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Paper Bears


This article looks at consumer sentiment during the Covid-induced recession of 2020. Despite the strong labor market, consumer sentiment hit a record low and remains near levels last seen in 2008 and 2011. Additionally, while workers are happier with their work situation than in decades, people are not optimistic about the state of the economy at a local and national level. The article explores why this might be the case, speculating that survey error, the negativity bias, and the deluge of bad news are all contributing factors. It concludes by noting that sentiment indicators may not be reliable signals, as people are often more bearish in their words than in their actions.


What is the University of Michigan index of consumer sentiment and what level is it currently at?
The University of Michigan index of consumer sentiment is a measure of consumer confidence and it currently is near levels last seen in 2011 and 2008.

What does the Wall Street Journal data indicate about workers' satisfaction with their jobs?
The Wall Street Journal data indicates that workers are happier with their work situation than they’ve been in decades, particularly those who switched roles during the pandemic and/or found a company that would allow them to work remotely for at least part of their schedule.

How has the Federal Reserve's report on the economic well-being of Americans been affected by the pandemic?
The Federal Reserve's report on the economic well-being of Americans has shown that most people report feeling good about their own financial situation but are worried about the economy at the local and national levels.

What is the default assumption for most people in terms of their own financial situation versus the economy at large?
The default assumption for most people is that they are fine but everything else is terrible.

How does the deluge of bad news from 24/7 news, social media, and alerts on smartphones affect people's perceptions of the world?
The deluge of bad news from 24/7 news, social media, and alerts on smartphones has activated people's negativity bias, making it harder to use sentiment indicators as a financial signal.

AI Comments

πŸ‘ This article shares valuable insight into the current state of consumer sentiment and why the general public may feel pessimistic about the economy despite the recovery from the pandemic.

πŸ‘Ž This article fails to address how to help people overcome their negative sentiments and build more optimism in the economy.

AI Discussion

Me: It's about the current economic recovery following the Covid-induced recession in early-2020 and how consumer sentiment is surprisingly low despite the strong labor market. It's interesting to note that people are generally happy with their own personal situations but assume that everyone else is worse off.

Friend: That's really interesting. It seems like the pandemic has had an effect on how people view the world, and it's easy to be pessimistic when negative news always seems to be more prevalent.

Me: Yeah, and the author brings up an interesting point about survey error - that people may only be responding to the extremes, and so their responses don't accurately reflect reality. He also talks about our negativity bias that makes it hard to look at the world optimistically.

Friend: That's definitely true. It's hard to be optimistic and look at the good when we're constantly bombarded with bad news. It's important to look at the long-term progress of the world and be aware of the positives, even if they aren't always the most prominent.

Action items

Technical terms

Covid-induced recession
A recession caused by the outbreak of the novel coronavirus (COVID-19).
Wall of worry
A phrase used to describe the stock market's tendency to climb higher despite the presence of negative news and economic uncertainty.
University of Michigan index of consumer sentiment
A survey conducted by the University of Michigan that measures consumer confidence in the economy.
A sustained increase in the general level of prices for goods and services.
Unemployment rate
The percentage of people in the labor force who are unemployed and actively looking for work.
Wall Street Journal
A major American newspaper published in New York City.
Federal Reserve
The central bank of the United States.
An American research-based, global performance-management consulting company.
Negativity bias
The tendency for people to pay more attention to negative information than positive information.
Paper bear
A person who talks about being bearish (pessimistic) on the stock market but still has a majority of their money invested in risk assets.

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