Retail Reality

Consumer spending is 2/3 of economy. This implies that nearly 70% of the United States economy is dependent on people shopping. Consumer’s actions affect nearly entirely what happens to the overall economy. They (FED, Wall Street, Washington D.C., CNBC), will do and say anything to promote people to spend, preferably on nonsense discretionary crap, to help boost the weak economy and take us out of recession.

How will people en masse increasingly spend when unemployment is at a 27 year high? As a logical investor with critical reasoning, ask yourself: will people spend on essential items (food, toothpaste, shampoo, gasoline, diapers) or will they spend more or reduce spending on non-essential discretionary goods (scented candles, new wardrobes, a 5th sweater, redecorating living rooms, a 3rd plasma TV, new towels and sheets, fine wines, margarita mixers)? Prudently, people with jobs will cutback on spending in the event they may lose their job. I doubt the unemployed will be shopping for scented candles and a pewter incense holder for the newly redecorated guest bedroom.

My question is how is Tiffany (TIF), Urban Outfitters (URBN) very near its all-time high (in this economy!), Kohl’s (KSS), Abercrombie and Fitch (ANF), Target (TGT), Nike (NKE), Under Armour (UA), The Gap (GPS), Starbucks (SBUX), Retail Holders ETF (RTH) all at new 52 week highs? This isn’t even a comprehensive list. Why are Wal-Mart (WMT) and McDonald’s (MCD) not at the same 52 week highs (I ask this question rhetorically)? Note the former list of 52 week high stocks sell primarily discretionary non-essential goods (scented candles as I will say to characterize unnecessary crap that people don’t need to drop a dime on). Both WMT and MCD sell more essential products priced at value for the consumer. The former stock list has the antithesis of this: all goods priced at premium margins selling crap (scented candles) that people don’t require. Wal-Mart for instance sells groceries (essential goods) and MCD won’t rip you off to have a meal or coffee. Both WMT and MCD were at their 52 week highs when the DOW was nearly 1,000 points lower than it is now. Why? Because Wall Street sentiment was that MCD and WMT are recessionary stocks that will do better in a recession as people will have less money and buy only what they need with some possible limited discretion spending (loose fun spending) at a WMT and eat out at a McDonald’s. As both offer value people with less money will go there as they are watching their pennies. But now that we are out of recession as Elmer FED Ben Bernake (Pancke) said
http://www.wallstreetwrath.com/2009/10/double-dipstick-recession.html
people just have endless amounts of money to spend (I suppose from all the unemployment checks) that they no longer need the value offerings at WMT or MCD, but they can now pay up for high margin goodies like $25 t-shirts from Cambodia and a scented candle at Urban Outfitters.

Billy Ray Valentine joked: “Hey I don’t need to pay a fair price, I’m rich b/c the DOW went up and this makes me feel good so I think I’m rich, so I can go to Tiffany’s and buy a diamond while wearing my True Religion Jeans (TRLG) (also at a 52 week high and near its all-time high), in my new Nike’s and a Cambodian flannel shirt that cost $60 bucks at ANF, while drinking a not so fairly priced Starbucks coffee. I just love my Saturday’s! Only the hoi polloi go to Wal-Mart and eat at MCD.” Presumably the stock market says at 27 year record unemployment the opposite of what is logical is true. People are so wealthy from the wealth effect of the S&P 500 that they can afford to go back to their reckless spending habits and buy crap they certainly don’t need. It is the American way after all. Yuck, and this is why I live in Turks and Caicos.

Someone explain to Shrimpton the newly minted Wall St. myth they are selling of the jobless recovery. Are these people spending or are they going to spend?

http://www.businessweek.com/magazine/content/09_42/b4151032038302.htm?chan=magazine+channel_top+stories

How is the retail index back to where it was? Market manipulation (you will see a theme of this on wallstreetwrath.com and just how the Fed does this will be explained). So if the retail stocks are up people will presumably spend more? Feel good so go shop at Tiffany’s and Kohl’s because the stock prices are up? How is this rational and possible? As unemployment is increases to 27 year highs people are spending as much as they were last year or even 2 years ago (at the market and economic peak)? The ‘resilient consumer’ as CNBC touts about 800x per day? The “resilient” American consumer is like the Michael Phelps of spending with endless endurance and speed to generate cash to spend as fast as that guy swims. I guess the unemployed have more time to shop as they aren’t at work. Are you spending as much as you were before? This is yet another example of how the stock market has a loose correlation to the realities of the economy.

Read these reports that are slightly more tied to reality because they aren't from a Wall Street Investment Bank. I would consider these fairly accurate reports as they are from Marcus and Millichap (the largest commercial real estate service firm in the nation). Where is all the retail spending here? Clearly the data from a not so much Wall Street source confounds what the stock market is saying. And by the way, in both these reports this is where the wealthy are. So if the rich aren't shopping to support the retail rents, who is shopping? Teenagers?
(copy and paste in a new window toolbar)

http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5006

http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5007

How does the illogical prevail? It always will in a fixed game. This will be explained more in a later article (how the market is rigged and fixed) and why what doesn’t make sense predominates the stock market.

But for now, downward pressure on WMT and MCD stock prices gives the illusion that the economy’s great and full of abondanza. If these stocks were at 52 week highs, as they were when the DOW and S&P 500 were lower, it would mean the economy isn’t so hot. Wall St. current sentiment is such that WMT and MCD stock prices perform better when the economy is in worse shape. The illusion that the economy is in better shape must prevail so these stocks will have down pressure on them. Therefore, when the arbitrary sentiment of fundamental logic finally hits the stock market, WMT and MCD will then be appreciated by Wall St. and the stock prices will act accordingly. When it’s again realized the economy isn’t in great shape these defensive names should hold up or decline less than the others, if not go back to their prior highs. Being defensive is a more conservative play right now given how far and how fast the market has run. And yes, I know that conservative is an anathema to Wall Street.