Confusing Consumer Behavior Debunked

Perhaps you were disturbed by the so-called disturbing consumer spending data reported last week. I know I was. However, I believe I have uncovered what was behind it, and I see a change in that same catalyst happening now for the better. Fresh data is verifying my view. Thus, I’m looking for consumer spending to be reported much improved in the months ahead. See more of this report here: Debunking So-Called Disturbing Consumer Behavior.

Security Sector	03-31-16 3:00 PM
SPDR S&P 500 (NYSE: SPY)	-0.3%
SPDR Dow Jones (NYSE: DIA)	-0.2%
PowerShares QQQ (Nasdaq: QQQ)	-0.2%
iShares Russell 2000 (NYSE: IWM)	+0.3%
Vanguard Total Stock Market (NYSE: VTI)	-0.2%
Financial Select Sector SPDR (NYSE: XLF)	-0.3%
Technology Select Sector SPDR (Nasdaq: XLK)	-0.3%
Energy Select Sector SPDR (NYSE: XLE)	-0.1%
Health Care Select Sector SPDR (NYSE: XLV)	-0.2%
Consumer Discretionary Select Sector SPDR (NYSE:  XLY)	-0.2%
Consumer Staples Select Sector SPDR (NYSE: XLP)	-0.5%
Utilities Select Sector SPDR (NYSE: XLU)	+0.4%
Materials Select Sector SPDR (NYSE: XLB)	-1.0%
Industrial Select Sector SPDR (NYSE: XLI)	-0.1%
iPath S&P 500 VIX ST Futures (NYSE: VXX)	+1.6%
SPDR Gold Trust (NYSE: GLD)	+0.6%
United States Oil (NYSE: USO)	-0.1%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. 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).

Take Heed: Retail Sales Alarm Tied to Debt Ceiling

The International Council of Shopping Centers (ICSC) produces its Weekly Same-Store Sales data every Tuesday. This week, the data seems to offer indication that consumers are concerned about the government shutdown and debt ceiling uproar. For the economy, this is critical as we enter the busiest buying season of the year. Furthermore, other consumer relative data over the past couple months has shown about as well as yesterday’s fad, so perhaps investors in the retail sector should take heed as well.

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.

The ICSC Tuesday reported that the pace of weekly same-store sales at retailers’ stores open for at least a year were notably softer. While Redbook’s year-to-year measure typically runs higher than the ICSC view, it also indicated a slippage in sales growth this past week.

	Week Ended 10/5	Week Ended 9/28
ICSC Week-to-Week Change	-0.1%	+0.2%
ICSC Year-Over-Year Change	+1.8%	+2.1%
Redbook Year-to-Year Change	+3.3%	+3.8%

While weekly data can be influenced by weather and holidays, the year-to-year comparisons seem to vet that possibility and confirm slowing activity. What we do know is different about this week is the fact that the U.S. government is shutdown, and more importantly for consumer spending, the media is making sure Americans know about it. In fact, the truly dire consequences of a debt ceiling debacle have been described by the President, the media and everyone else who could benefit from the attention as potentially “catastrophic” and likely leading to a deep recession. That’s not the kind of discussion that inspires Americans to go out and spend money.

Meanwhile, and just as concerning, I recently noted one Tea Party Congressman’s misguided disregard for the October 17 deadline as he discussed an October-end Treasury auction on television Monday. In my expert view, even approaching the deadline could insight rating agency downgrade of America’s sovereign credit rating again, and that is highly troublesome to me. If two rating agencies were to downgrade our credit, it would be equivalent in its impact to the economy as a real default on our sovereign debt. Passing the deadline is unfathomable to just about everyone but the sector of Congress I describe as holding this issue hostage. It’s my view that the stock and bond markets will begin to truly reflect panic on or before October 17 if it appears the deadline will pass. Depreciating financial securities affect the pocket books of every American with a corporate pension plan, and thus, affect consumer sentiment and spending.

