Consumers Express Buyers' Remorse

Consumer Mood Sours

Some of the latest data around consumers seems to show that they are perhaps experiencing buyer's remorse after overspending through the holidays. That said, hope still seems to exist in their hearts as well, and so there remains the possibility of a future let down there too. Oh happy joy!

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Consumers Express Buyers' Remorse

You might have missed the negative perspective expressed here with regard to the consumer related economic data released in mid-January, given that many publishers were writing about the strongest annual rate of retail sales growth in more than a decade. Lucky you have cheery old Greek to remind you that the last few years' joyous journey have not exactly set a high bar for consumer spending to climb over. With that in mind, the 6.7% growth in retail sales (excluding autos) through 2010, the fastest since 1999, is not so special. Mathematics tells us the biggest growth rates should come after the softest of periods. And the latest days have been especially lacking.

Furthermore, Retail Sales grew just 0.6% in December, short of November's 0.8% increase and under the 0.8% bar set by the economists' consensus for the more important month. We saw a similar disappointment in the month's chain store sales data, and we theorized that the let-down might perhaps have occurred due to weather, or more likely due to pulled forward purchases on early sales promotions. That said, at least sales were growing versus the other possibility. However, another data point, also released last week, reinforced worries about the mood of Americans, which is something that might have them now reconsidering their silly spending of November and December.

The University of Michigan, in concert with Reuters, reported on January Consumer Sentiment last week. The latest take on the consumer mood offered a Consumer Sentiment Index reading of 72.7, down from 74.5 in December. Could the American consumer be expressing remorse, after perhaps spending beyond his means over the holidays? Economists had forecast this preliminary reading for January would hit at 75.0.

The state of consumer affairs has not improved much for the unemployed, and they were just put through the wringer too when Congress considered not renewing unemployment insurance extensions. While credit may be available to those of you with jobs, people scraping by on government assistance aren't having such a good go at the bank. So we suggest all of the gains of 2010 have come on a crippled consumer, and his crutch has been in use for so long now that it's getting rusty. Meanwhile, the doctor is lacking the political will to continue prescribing replacement crutches.

I Digress

Thus, I'm not as psyched as some of Wall Street's highly paid (and out of touch with Main Street) strategists living up there in the Park Avenue clouds of their own special reality. A few were heard early this year raising their GDP estimates and consumer spending forecasts for Q4 and 2011. Rather, I'm in tune with the tone of Park Ridge (also in NY), where most of those guys wouldn't venture during the daylight. That daylight shines on the truth of our struggles though. There are no Saks (NYSE: SKS) stores up in that cement jungle; heck there's not even a Kmart (Nasdaq: SHLD). These poor people can barely afford to even come into the city anymore, given the hikes in subway fares they are being burdened with to keep the second avenue tunnel drill running.

Those with cars have neither missed the fact retail gasoline prices have sped well above the $3 mark. The Reuters/Michigan metric shows inflation is in fact one of the main worries of the American consumers surveyed. The guys up on Park Avenue wouldn't know about that though, since the company takes care of the car service. The survey's one-year inflation forecast jumped to 3.3%, from 3.0% when measured in December; and guess what, I think the regular folk have a better bead on inflation that most of Wall Street. Tunisians do too.

The Consumer Price Index (CPI) for December, published Friday, was consistent with the Producer Price Index (PPI) published Thursday. Both reports showed raw prices lifted above economists' expectations on higher commodity costs, including food and fuel prices. The Headline CPI showed a December increase of 0.5%, though it was only up by 1.5% for the full year; that's not inflationary. Core CPI, which leaves out the volatile and lately lofty food and fuel prices, only increased by 0.1%, the same as the prior month and in line with expectations. However, if strain remains on scarce resource commodities that fire the global economy, which includes sectors of the world which are in growth mode, then we continue to posit, they threaten to infect the prices of goods ranging all the way to the finished segment… aka inflation. And that does not even include the impact of diluted dollars, dinero, and euro…

The Europeans are apparently already worried about that possibility, perhaps a bit early for them, given the burdens they've allowed to be weighed on Portugal, Ireland, Italy, Greece and Spain (the affectionately labeled PIIGS). The ECB Chief, Jean-Claude Trichet, spent a good deal of time talking about price stability and the evidence for and threat of rising energy prices, which he said warranted close monitoring.

That said, and despite our struggles, optimism continues in abundance in America, with the Reuters/Michigan index that measures the 12-month economic outlook up at 87 – that's a positive outlook. Well, if buyers could express remorse after spending like drunks on borrowed money for Christmas, then they certainly could have their hopes quelled by an economic recovery that looks to be a slow go at best. Our hopes continue to be bet on a country run by antagonists, who allow criminals to purge our intellectual property; who invite our companies to break ground on their land so that they can copy and contain their wisdom; and who threaten us on an ideological level. Yeah, that sounds like the road to prosperity to me…



Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE), Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), J.P. Morgan (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC).

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