Like the vast majority of economists, I expected there to be some sort of gain for the retail world in July, because of the “Cash for Clunkers” program, that shining light that was hailed as such a wild success… the same one that Congress needed to quickly grant an additional $2 billion to fund it.

And while car sales definitely did leap (consumer demand has since slowed down from the peak rates we saw just a few weeks ago), it wasn’t enough to compensate for the fall in other areas.

Auto Dealers:            2.4%

Gas Stations:         -2.1%

Department Store:  -1.6%

All put together, the consumer activity fell by 0.1% in July according to The Commerce Department, instead of the 0.7% increase prediction made by the experts.

And that wasn’t the only downside reported on Thursday concerning last month:

-         US households on the verge of losing their homes rose 7%

-         Foreclosure filings picked up by 32% as compared to same time last year.

-         Banks repossessed over 87,000 homes as compared to 79,000 from June

Not to mention that initial unemployment claims went up again, from 554,000 in a week to 558,000. That was despite analysts’ expectations that the picture was growing rosier. They thought the number would drop to 545,000.

I’d call that attempt at estimating an epic failure.

Yet the markets are mostly up today. It’s concerning that such economically affected and affecting data wouldn’t make the markets do more than pause.

Instead, they’re so intent on flying that they’re ignoring the fact that they took off on a dangerously low amount of fuel and are running on barely more than a prayer now.

And our own government is more than willing to tell everybody that the situation is A-OK.

The Trick To Trading Like There’s No Yesterday

So let’s get down to it. How do you change negative data into positive news?

Well, if you really want to know, just ask the government, because they have that skill mastered.

Yesterday, the Federal Reserve reported that the economy appeared to be “leveling out.” And from the larger administration, we didn’t hear a single peep of protest at that extremely optimistic analysis.

The central bank held interest rates at the record lows they’re at, and determined that one of its “emergency rescue” programs could even be shut down a month earlier than originally planned.

So clearly, the government’s way of dealing with a crisis is just to ignore it… when our elected officials aren’t milking it for all its worth that is.

Meanwhile, over in England, Royal Bank of Scotland’s Bob Janijuah had this to say on what he sees to be an overly cheery economic outlook in his own country:

“We are now in the middle of a parabolic spike up. I expect this risk rally to continue into - and maybe through - a large part of August.

“What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone,’ driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets.”

But that’s the UK, right? We here in the US are different. Clearly.

Thursday, August 13, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon