Bedel Barometer

4Q Update – 12/1/2011

Manufacturing Activity - Positive.  Activity numbers have continued to surprise on the positive side.  In addition, future order numbers are strong and inventory rebuilding has been suppressed.

Consumer Price Stability - Positive.  Provided we are not seeing deflation or an accelerating inflation number, this input will likely be considered positive.  The recent rebound in the price of oil could have an impact over the next few months.  Thus far, it has not impacted the price of gasoline.

Stock Market Performance - Neutral.  The stock market has rebounded from the summer/fall downturn, but is still well below its level of early May (about 8% below).

Consumer Spending – Positive.  Consumer spending has been positive and data has been surprising on the positive side.  Consumption represents over 70% of GDP, so this metric is an important indicator.

Housing Market – Negative.  The housing market has significant inventory issues.  There are some signs that the housing market could have bottomed out and we could be headed for a healthier market in 2012.  Until we see this materialize, we will keep our score at negative.

Volatility – Negative.  We like to watch the VIX, which measures the cost of protecting stocks.  When the cost of protection is high, volatility is usually high and the potential for stocks declining is higher.  Today’s volatility reading is elevated but may be trending toward lower levels.

TED Spread – Neutral.   The difference between our Treasury’s cost of borrowing short-term money and our banks’ cost of borrowing short-term money.  When the spread is significant, banks are worried if they will be repaid.  Current spread has been increasing as European debt issues remain.  The recent spread of 0.50% is close to the average spread of about 0.6%.

Score:  +1.