American consumers already have enough reason to worry, given a still fatigued U.S. economy with its lagging employment recovery. Though, until recently, investors have been unfazed by most crises. Still, the really serious issues do finally garner investor attention. For instance, Americans have gotten used to upheaval overseas, but when it seemed we might get involved in another war, stocks started lower. The same thing is happening as this unreasonable bargaining chip is placed on the roulette table. In fact, it’s Russian roulette that the U.S. Congress is playing, with the full faith in credit of the United States at stake. It’s not an issue up for gambling, and yet it is being put into play today.

Consumers and investors are being made aware of that fact, no matter which channel they choose to watch or website they determine to read. And now that the consumer seems to reflect worry, a recently hot group of stocks is also reflecting it. Consumer discretionary and retail store shares have been market leaders this year, as our table below illustrates. It may be time to take profits.

Security	Since September	Year-to-Date
SPDR S&P 500 (SPY)	-1.5%	+16.2%
Consumer Discretionary Select Sector SPDR (XLY)	-2.4%	+24.7%
SPDR S&P Retail (XRT)	-2.8%	+27.8%
Wal-Mart (WMT)	-1.4%	+6.8%
Amazon.com (AMZN)	-3.0%	+20.9%

Wal-Mart (WMT) stands out in this table, and not in a good way. It has lagged the performance of the other four securities, including its online rival, Amazon.com (AMZN), which is up sharply this year but down the most over the last week. Wal-Mart is America’s most important brick and mortar retailer, but it has struggled on a relative basis of late. That is in part due to a September report that inventory was piling up at the megastore chain. The inventory issue was described by an executive of the company, as relayed by a CNBC report I witnessed, as a part of doing business in retail. However, I posit that if Wal-Mart, the destination of America’s poor and new poor, is seeing slower sales, then there’s a broad-reaching problem.

Chart at Yahoo Finance

Amazon.com (AMZN) is down after this report by Barron’s, but its valuation has been questionable for some time. If consumers are cutting back even at discounters, then we really have a problem, and so might shareholders of even Amazon.com and Wal-Mart.

Chart at Yahoo Finance

There are profits to be taken in the consumer and retail sector, as evidenced by the gains in the XLY and XRT securities this year. Furthermore, the month of October often offers disappointment, and can be a transition period due to the end of fiscal year for many institutional investment funds around this time. With important profits at stake now in the retail and consumer discretionary stocks, and with signs of consumer sentiment falloff and spending issue, investors in the segment should likely take heed and sell the group.

Economists should also note the warning signs in this critical driver of the American economy. If I may conclude with one informal point: I believe that any economist not advising government representatives today of the dire risk in dealing in the debt ceiling issue is an irresponsible economist wasting his expertise. It is up to the experts to cure ignorance about economic issues. I’m doing my part here.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumer Confidence Will Dive When 401K Statements Arrive

By The Greek:

The Conference Board reported that consumer confidence soared in June to a five-year high, but be careful, as this is only sustainable until passive investors receive their 401K statements next month. The consumer mood is greatly shaped by the personal wealth perspective.

The Conference Board reported the Consumer Confidence Index jumped to 81.4 in June, up from 74.3 in May. Some of the gain was due to improvement in the Present Situation Index, which rose to 69.2, from 64.8. However, a good portion of the improvement came on a gain in the Expectations Index, which improved greatly to 89.5, from 80.6.

I’m always wary of gains driven by expectations, as they are built on hope more than substance, and so can disappear as quickly as they come. In this case, that’s exactly what I expect to happen in a few weeks when passive investors across corporate America receive their 401K statements. The statements will show a disruption in the returns they had grown used to recently. Such disruption is especially important because Americans feel confident when they feel wealthy, as evidenced by the “wealth effect,” which is most often related to real estate values.

