced by the glimmer of light that seems
to be flickering at the end of the credit crisis tunnel.
But Thursday afternoon brought sobering news that
the light signaling hope may be an oncoming freight
train.

After the closing bell Thursday, American International
Group, the giant insurance and financial services
conglomerate known by it’s ticker AIG, announced a
staggering loss of $7.8 billion and the need to raise $12.5
billion in fresh capital. (This is in addition to $5.3 billion
dollars worth of red ink in the previous quarter- and the
capital infusion request is larger than the street’s sages
expected.)

This news, coupled with another spike in oil prices,
contributed to swift price declines on global equity
markets Friday. It seems as though the effects of the
credit crisis will be with us for longer than the eternally
happy wizards on Wall Street expect.

The fact that stock prices have rallied over the past few
weeks as the economy struggles under the weight the
housing market’s death spiral and the tightening of
consumer purse strings, highlights the disconnect
between investors expectations and reality.

Even after a series of panicky whacks at short-term
interest rates and the rescue of Bear Stearns by the Fed,
credit conditions remain tight for consumers and small
businesses. And, worst of all for the struggling housing
market, mortgages are harder to come by. (Speaking of
America’s most notorious sinking asset class, more than
50 percent of mortgages issued over the past three years
are for sums that exceed the price of the homes that
they purchased.)

Wall Street has been digesting lousy economic news for
several weeks as prices continue to climb toward the sky,
and the sad numbers spewed out by AIG will probably be
ignored when trading resumes this week. But, there seems
to be a disconnect shaping up between what investors want
to believe and the bleak reality that is facing most Americans.

Easy credit, rising home prices and tame inflation rates
created a wave of false prosperity. Now, the tide of easy money
has receded, exposing a nation with a weak job market and
virtually no money in its collective savings account. And, as
the news from AIG showed, the losses from the credit bubble
still keep piling up. It is just a matter of time before these
facts smack investors in the face.

© Greg Strid 2008

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Burst Media, a provider of online advertising services to Web
publishers, based in Burlington MA, launched Burst Green
Network for advertisers seeking out environmentally conscious
consumers. This is a network that includes all shades of green
consumers, ranging from the committed and vocal to the
curious and slightly enlightened.

Many advertisers are curious about the attitudes of “green”
consumers. They want to know what drives them to purchase
items that save energy and reduce waste. Burst Media recently
conducted an online survey of over 6,000 consumers, discovering
that approximately four out of five use the Web to research green
products and initiatives. Click:www.burstmedia.com

This survey reveals the fact that a majority (81.9%) incorporate
a minimal level of green activity into their lives, with only 12.9%
admitting to not being green at all. And only 5.2% are completely
and utterly glowing green.

The most popular reason for going green is that this type of behavior
is “good for the environment.” Other popular responses include: “to
impact the future”, “to live a better quality of life”, “good for the
community”, “desire to make a difference”, “desire for a healthy body”,
and “desire to live simply and use less.”

Just over 60 percent of those who aspire to be green (sniffers)
behave this way because it benefits the environment. Close to 40
percent of those who are completely green (deep inhalers) embrace
environmentally sound living “to live a better quality of life”, with
“good for the environment” falling in 10 points behind.

According to this survey, consumers receive the bulk of green
information from news stories, followed by word of mouth,
personal research and then advertisements. Sniffers rely more
on news stories, inhalers prefer to conduct their own research.

All of this information seems to point to the fact that the bulk of
consumers embrace environmentally sound practices to feel good
about themselves. The hardcore, deep inhaling subset do so to
improve their quality of life, which most likely centers on health
and mental well-being.

What about cost savings and value for your money? The American
economy is shifting from blind, credit-fueled consumption to a
much more sober approach toward spending. The producers of
green goods and services need to convey the tangible value
associated with saving the planet, and they need to do so right
away. A slowing economy will demand that ALL companies clearly
explain the benefits received for each dollar that is charged.
© Greg Strid 2008