Let's not be confused by the numbers. Yes, retail sales jumped 2.7% in August, but they are still down twice as much from last year -- 5.7%.

Gas stations saw an increase of 5.1% due to the increase in oil prices.

Wholesale prices rose 1.7% in August, after falling 0.9% in July. But again, keep in mind that wholesale prices are down 4.3% from a year ago. This month's rise was led by an 8.0% jump in energy prices and a 23% spike in the price of oil.

2008's economy can be divided into two parts. The first is the period between January and July when oil prices ran up to $147 thanks to a speculative trade to short the dollar and buy oil and other commodities. The second part is the post oil's July peak where oil prices have featured a 60% to $55. Today's wholesale price report shows what happens to prices when supply exceeds demand and banks stop lending money to traders trying to profit from anticipated inflation.

Today's wholesale price report is a doozy. The Producer Price Index (PPI) fell 2.8% in October -- much more than the 1.8% decline economists had anticipated. The PPI decline was fueled (pun intended) by a 12.8% decline in energy prices in October. And as long as those energy prices keep falling, inflation will be in full downswing mode. (I am happy to report that I won my bet that gasoline would drop below $1.99 a gallon in Eastern Massachusetts by February -- I went to a station Sunday that charged $1.97.)

But there's more to it than simply declining oil prices. The entire economy was producing goods and services based on an assumption about demand that depended on easy access to debt. By shutting off the debt flow, goods are simply too expensive for consumers and businesses to pay the price. This means businesses will cut back on production and slash prices to clear their shelves of inventory. Then they'll shut down factories and lay off workers. And the lower demand from those poorer former workers will start the cycle anew.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

In today's market, the retail space is fraught with risk. High energy prices have crimped consumers' disposable income, and the housing slump has dented household formation -- a backbone of retail sales growth. Meanwhile, sluggish job growth is sending a signal that a U.S. economic slowdown is underway.

Hence, if one is to consider a retail play, it should be a well-capitalized company, with a demonstrated business model, and Costco (NASDAQ: COST) fits that bill.

Costco helped define the 'get it for wholesale' space and now operates 520 warehouses, primarily in the United States and Canada. (The company operates 30 stores in Mexico via a joint venture.)

Costco's philosophy differs from its competitors in that it focuses on a limited selection of national-brand merchandise and some private-label products. That laser focus, combined with buying direct from manufacturers and the company's bare-bones warehouses, enables the company to operate profitably despite smaller gross margins. The Reuters F2008/F2009 EPS consensus estimates for COST are are $2.98/$3.39.

In today's world, people rarely carry large amounts of cash on them. People have credit cards for large purchases or even debit cards to access their checking accounts. ATM machines are on every urban street corner in America. But what happens when you're not at home in that urban setting? What do you do if you're on vacation?

I recently went to the Caribbean with my wife. We knew that most places would accept our cards but we questioned the exchange rate. Eastern Caribbean money isn't that strong in comparison to the U.S. dollar ($2.60 EC to $1 U.S.) and we knew that our credit cards would charge a service fee for purchases made in EC dollars. My wife, whom I consider a "world traveler," has always gone with the traveler's checks and prepaid card route. She would cash the checks in at the hotel and use prepaid cards so she wouldn't put her personal accounts at risk. I always used my credit card on vacation. Before our trip, I was sent to the bank to pick up a pair of prepaid cards and some traveler's checks.

The July issue of Money magazine has a great article regarding the best way to keep exchange costs to a minimum with today's weak dollar.

I found out she was completely wrong - a month too late.