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Sunday Funnies: Retail Sales and Investors

Most of this past week the stock market was erratic. News from Asian and American Markets was generally positive, sending the indexes higher, until unsettling news from the European Union let the air out of the tires, resulting in 100 point swings of the Dow Jones Industrial Average, which ended Friday up about 50 points for the week at 10,850.36.

Each day started upbeat and then we would hear about Greek debt, bonds coming due, Germany pushing for IMF participation in any plan to help Greece. Finally when this looked to be settled, we then got news of economic turmoil in Portugal. This activity stimulated me to write the following recent commentary:

Continue reading Sunday Funnies: Retail Sales and Investors

Don't Put an Economic Recovery on Your Christmas List

For retailers, it doesn't get bigger than the holiday season, but even a raving success may not be enough to push an uneasy economy on the road to recovery. Basically, the retail sector has to do well to keep people from worrying more, but we'll all have to wait a while for some economic bliss. According to an MSNBC report, gift sales aren't as powerful as many believe.

So, here are five reasons why a great visit from Santa won't be enough to kick-start the economy:

Continue reading Don't Put an Economic Recovery on Your Christmas List

Retail sales rise more than expected last month

november retail salesThe retail industry got some good news today as the Commerce Department announced that retail sales rose more than expected last month.

Before today's report, analysts had predicted that we would see a 0.7% jump in retail sales last month, but the actual figures showed a much higher 1.3% increase during the month. This comes on the heels of a 1.1% increase in October.

Continue reading Retail sales rise more than expected last month

Consumers feel entitled to free shipping

Okay, so we all know retailers are looking for every holiday edge this holiday season. Consumer spending's been down, and the sprint to Christmas offers the last chance to pump up those Q4 numbers. They are trying out new ways to reach and engage shoppers, particularly via social media. But, the most effective way to bring new customers into the fold -- and keep them around for a while -- may be to pick up the shipping tab. It's pretty old fashioned, but it's best by test.

Once considered a bonus, a special effort, free shipping isn't really optional any more. If a shopper has to pay for shipping from one retailer, he may move on, knowing that plenty of others aren't charging for it. Rebecca Lieb, vice president at Econsultancy, a digital marketing news publisher, notes, "You're delighted the first time you get free shipping, but you expect it the second time."

And, free shipping shouldn't come with any strings attached, according to Shop.org's eHoliday Study (Shop.org is the e-commerce division of the National Retail Federation). Five years ago, 25% of retailers didn't charge for shipping during the busiest shopping day of the year. This year, however, 57% are planning not to hit their customers up for the extra cash, making this cost just another expense associated with running the business during the holiday season.

Continue reading Consumers feel entitled to free shipping

Healthcare, tech and energy to outperform in next 12 months

For the first half of 2010, almost two thirds of money managers are bullish, according to Barron's. In fact, 54% are bullish, and 5% are "very bullish." Responses suggest that the Dow Jones Industrial Average is expected to gain another 5% by the end of the year.

According to Barron's, "Today's bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession."

Continue reading Healthcare, tech and energy to outperform in next 12 months

Under new leadership, P&G begins to build a brighter future

As with the consumers to whom it sells, Procter & Gamble Co. (NYSE: PG) has weathered tough times in recent months. The Cincinnati company saw revenues fall and volumes squeezed (not unlike its trademark Charmin bath tissue) as recession-weary shoppers continued to rein-in expenses and begged off buying pricier goods.

Still, following a year in which the company faced one of the most difficult macroeconomic environments in decades, P&G surprised analysts Thursday by reporting fiscal first-quarter earnings of $3.31 billion, or $1.06 a share, compared with $3.35 billion, or $1.03 a share, a year earlier. Analysts polled by Zacks.com anticipated the company would earn just 97 cents a share.

Continue reading Under new leadership, P&G begins to build a brighter future

Four reasons we're stuck with high unemployment for a while

Some of the jobs that have disappeared through this recession are gone forever, it seems. Even when the market turns, and even gains momentum, we could be stuck with a fairly weak employment market for a while. The recovery will take longer than we'd like, putting more distance between now and the top of the next market run. We've lost 7.2 million jobs since December 2007, and the predictions of some economists that we'll get them back by 2014 may actually seem optimistic.

Unemployment is at 9.8%, and it's expected to clear 10% early next year. Then, we have the specter of a jobless recovery with which to contend. "Full employment" is often considered to be an unemployment rate of 4% to 5%, but it could be a while before we get there. The last downturn, following the dotcom bust, resulted in a peak unemployment rate of 6.3% in 2003 ... and we're already well past that.

Why is the recovery going to be such a grind? Check out the four major reasons after the jump.

Continue reading Four reasons we're stuck with high unemployment for a while

Consumer sentiment drops: savings and debt repayment are culprits

The recession is only over if you ask the right people. While some sectors are starting to see the light at the end of the tunnel, consumers remain concerned. It may be tempting to listen to the experts over the average Joe, but the former don't control 70% of the U.S. economy. So, as long as people are worried abou unemployment (which continues to rise), the levels of debt they carry and whether they're at risk of foreclosure, the recession will live on in the hearts of those who write checks and swipe credit cards.