Market Security	June-to-Date	Year-to-Date
SPDR S&P 500 (NYSE: SPY)	-3.4%	+11.4%
SPDR Dow Jones (NYSE: DIA)	-3.0%	+13.3%
PowerShares QQQ (Nasdaq: QQQ)	-4.5%	+7.7%

As you can see, stocks have not done well in June versus the returns investors had gotten used to this year and last. Yet, consumer relative shares are higher today on the consumer confidence news, with the two top retailers online and on the street, Amazon.com (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT), up 0.1% and 0.5%, respectively today. Each of the two stocks has had a good run through the economic recovery of the last couple years. Furthermore, both Amazon.com (AMZN) and Wal-Mart (WMT) have benefited from offering lower cost goods into a still laboring economy.

Chart at Yahoo Finance

A second bit of retail data reached the wire today as well. The International Council of Shopping Centers (ICSC) reported its Weekly Chain Store Sales data. For the period ending June 22, same-store sales rose 1.1%, versus the prior week increase of 0.3%. On a year-to-year basis, sales were up just 1.6%, versus the prior week’s yearly gain of 2.5%. While inflation is low now, these growth rates are only just barely meeting rising prices, and that is not a sign of health, though possibly a good sign for Wal-Mart and Amazon.com, which cater to value shoppers.

For economists and market enthusiasts, the takeaway from the Consumer Confidence Index should be that this might not last given the new paradigm the Fed has laid out for stocks. In my weekly report at my blog, I warned investors to beware of dated data this week, which would provide false comfort to markets. This data point is not one of those as it is measuring a current period, but it is at risk of change near-term due to the likely change in consumer mood that should come with altering perspectives of personal wealth as 401K reports are received. So, in conclusion, I advise those made confident by today’s report to temper their enthusiasm.

Retail Relative Securities	June 25 Change 3:20 PM ET
SPDR S&P Retail (NYSE: XRT)	+1.8%
Consumer Discretionary SPDR (NYSE: XLY)	+0.9%
Macy’s (NYSE: M)	+1.1%
J.C. Penney (NYSE: JCP)	+4.0%
Nordstrom (NYSE: JWN)	+2.2%
Kohl’s (NYSE: KSS)	+1.8%
Sears (Nasdaq: SHLD)	+0.1%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Recession Signal - This Consumer Data is Alarming

By The Greek:

Bloomberg’s Consumer Comfort Index showed improvement today, but the abrupt change in the weekly measure is deceptive and perhaps simply influenced by pleasant weather in the population dense Northeast U.S. The index, while still deeply in negative territory, still reflects a troubled state of affairs. Furthermore, recent monthly measures of consumer sentiment have clearly shown cause for alarm, and for good reason.

Bloomberg’s Consumer Comfort Index improved for the week ended April 14 to a mark of -29.2. The magnitude of the 4.8 point improvement was unusual, only seen about 1.8% of the time. The gain was the biggest seen since December 2011, and the absolute value of the index was the highest it has been in five years. But there was a divergence in the groups of Americans measured, with lower income Americans remaining depressed. Considering that the real unemployment rate could be as high as 11.9% and real underemployment could reach 17.8%, this is an important segment of the nation today, and bigger than the government estimates.

Because of the divergence in wealth segments, I suspect the improvement could simply be the result of warmer weather in the Northeast. Obviously, I cannot prove this, but the cherry blossoms are blooming on 81st Street outside my window, and a pleasant feel fills the air.

Three component measures of the index gained last week, and the Personal Finances measure actually moved above the waterline. The tragic state of affairs is apparent nonetheless in the fact that most of the measures remain in deeply negative territory, with the index range from +100 to -100.

Component	Level
Personal Finances	+1.6
Current View of Economy	-54.7
Good Time to Spend	-34.6

Further evidence of the way consumers really feel today was provided by the most recent monthly measures of consumer sentiment. The Thomson Reuters/ University of Michigan Consumer Sentiment Index, reported last Friday, showed the index fell to a nine-month low in April. The measure of the consumer mood fell 6.3 points, to 72.3, the lowest it has been since July 2012. It caught economists by surprise, with the consensus forecast set at 78.5, according to Reuters.

Not long before Reuters’ reported on it, the Conference Board reported its Consumer Confidence Index for March dropped precipitously by 8.3 points to a mark of 59.7. Most of the decline was measured in expectations, which I have proposed in the past were raised after the U.S. government passed its debt ceiling and fiscal cliff tests. Those moves allowed stocks to rise in the first quarter, including consumer shares.

Security	Q1 2012
SPDR S&P 500 (NYSE: SPY)	+10.5%
SPDR Dow Jones (NYSE: DIA)	+11.9%
PowerShares (Nasdaq: QQQ)	+6.1%
Consumer Discretionary SPDR (NYSE: XLY)	+12.0%
SPDR S&P Retail (NYSE: XRT)	+12.8%

However, the declines seen in the monthly measures of the consumer mood probably better reflect reality, considering hopes were built on expectations and not the views of consumers about the present situation. What’s weighing on them today was verified to me by the simple statement of a simple friend, a gentlemen maintenance worker at my church, who said, “I don’t like Obama anymore.” I asked Vangelis why and he responded, “Because my taxes went up.”

The expiration of the payroll tax break was a failing of the government with regard to the fiscal cliff, and is weighing today on an already stressed American consumer. Furthermore, those 7.7 million Americans we are not counting today as part of the labor force are not employed (including the retirees), except for possibly undocumented work doing things like dog walking and odd jobs for cash. Such means of making a living is not going to inspire them to shop much. This situation must result in lighter consumer spending, and therefore, a slower pace of GDP growth. Indeed, even the Federal Reserve said a 1.5 percentage point drag could be expected for GDP this year because of the Sequester Spending Cuts and the payroll tax break expiration. Yet the Fed failed to include its own admission in its forecast this past March. This means a surprise could be in store when GDP is reported.

Retail Sales, reported for March last Friday, showed sales excluding autos and gasoline fell by 0.1%. Major retailers are no longer reporting their monthly same-store sales, and even that is indicative of bad times. Public companies are all the more likely to share good news and to keep bad news quiet if they can. The trend of many now joining the major names like Wal-Mart (NYSE: WMT) in refraining from such reporting could be an omen of a tough quarter ahead. The market share gains of discounters and bargain web retailers, like Amazon.com (Nasdaq: AMZN), Wal-Mart, Target (NYSE: TGT) and Costco (Nasdaq: COST) are indicative of the erasable era we live in. But what is troubling me most today is that these latest consumer mood measures show that how consumers really feel is alarming, and economic recession is all the more possible because of it.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Why the Week’s 4.7% Same-Store Sales Growth is Misleading

By The Greek:

It sounds fantastic! Retailers reported weekly same-store sales increased by 4.7% week-to-week in the period ending March 30. That is great news right? No, it’s not, and here’s why.

The International Council of Shopping Centers (ICSC) reported same-store sales rose 4.7% week-to-week in the March 30 period. On a year-over-year basis, sales were up 1.9%, though Redbook saw the yearly comparison for the period even better, at plus 3.5%. Perhaps readers suspect we might pooh-pooh the news by attributing the sales growth to discounters like Wal-Mart (NYSE: WMT) or to online sellers like Amazon.com (Nasdaq: AMZN), due to their stealing of market share from the Macy’s (NYSE: M) and J.C. Penney’s (NYSE: JCP) of the world. No, that’s not it. So what’s wrong with the numbers then?

Well, a peak at the prior week’s results offers a clue. In the week ending March 23, the ICSC reported same-store sales were down 1.7% week-to-week. The yearly comparisons were likewise poor, with sales only 1.0% higher according to the ICSC and 2.6% higher according to Redbook. The reason is really rather simple.

