Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Retail Sales Signal Economic Recovery Or the Bleeding Edge of the Great Recession's Next Down Cycle?

Economics / US Economy Jul 12, 2010 - 02:24 AM GMT

By: Adam_Lass

Economics

Best Financial Markets Analysis ArticleIs Retail the "guiding light" of the recovery – or the bleeding edge of the Great Recession's next down cycle?

"It was the best of times, it was the worst of times..."

I know it's a bit saddle-worn, but old Chas. Dickens was one heck of a student of humanity, and his opening to A Tale of Two Cities, what with its dichotomous wisdom, foolishness, belief and incredulity, just seemed too apropos to pass on today.


If you've been watching the newswires at all lately, then I imagine you are a tad cross-eyed right about now. The Service sector is supposed to be our biggest economic driver, providing some 80% of the action here in the States. And Retail is supposed to be the single biggest slice of the Service pie.

So one can only imagine the tension this week as we await several reports that are supposed to reveal how well or poorly Service and Retail are doing, especially when one considers the lousy employment news the markets had to swallow last week.

So how are these "engines of the economy" doing?

Dueling Experts

They're up – which is good! Unless of course they're not, which would be bad.

If you were to ask a supposed expert such as Federal Reserve Bank of Richmond President Jeffrey Lacker, he would tell you that consumer spending is " moderately strong," and might be expected to sustain the economic recovery.

But if you were ask Lacker's compadré the same question (and an enterprising Nikkei reporter did just that), Dallas Federal Reserve Bank President Richard Fisher would cavil that "cautious households" could be expected to "cool" growth for the rest of this year.

Confused? You ought to be.

(By the way, the editors here at Taipan Daily always try to provide our readers with analysis of confusing situations. Sign up here for our investment commentary.)

The Numbers Breakdown

On my desk in front of me are two wire service reports. One claims "U.S. Retailers Sales Rise at Fastest Pace in 4 Years." The other speaks to the "U.S Service Sector Slipping in June."

As usual, one has to dig a bit deeper to find the nuggets of truth that lie buried in the all the blather. Let's start with the second of the two, which addresses the numbers coming out of the Institute for Supply Management, a trade group composed primarily of Purchasers.

In May, the ISM's index tracking service-oriented companies hit its post-recession peak of 55.4. (Fifty is the index's break point, with any reading above indicating growth, while results below that benchmark read as recessionary.)

Now ISM is reporting that its June Service index figure has slid back to 53.8. While this is still barely holding on in positive territory, it does reveal a marked misstep in this index's post-recession forward march.

Dig even deeper into ISM's latest data dump, and you will find that its Employment Index did dip below the break line, dropping from 50.1 in May to 49.7 in June. Looking forward, ISM tells us that many of its pollees report that they are cutting future hiring plans.

Which End Is Up?

So how can Retail be doing so well, and yet not support its overall category? For that, we must investigate just how well Retail is doing.

There are several major reports on this topic due over transom in the next five or six days, including sales figures from Nordstrom (JWN:NYSE) and Kohl's (KSS:NYSE), as well as the Census Bureau's June Retail Trade report.

The "information" that was delivered under that oh-so-optimistic headline wasn't really fresh news at all. Rather, it was yet another trade group, the "International Council of Shopping Centers," reiterating its rosy numbers from the first five months of 2010, wherein, they note, sales "probably expanded at a monthly average rate of 4%."

Alarming Dark Spaces

As I sat to write to you today, the wire services had yet to disgorge actual June sales figures. So I thought I might ramble about the "Retail Space" and find it on my own. What I found instead was anything but heartening.

Over the next few days, you will probably hear a good bit about retail sales at existing stores – that is to say, the joints that have managed to survive the first leg of the "Great Recession." But those figures do not necessarily paint a true picture.

According to real estate data firm Reis Inc., vacancies at retail shopping centers are proliferating at an alarming rate. Reis' Q2 2010 figure rose to 10.9%, higher than Q2 2009's 10%, and approaching par with the all-time record of 11.1% back in 1990.

In other words, same store sales may very well report up. But the rise could simply be the result of consumers having markedly fewer places to shop.

Capitalizing the Next Leg

Now I must be fair and confess that I do have some interest in all these reports. First of all, I ran stores for a large portion of my working days, and even owned a piece of one for a decade or so. I can tell you for a fact that my expertise in this sector was hard won over many 80-hour weeks.

Perhaps more to the point right now, I have advised readers of my WOW column to short Kohl's (KSS:NYSE) shares, among other retailers, to the tune of some 137% gains as I sit to write. And just last week, we suggested put option contracts against the hardware chain Home Depot (HD:NYSE), which is doubly exposed to both retail and real estate headwinds.

So to be honest, I am banking more than a bit on the idea that retail is indeed leading us into the next leg of the "Great Recession."

Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

Source : http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-070810.html

By Adam Lass
http://www.taipanpublishinggroup.com/

Adam Lass is the Senior Editor of WaveStrength Options Weekly along with Bryan Bottarelli, and a regular contributor for free financial market e-letter Taipan Daily. Adam's fascination with technical analysis started in his early days as a wholesale purchasing manager, when successfully forecasting the public's future spending habits (using Treasury reports, stock trends, interest rates, even the Farmer's Almanac) meant the difference between prosperity and failure.

He has been called “one of the most brilliant charting minds in the country.” His deep insight into the economy and value analysis enables him to reliably guide readers through today's incredibly volatile market in WaveStrength Options Weekly.

Copyright © 2010, Taipan Publishing Group


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules