Twas the eve'n after Turkey Day and all through the mall,
There were creatures a-stirring, but not buying all.
The discounts were posted in the stores with care,
In hopes that the shoppers soon would be there.
The security teams were nestled all snug at their posts,
While visions of safety were bigger than most.
Shoppers in PJs, some with hot plates,
Had just settled in for a cold morning's wait.
When out in the parking lot there arose such a clatter,
Security sprang to attention to see what was the matter.
Away to stores I flew like a flash,
Held on to my credit cards, I'd only pay cash.
The fluorescent lights gleamed on the newly arrived stuff,
Gave a glimmer of hope to the retailers who'd had it so tough.
When what to my wondering eyes should appear,
But a whole slew of shoppers, with Christmas lists for those dear.
They clutched at the flyers, all glossy and slick,
And I knew in an instant that it was bargains that would stick.
More rapid than hordes, the shoppers they came,
Crowding home and electronics, gotta get that new game.
Now toasters, now iPods, now board games and toys,
Grab discounts, grab bargains, can't afford to be coy.
To Kohls and to Target, To Walmart and the mall,
Shop away, shop away, shop away all.
As dry leaves that before the wild hurricane fly,
Grew the lines at the checkouts with items to buy.
So up to the next floor, the hordes they plain flew,
They wanted those bargains, apparently more than did you.
And then in a twinkling, I heard from the clerks,
'Next in line please,' they were glad to have work.
As I talked with consumers, the people in line,
It was really apparent they weren't feeling too fine.
They were clutching their wallets, a glaze in their eyes,
'No credit left for me this year,' was often their cry.
Their choices were careful, each item a find,
Yet the retailers had obviously kept margins in mind.
Their steps they were quick, but eyes were quite bleery,
Still yawns they were stifled, due to caffeine with dairy.
Their bags didn't bulge, despite purchases paid,
A few less per family than they'd previously made.
Still some shopped for sport and had good fun,
Twas quite the excitement to watch where they'd run.
A quick look through stores when I should be in bed,
Soon gave me to know retailers might have a tough time ahead.
The customers they shopped where stuff was on sale,
But no discount equaled no purchase despite their avail.
And leaving the mall to hit the next store,
The consumers weren't confined to stores they adore.
The shoppers want value, not just cheap price.
And retailers win who know naughty from nice.
We're still not done with the shopping this season,
But retailers will win who use their good reason.
Sunday, November 29, 2009
Saturday, November 28, 2009
NBC Nightly News
Did a little work for my friend Brian Williams on Black Friday. Okay, I don't know Brian, but I'm sure we'd be friends if I did. Anyway, watch the results of 4 hours with a camera crew starting at 3:15am:
Visit msnbc.com for Breaking News, World News, and News about the Economy
Tuesday, November 17, 2009
Sandbagging or realism?
Interesting debate going on today after more retailers reported earnings. Several folks insinuated that management teams are sandbagging earnings expectations for Q4 so they can knock it out of the park. Let's be clear...no sane retail management team is going to be pumping up expectations when headline unemployment is 10.2% and the more realistic U-6 number that includes discouraged workers and the under employed is 17.5%. If people can't get jobs, they can't spend.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Wednesday, September 30, 2009
What is a successful career anyway?
Some interesting moves today after the close... moves that made me think about the difference between being famous or infamous.
First, Ken Lewis announced his retirement from Bank of America as of the end of this year. The stock immediately rose in after hours trading, even though Cuomo says he's still coming after BoA. How humilitating it must be to know that investors think your company will be better off without you. Ken Lewis had a huge part in building up the financial supermarket concept... and yet all he'll be remembered for is his flame out at the end.
At least that's better than John Thain's fate - he'll always be the guy with a penchant for decorating... and an exquisite commode. Oh yeah, and didn't he do something in the investment business too?
Michael Vick, on the other hand, was given yet another shot at redemption today. Nike has decided to take what I hope is an educated gamble on Vick... again. This could either be very very good for them... or end in a greater-than-Thainsian blaze of glory.
At least this business is never boring.