It’s about the Easter holiday and where it sits on the calendar this year versus last year. This year, Easter fell on March 31st, and last year it fell on April 8th. Sales were strong in the week of Easter and Passover because of the surge of seasonal sales tied to the holidays, not all of which are accounted for perfectly. Consider all the flowers 1-800-Flowers.com Inc. (Nasdaq: FLWS) sells and all the Easter Baskets CVS Caremark (NYSE: CVS) sells, all the Easter Bonnets Macy’s (M) sells and all the new dresses J.C. Penney (JCP) sells. Let’s not forget the Easter and Passover meals that lead families to gather together, and the necessary shopping at Kroger’s (NYSE: KR) and Whole Foods Market (NYSE: WFM).

For this reason sales picked up in the week before Easter as they do every year. From this understanding, we garner insight about next week as well, because last year the week incorporated Easter shopping and this year it will not. Thus, these same-store sales reports should show poor comparable results on a weekly and yearly basis when reported next Tuesday.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Recession Omen - Consumer Confidence Collapse on Payroll Tax Hike

By Markos N. Kaminis:

Tuesday’s consumer confidence report could be offering important insight into the real impact of the payroll tax break expiration. Confidence soared once politicians got out of the way of the stock market. However, as Americans noticed shrinkage in their paychecks, the consumer view changed. The government itself thinks there should be a 1.5 percentage point drag on economic growth as a result, but in a consumer driven economy, everything is at stake.

The Conference Board reported its Consumer Confidence Index for March Tuesday morning. The index, which had gained more than 10 points last month on new hope for stocks and the economy, shed all of its gains this month I believe on the reality of lighter paychecks. Economists surveyed by Bloomberg were expecting a slight slippage in the index, to 68.0, from the 69.6 reported in February. What they got was a far worse result, with the Consumer Confidence Index falling nearly 10 points to 59.7.

Stocks ignored the recession warning signal, with all the broader indexes higher on the day, as gold retrenched. However, the ignorance of the major indexes was in the shadow of the move of a broader grouping of stocks measured by the iShares Russell 2000 (NYSE: IWM), which was only fractionally higher toward the close. That was against the 0.7% gain of the S&P 500 Index at 3:30 PM ET.

Broad Indicator	Tuesday Through 3:10 PM
SPDR S&P 500 (NYSE: SPY)	+0.7%
SPDR Dow Jones (NYSE: DIA)	+0.6%
PowerShares QQQ (Nasdaq: QQQ)	+0.4%
iShares Russell 2000 (NYSE: IWM)	+0.1%
SPDR Gold Shares Trust (NYSE: GLD)	-0.3%

The Confidence Report showed that the consumer view for the current situation fell off. The Present Situation Index dropped to 57.9, from 61.4. Still, the news about the future was even worse. The Expectations Index collapsed to 60.9 from 72.4 last month.

In the past I’ve talked about the importance of the Present Situation measure versus the Expectations measure. We want to see improvement in the present situation to realize real economic gains. Stocks may move on “expectations” just as well though. Still, we cannot really consider this measure as a good gauge of the economy unless the overall gain is driven by the Present Situation Index. Expectations can change on a whim, for instance on the passing of the fiscal cliff or the debt ceiling issues.

The truth today is that Americans are seeing smaller paychecks because of the expiration of the payroll tax break. This was made real for me when last week I shared a meal with a maintenance worker from my church. Vangelis told me that he no longer liked President Obama, because his taxes went up. When Americans feel like they’re poorer, they are less likely to spend. With so many just getting by, a little less income makes a big difference. Also, the expiration of the tax break is not viewed as such, but as a tax increase by people who are not following the complicated news flow. Tax hikes have a way of killing spending, whether they are real or perceived.

Last week, I talked about the Fed’s economic forecast, which were hardly changed even despite their own acknowledgement that the payroll tax break expiration and the sequester spending cuts could burden economic growth by as much as 1.5% this year. I said The Fed’s Math Just Doesn’t Add Up. What might add up though is if consumers stop spending, as indicated by the sentiment result Tuesday. Then the Fed’s nearly unchanged GDP expectation for 2.3% to 2.8% growth this year could also be exposed. Make no mistake about it, in this consumer driven economy, the March message from consumers could signal a recession. I’ll be following this week’s GDP revision and Personal Spending data so you may want to follow along.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Seeing a Busy Black Friday

The latest weekly chain store sales data, reported Tuesday, were unimpressive in my estimation. However, I expect that bodes well for Black Friday shopping activity, and for certain retailers in particular.

