An Analysis of Retail Sales Media Coverage

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


Retail sales look like they increased 8% to 10% in March 2010 according to the International Council of Shopping Centers. Assuming the numbers are correct, and this is perhaps a very big assumption, a number of mitigating factors led to the unusual rise, including an Easter holiday that fell right in the beginning of April and very mild weather in March after a February filled with snowstorms. Nevertheless, mainstream media reports heralded that "consumers are finally coming out of hiding" and that happy days are here again.

Today's New York Times had some of the most positive reporting stating that the U.S. consumers' mood has gone from panicked to cautious to "almost a bit giddy" - a quote from Mark Zandi, chief economist for Moody's Economy.com. In coverage elsewhere, Jackson Bros., Boesel & Co. noted that this is season when chain store sales increase and that they saw interesting possibilities in Woolworth, Grand Union, and J.C. Penney.

Today's coverage in the Times noted that "import cargo volume in March also suggested a strong month for retailers", having risen for four months in a row and being up an estimated 6% in March according to the National Retail Federation.  Other publications reported that rail freight loadings in the week that ended March 21st gained more than they usually do in March and had hit a new high for the year. The implications are of course that this indicates that retail sales will be getting better in the future.

The Times upbeat coverage also included "sales are simply much stronger than companies had expected,” and the improvement extends to some of the most costly items including autos with Ford, Toyota and General Motors having robust sales increases in March. The Times did concede that incentives such as no-interest loans may have been responsible. Other sources reported that one major automaker had its third straight monthly gain of around 50% and its highest sales since last June. Dodges, De Sotos, Plymouths, and Fargos were apparently flying off the lot in March... March 1931 that is.

While the New York Times article was published on April 7, 2010, the other articles cited were published 79 years ago in early April 1931 - two years before the economy hit bottom during the Great Depression and many more years before the U.S. managed to crawl out of the economic devastation that the downturn had caused. Rosy media reports in 1931 did not mean that the economy was getting better and it is quite possible that don't indicate that in 2010 as well. Mainstream media wants to tell the 'everything is getting better' story and managed to do so in 1931 when the U.S. economy was actually falling off a cliff. Investors should assume little has changed with media reporting since that time.

What has changed since the 1930s is that the Federal Reserve is pumping huge amounts of liquidity into the financial system and the government is spending huge amounts of money it doesn't have to keep the economy functioning. Retail ETFs, such as RTH, XRT and PMR, are trading at two-year highs. While a realistic analysis of the macro picture may not justify such high stock prices for retailers, liquidity is responsible for the ongoing rally. The party should continue as long as the Fed continues to supply free booze. One it stops doing so, expect one big hangover.

Disclosure: None

NEXT: Why China is About to Change Its Currency Policy

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Stock Market Gappy, Inflation Worries Surface

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Global market weakness started again in Asia last night. At one point, the Shanghai market was down more than 5%, but recovered slightly to close down 4.3%. So far this month Shanghai is down almost 20%. Hong Kong was down 1.7% and the Nikkei in Japan was down 0.8%. This was a greater amount that their dead cat bounces on Tuesday. Europe was down strongly this morning and the U.S. markets gapped down again, just like they did on Monday. Strong buying came in immediately to fill the gap. The gap on Monday was partially filled in Tuesday's trading.

Since the market has had a long rise and has been flat for a few weeks now, a gap down where the gap is not filled would be a breakaway gap (or more appropriately a breakdown gap). This is the only type of gap that doesn't have to be filled. The breakdown gap establishes a new ceiling for trading and indicates the beginning of a longer sell off. This hasn't happened yet, but there were two almosts in the last three days. The VIX (volatility index) had its third spike up on the open in three days. When the VIX goes up, stocks go down. The dollar was just above 79.00 recently, still keeping above its 78.33 breakdown level.

A survey of fund managers by Merrill Lynch indicates fund manager optimism is at its highest level in 6 years. This is a contrary indicator. Fund managers love buying at the top and selling at the bottom, which is why as much as 85% of mutual funds fail to beat the S&P 500 in any given year. This doesn't mean the market is going down next week however. Within the next few months though is quite possible.

There are some important articles out today about inflation. One states the Fed has no exit strategy from its stimulus programs (in fact, it is extending them). The one getting the most attention though is an Op-Ed piece by Warren Buffet in the New York Times, entitled "The Greenback Effect". Buffett very gently points out that printing money can cause inflation and there could be trouble on the horizon for the U.S. While the New York Investing meetup has been pointing this out for the last two years, this reality-based view is not supported by the government, Wall Street or the mainstream media. Buffet deserves credit for stating the obvious.

NEXT: Oil Up; Retail, Employment and Economy Down

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21


This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Pandemic of Government Stupidity Over Swine Flu Sweeps Globe

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

The biggest thing to fear from the current swine flu outbreak is the stupid reactions of government officials. While we would like to think that we live in a world where intelligent scientific thought dominates and ignorance and irrational emotional reactions are not the basis for important decisions, the reaction to swine flu indicates otherwise. The global medical establishment, highly trained scientists, have reacted more like voodoo shamans instead of engaging in rational analysis. The mainstream press, instead of acting as a responsible gatekeeper, has had a field day spreading panic. Government officials have followed up by doing some of dumbest things imaginable (in case you don't understand what is going on with how they are dealing with the Credit Crisis -think about how well that's probably being handled).

One of the most outrageous government acts so far has taken place in Hong Kong where authorities have sealed the downtown Metropark Hotel, where a sickened Mexican tourist had stayed, trapping 350 business travelers, tourists and employees inside. Riots have broken out in Egypt when police have tried to fulfill the government's mandate to kill all of the country's pig population - there is no evidence that any of pigs have swine flu there. In Baghdad, the Boars in the zoo were slaughtered even though there is no swine flu in Iraq. The U.S. has closed down hundreds of schools. In Mexico, the capital is totally closed down and will remain so for a few more days. Officials from the CDC, the federal Health and Human Services Department and the New York City Health Department have made irresponsible statements that have helped engender panic. The first two warned of an increasing death toll from swine flu and the latter that there were already hundreds of cases in New York City last week - none of which has turned out to be true.

The source of all the worry about swine flu is and always has been suspect. There have been two competing strains of information that have led to contradictory conclusions. Authorities throughout the world have chosen to believe the unreliable information source over the reliable one. The first strain of information are reports and statistics on swine flu from Mexico - a country with a chaotic health care system and questionable data gathering ability. The second data source is from the developed world, where health statistics are reliable. Based on initial reports out of Mexico, swine flu was a deadly virus. However, even as of today, there have been no fatalities elsewhere - and that's hard reliable data. When you are exposed to contradictory information from two sources with widely varying credibility, which do you believe? In the case of swine flu, it as if the medical authorities chose to believe Star Magazine over the New York Times.

Moreover, it has since been demonstrated that the initial reports on swine flu from Mexico were pure speculation and are not supported by the facts. Over a week ago, there were already supposed to have been 160 deaths there from swine flu in Mexico. The current count has risen to 19. What? Tests for swine flu were not being done initially and now that they have been only 19 people so far who have tested positive for swine flu have died. Whether or not they died from swine flu is not proven and should be questioned considering that no one outside of Mexico dies of swine flu. These 19 could have died from any number of other illnesses and considering there was an epidemic of virulent pneumonia in Mexico, this would be a strong candidate for the actual cause of death. How are the Mexicans handling this rather embarrassing situation? Just today, in a news release, Mexico's Health Secretary said "11 people were suspected to have died from the virus in the previous 24 hours". Huh? While the glaring headline seems to indicate swine flu deaths are increasing, what was meant was that testing has shown the number of supposed deaths from swine flu jumped from 9 to 20 (including the Mexican toddler that died in Texas). Note to Mexico's Health Secretary, 20 is a much smaller number than 160.

U.S. medical authorities are already backtracking and making the case that their highly irresponsible actions were justified. In appearances on the Sunday talk show circuit, it was stated that a vaccine for swine flu is being prepared and after it was created it would then be decided whether or not to order large amounts of it be produced in the fall. Despite their hemming and hawing, it was quite obvious they realized they had screwed up big time. Don't expect an admission of this and don't expect any one of these bozos to be fired. After all, why should the health of the American people be in the hands of competent people.

NEXT: Banks Get Swine Flu; William Cohan at New York Investing

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.