First, Ken Lewis announced his retirement from Bank of America as of the end of this year. The stock immediately rose in after hours trading, even though Cuomo says he's still coming after BoA. How humilitating it must be to know that investors think your company will be better off without you. Ken Lewis had a huge part in building up the financial supermarket concept... and yet all he'll be remembered for is his flame out at the end.
At least that's better than John Thain's fate - he'll always be the guy with a penchant for decorating... and an exquisite commode. Oh yeah, and didn't he do something in the investment business too?
Michael Vick, on the other hand, was given yet another shot at redemption today. Nike has decided to take what I hope is an educated gamble on Vick... again. This could either be very very good for them... or end in a greater-than-Thainsian blaze of glory.
At least this business is never boring.
Thursday, September 17, 2009
What's driving this thing?
I've been doing a lot of research with my friend JT Smith (CIO of Aristar Funding), trying to figure out exactly what was driving this market.
The 'this market is cheap' argument hasn't made any sense to me for some time. Cheap does NOT refer to stock prices relative to where they've been, contrary to what is implied by a lot of folks. Historically, bear markets have bottomed at roughly 7-8x earnings. We only got to 10.2x forward earnings at the bottom in March - not low enough for my liking. Now we're trading at... sit down... 17.8x FORWARD earnings. Put another way, the S&P is more expensive than it has been in the past FIVE YEARS or more.
I might be 'of a certain age,' but my memory isn't so weak that I can't remember that the economy at least appeared to be much more robust at almost any time in 2004, 2005 or 2006 than it does now. And yet we're paying significantly more for a dollar of next year's S&P earnings now? Makes no sense. Unless...
What if this market isn't discounting future earnings right now? It's my belief that a lot of times the animal spirits of the market discount things without really knowing what it is they're discounting. So, what if... just what if... this market is actually discounting the inflation that almost certain to come? Gold over $1000 an ounce is telling us that either everyone is scared to death of this market (not confirmed by the VIX), or that inflation might be rearing it's ugly head. And yesterday's rumors that two Fed officials were ready to vote to tighten! Even today's Philly Fed numbers pointed out that the Prices Paid component is ticking up. Inflation.
Yeah, I know we've been seeing deflation in food and consumables. But that can turn quickly. And more importantly... how else are we going to dig ourselves out of this debt pit unless we pay it off with cheaper dollars?
If we're heading into inflation, folks, the game plan changes.
The 'this market is cheap' argument hasn't made any sense to me for some time. Cheap does NOT refer to stock prices relative to where they've been, contrary to what is implied by a lot of folks. Historically, bear markets have bottomed at roughly 7-8x earnings. We only got to 10.2x forward earnings at the bottom in March - not low enough for my liking. Now we're trading at... sit down... 17.8x FORWARD earnings. Put another way, the S&P is more expensive than it has been in the past FIVE YEARS or more.
I might be 'of a certain age,' but my memory isn't so weak that I can't remember that the economy at least appeared to be much more robust at almost any time in 2004, 2005 or 2006 than it does now. And yet we're paying significantly more for a dollar of next year's S&P earnings now? Makes no sense. Unless...
What if this market isn't discounting future earnings right now? It's my belief that a lot of times the animal spirits of the market discount things without really knowing what it is they're discounting. So, what if... just what if... this market is actually discounting the inflation that almost certain to come? Gold over $1000 an ounce is telling us that either everyone is scared to death of this market (not confirmed by the VIX), or that inflation might be rearing it's ugly head. And yesterday's rumors that two Fed officials were ready to vote to tighten! Even today's Philly Fed numbers pointed out that the Prices Paid component is ticking up. Inflation.
Yeah, I know we've been seeing deflation in food and consumables. But that can turn quickly. And more importantly... how else are we going to dig ourselves out of this debt pit unless we pay it off with cheaper dollars?
If we're heading into inflation, folks, the game plan changes.
Tuesday, September 8, 2009
Bet you dollars to donuts
Actually, if the dollar keeps sliding, donuts might be the better investment soon. Yeah, the DXY Index was lower when Lehman collapsed last year, but beyond that, we're at pretty much the lowest levels we've seen in a long time.