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.

Black Friday

Heading into Black Friday, the state of shopping activity has been weak if not meek even. Year-to-year rates of activity have been barely edging out inflation. The latest data out of the International Council of Shopping Centers (ICSC) had the year-to-year pace up 2.5% for the week ending November 17, but some of those gains were due to Hurricane Sandy and its aftermath, with blockbuster business occurring in Northeast located Home Depot (HD) and Lowe’s (LOW) stores. We recommended those names, especially Lowe’s (LOW), just after the storm’s passing. After a Nor’easter struck just a week later, storm shocked residents of the highly populated region have certainly continued to stock up on emergency goods from Wal-Mart (WMT) and other big box stores so as to better prepare for the next big one.

Redbook also reports on year-over-year sales rates weekly, and had the same period pegged at an inflation trailing pace of 1.8%. Indeed, when looking back past the storm skewed data, this is the result we find. American consumers have slowed their spending, and where they haven’t slowed it, they’ve shifted it to better value, or discount stores like Wal-Mart (WMT) and Costco (COST), deep discount stores like Dollar Tree (DLTR), and bargain pushing web retailers like Amazon.com (AMZN) and eBay (EBAY).

Some might interpret the dragging rates of recent sales as a bad omen for the holiday shopping season. However, the promotional period, and especially its high profile Black Friday, should draw enormous numbers of shoppers this year because of it. In fact, I believe the soft rates of sales leading into the season are a positive indicator of what will happen on Black Friday. Bargain seekers will be out in force to get the best deals on the gifts they are compelled to buy for relatives and friends sometime before December 25th; so it might as well be Black Friday. The drop-off of activity leading into the sales season may simply be indicative of shoppers waiting for their big bargain opportunity.

Discounters like Dollar Tree (DLTR) have outperformed most department stores and specialty retailers over the last several years, which has led some stalwarts like Macy’s (M) and J.C. Penney (JCP) to strike out on strategic initiatives to save share. The results have been mixed, without a doubt. The issues of retail have been the result of the condition of the economy, with such long lasting excessive unemployment rates and underemployment realities. I’ve suggested that recent increases in consumer confidence indices have been superficial and questionable, and I believe those will fade if the fiscal cliff solution is not satisfactory for most Americans. I expect the fiscal cliff issue has damaged the economy already, and continues to do so with each passing day without an effective resolution.

In conclusion, I suggest investors take the latest slow rates of chain store sales as indicative of a positive result for Black Friday retailers, as long as those retailers effectively promote attractive sales and deals. The failsafe sellers will be those iconic brands shoppers have come to know as the deal-makers, including your Wal-Marts, Costco’s, eBays and Amazons of the space.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

America Confident in Romney

Consumer confidence has improved over the course of the last several weeks and months, and I believe one reason for it is traceable to something other than improved employment data. Stocks have held up relatively well through a challenging earnings season as well, and I think the same factor may be at play there. Over the course of the last several months and especially after the presidential debates began, Governor Romney has made inroads and gained in polling points. I believe consumers and investors are enthused about that, based on the trend in confidence measures and also stock prices.

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.



The latest and final Gallup Election Poll shows President Obama ahead among registered voters, though Governor Romney is leading among likely voters. Most importantly, Gallup’s final allocated estimate has Governor Romney getting 50% of the vote and President Obama receiving 49%. Obviously, that does not tell us what the Electoral College will do. Still, Governor Romney has over time gained the attention of prospective voters, and I believe that the various sentiment measures discussed here are somewhat tied to his rise in popularity.