Continue reading Consumer sentiment drops: savings and debt repayment are culprits

Stone & McCarthy suggest: Make it to March

It's going to get worse before it gets better, according to Stone & McCarthy Research. Early 2010 has "the more troublesome outlook," as the economy will have to walk on its own, the research firm says. This year, it's had a pair of crutches: tax credits for first-time home buyers and the cash-for-clunkers program. So, if the stimulus hasn't taken hold by the end of the year, the first quarter could be a bruiser.

The firm adds that "continued growth in aggregate demand" is needed, bringing the discussion back to consumer spending . . . which is where it will always land. We're likely to see the 3.2% growth rate from July through September drop to 2.4% at the end of the year because the crutches will have been gone. And, let's not forget that unemployment is expected to break the 10% level next year.

Continue reading Stone & McCarthy suggest: Make it to March

Recovery now more dependent on consumers than ever

Consumer spending may be down, but its share of U.S. economic activity has increased. So, we're now more dependent than before on the average Joe's open wallet to guide us out of the recession. A year ago, consumer spending accounted for 70% of the U.S. economy. Since then, it has edged up to 71%. The long-term average is approximately 65%.

The increase in consumer spending's share of the economy indicates that other sectors fell harder. Business and construction spending on new equipment have constricted at a record rate since 2008. This isn't unusual, though, as consumer spending tends to take a larger piece of the economic pie during downturns.

Continue reading Recovery now more dependent on consumers than ever

Consumers' wallets peeking open

Consumers are finally spending more, with September posting the first gain in more than a year. The International Council of Shopping Centers and Goldman Sachs (NYSE: GS) found that retail sales inched 0.1% higher last month. It doesn't seem like much, but a gain when you anticipate a fall is good news magnified. But, it came at the expense of great deals and other tools to entice somewhat hesitant customers into stores.

Kohl's (NYSE: KSS) and Limited Brands (NYSE: LTD) reported sales increases in September for stores open more than a year. J.C. Penney (NYSE: JCP), Macy's (NYSE: M) and Target (NYSE: TGT) posted declines, but they were better than expected. Delayed school openings thanks to a late Labor Day helped push to September sales that might have occurred in August otherwise.

Of course, all eyes are on the coming holiday season. The National Retail Federation forecasts U.S. consumer spending of $437.6 billion – up only slightly from $433.7 billion four years ago. So, we still have a lot of ground to make up before we can celebrate a recovery. As long as the situation is staying steady, though, we'll at least have a solid starting point.

Consumer debt declines for seventh month in a row

Consumer debt levels fell again in August for the seventh month in a row. Facing continued instability in the job market, people are paying down their debt, as a way to protect themselves. Savings are up, and borrowing is down – which could weaken the recovery. Consumer spending accounts for 70% of economic activity in the United States.

Total consumer debt outstanding dropped by $12 billion in August, according to the Federal Reserve, reflecting an annualized rate of 5.8%. Reality outpaced Wall Street's expectations, which were around $10 billion. In July, consumer debt outstanding fell $19 billion (9.1%), which was the largest in hard-dollar terms since 1943 and on a percentage basis since June 1975's 16.3%.

While consumer fear is playing a significant role, as a touchy housing market and dicey job situation leave little to lean on, the banks are also responsible for the change in direction. They aren't lending as easily, with stricter standards limiting the amount of credit available to consumers. You can't spend what you can't borrow.

Continue reading Consumer debt declines for seventh month in a row

Consumer confidence drops unexpectedly

consumer confidenceAs we continue to question whether or not America is emerging from the recession, one indicator that a lot of people are paying attention to is consumer confidence. Unfortunately, consumer confidence fell unexpectedly this month, as more and more people are worried about their jobs.

According to the New York-based Conference Board, its consumer confidence index dipped to 53.1 in September, down from 54.5 in August.

The dip ends a three month streak, and is being blamed mostly on Americans concerns over job security. The drop raises concerns over any economic rebound, and comes at a bad time for retailers that are gearing up for the upcoming holiday season.

Continue reading Consumer confidence drops unexpectedly

Short City Update: McDonald's: hold short; Fortune Brands: cover short

An update on two short positions: McDonald's Corporation (NYSE: MCD), recommended on June 26, 2009 at a price of $57.00, and Fortune Brands (NYSE: FO), recommended on the same day at a price of $35.56.

McDonald's: Hold Short. MCD's shares remain under pressure. The era of the 'frugal consumer' is well underway in the United States, to McDonald's detriment. There's also a trend away from standardized fast food, and toward local, 'roadside' hamburger joints and diners: they offer unique flavors and recipes, fresher food, and often atmospheres that can't be beat.

Continue reading Short City Update: McDonald's: hold short; Fortune Brands: cover short

Sunday Funnies: Pervasive bad advice

We keep hearing that consumer spending propels 70% of our economy and that we will not see real growth without an increase in consumer confidence, meaning spend, spend, spend. This is very bad advice! Let other people spend -- you should be saving!

This is a theme I have been hammering on all year and I will continue to do so. I believe this is so important to our personal and national long term health that any true investment discussion, be it on the web, radio, television, newspapers or magazines, is just blowing smoke if it is not a primary focus.

Continue reading Sunday Funnies: Pervasive bad advice

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Last updated: May 22, 2013: 05:34 AM

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