What's it mean? Well, first of all it means that those commodities valued in dollars become more expensive for the American consumer. If you're a Middle Eastern country selling oil, you need the same buying power when you jaunt off to Paris regardless of what the dollar is doing vs the Euro... so the price of oil and gold go up. For that reason alone, I'm a little skeptical of the folks who are saying that the rise in the oil price is a reflection of stronger economic activity. But I'm a skeptic.
And let's look at the poor consumer again. So now energy prices are going up. And home prices still stink. And they have no credit available. And their retirement accounts are worth 40% less than at the top of the market. But those retail stocks are going to have earnings rebounds just like a coiled spring because of cost cutting. Whatever.
One more thought on the whole dollar/hard commodities thing - could people be piling into those commodities because of a fear of inflation? Yep. Does it make sense? In my mind, yes. How else are we going to pay off this amazing amount of federal debt that we have but to create inflation and pay it with cheaper dollars? And what holds value in inflationary times? Hard commodities.
Yeah, you can guess where I've got client money right now. Go ahead. If you get it right, I'll buy you a donut.
What's it mean? Well, first of all it means that those commodities valued in dollars become more expensive for the American consumer. If you're a Middle Eastern country selling oil, you need the same buying power when you jaunt off to Paris regardless of what the dollar is doing vs the Euro... so the price of oil and gold go up. For that reason alone, I'm a little skeptical of the folks who are saying that the rise in the oil price is a reflection of stronger economic activity. But I'm a skeptic.
And let's look at the poor consumer again. So now energy prices are going up. And home prices still stink. And they have no credit available. And their retirement accounts are worth 40% less than at the top of the market. But those retail stocks are going to have earnings rebounds just like a coiled spring because of cost cutting. Whatever.
One more thought on the whole dollar/hard commodities thing - could people be piling into those commodities because of a fear of inflation? Yep. Does it make sense? In my mind, yes. How else are we going to pay off this amazing amount of federal debt that we have but to create inflation and pay it with cheaper dollars? And what holds value in inflationary times? Hard commodities.
Yeah, you can guess where I've got client money right now. Go ahead. If you get it right, I'll buy you a donut.
Tuesday, September 1, 2009
View from the Top
For those of you who haven't been to the Seattle area, that's Mount Rainier up there, taken from the SE side of the mountain. I took the picture a couple of weeks ago. Mountain tops are beautiful, aren't they? Problem is you can't stay at the top forever, you eventually have to go back down the other side.
In my opinion, today's sell off has been a long time coming. Of course, if you've read this blog at all, seen me on TV, heard me on radio, or seen me quoted in print... you already knew that.
What really killed me this morning was listening to some folks trying to hype the economic releases as positive. Look, we're in a pretty down time right now. If you don't think that the folks who put out those releases are trying to highlight the happiest stuff they can, you're naive. Let's take them one by one.
ISM Manfacturing: Headline number was better than expected, coming in at 52.9 vs expectations for 50.5. HOWEVER, you have to look behind the headline number. Looks like Cash for Clunkers is part of the pop – drew down inventories and there’s some restocking going on there. Is it sustainable? No, but the lower level wasn’t sustainable either. Employment is still declining – manufacturers aren’t confident about this or they’d be hiring. Prices paid is going up, which could mean that inflation is coming down the road, perhaps at a faster pace than most expect.
Yes, right now we're dealing more with deflation than inflation. But what if we can't sell bonds and need to increase interest rates? Yes, the dollar has been getting stronger. For me, that's a head scratcher. I certainly don't think the US is the safety currency or economy at this point. In fact, for our clients, I'm deliberately betting that the dollar gets weaker, strengthening commodities.
Pending Home Sales: Those are sales contracts... NOT completed sales. People still have to get loans, which are darn hard to get these days. Which leads to my next topic...
Construction Spending: This is the one that kills me... Year over year residential spending is down 26.4% (not-seasonally adjusted). But everything's okay folks. Really.
If you need a reason that the market tanked today, part of it was the stuff above. Part of it was what's coming down the pike at us. If you want more insight into what joy may be coming, follow jtsmith24 on Twitter - smart guy, good insights into the economy. You can follow me there too (PattyEdwards) for more timely, intraday, updates.
Take some profits folks. There's no reason to be a hero.
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