The Conference Board’s Consumer Confidence Index
The Conference Board last reported its Consumer Confidence Index last week, on November 1st. The measure of consumer views improved to 72.2, from 68.4 in September. As has often been the case lately, the index was mostly supported by expectations for the future and not so much the view of the current situation. Because of that divergence, we might say that consumers perhaps anticipate a change in store at the White House. Because of the differences in economic and other philosophy between Governor Romney and President Obama, perception of the presidential election result could influence consumer confidence. There is another perspective to consider as well. Political views could sour the survey, as political adversaries to the incumbent express discontent about the current situation simply because of who is in charge.

NFIB Small Business Optimism Index
The National Federation of Small Business (NFIB) Small Business Optimism Index has followed a similar pattern to the Consumer Confidence Index. It has recovered more recently after a dip just before. It’s been a steadily improving measure since the depths of the Great Recession were reached, but it is still far from reflecting a sanguine situation. In its latest reading for October, the index actually slipped slightly, by 0.1 points to 92.8. That said, small businessmen likely favor Governor Romney on net because of the pressure he may remove with regard to healthcare and also red tape and taxation. It’s an arguable issue as to which candidate helps small business more on a tax basis, depending on what level of income you consider the qualifier to be for a true small business. However, when all issues are taken into account, it seems to me that Governor Romney has more small business support; though I want to stress that this is an assumption on my part.

State Street Investor Confidence Index
Ironically, and certainly adding doubt about the thesis of this report, State Street’s Investor Confidence Index dipped when it was reported last week. But while State Street’s measure of the risk held by institutions dipped dramatically, it was mostly driven by a decline in European interests. In North America, the regional index also dropped, but by a lesser 2.7 points, to 79.0. I believe the index captured the realization of inadequate corporate earnings led by marquee names like Apple (Nasdaq: AAPL), Caterpillar (NYSE: CAT) and others. Even so, stocks, as represented by the SPDR S&P 500 (NYSE: SPY), are only down 3.7% since marking their September 14 closing high.

Let’s See Action
When all is said and done, confidence doesn’t mean a heck of a lot if it’s not followed up by action. We already know that stocks have taken a hit, but have still held up relatively well through the earnings season. Well, that’s as long as you don’t look at the NASDAQ. The PowerShares QQQ (Nasdaq: QQQ) is down 6.8% since September 19. So what about consumers then? Are they backing up confidence with spending?

The answer is “not really,” which is seen in the weekly chain store sales data. The reports from the International Council of Shopping Centers (ICSC) and Redbook show sales hardly edging the rate of inflation on a year-to-year basis. The last Personal Income & Outlays Report showed consumer spending up by 0.8% in September, but that was skewed by higher pricing. The PCE Price Index was up 0.4% month-to-month. The last Retail Sales Report published in mid-October showed retail sales up by a robust 0.9% excluding autos and gasoline. However, we reported that the data was apparently skewed by Apple product introductions.

Wal-Mart (NYSE: WMT) is a barometer for spending because of its important market share in the U.S., but its accuracy is distorted a bit because of the chain’s low price points for shoppers. While we have warned that the stock’s success may not mirror its market share gains, due to its expanded valuation, we understand why it has expanded. Still, we cannot say America is shopping simply because WMT is doing well, at least not yet. Americans are buying what they need at the best price, and sometimes at the sacrifice of quality.

In conclusion, the Consumer Confidence Index clearly shows a divergence between current views and expectations. In that kind of scenario, we would expect shoppers to act cautiously. But if there is a tie between expectations for Mitt Romney and American confidence, then we should expect economic conditions to benefit should Romney win. In theory, a benefit could come through self-fulfilling prophecy. As Americans spend on high expectations, future economic conditions would reflect improvement, at least over the short-term. One thing is for sure, we will know for sure how American consumers feel about Mitt Romney should he be victorious today. Though, keep in mind that how Americans feel about Romney’s impact on the economy could be different than how they vote.

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