Surprise! Retail Sales Fall
An anonymous (but known) friend writes me:
“I’m watching CNBC for the first time in about two weeks this morning. They seem to be actually surprised that retail sales dropped in March
Lets see, economy shrinking at 6% rate, unemployment climbing to 25 year high, 600K+plus jobs lost, car sales off 50%, and every discretionary retailer reporting shitty results.
AND SOMEHOW IT’S SURPRISING THAT RETAIL SALES FELL?”
Peter Bookvar fleshes out the details:
Retail sales were weaker than expected with the headline figure dropping 1.1% and ex autos dropping .9%. Digging beneath the headline, there were declines in most categories including motor vehicles and parts which fell for the second straight month even as unit auto sales rose for the month. Furniture fell, electronics got shellacked and there were further declines in clothing which had seen a bit of a rebound thanks to the early year discounts. With many of those discounts abating as the year progresses, the conversation will again return to whether the consumer is in a place to pay full price for goods that were very recently 70-80% off. Additionally, both non store retailers and department stores saw declines meaning people weren’t going out to buy stuff and didn’t buy stuff while staying home either.
On the inflation front, headline PPI fell 1.2% while core PPI was flat. Both readings were less than expected. For some reason, people have gotten optimistic about short term inflation but as I noted last month, the prospect of further price declines as we enter warmer months is very real and that prospect has not abated at all. There continues to be deflation in the pipeline with intermediate goods dropping 1.5% and crude goods, those at the earliest stage of production, dropping .3%. On the crude goods front, the .3% decline is a bit less of a price drop than we’ve seen lately so maybe there will be a let up in the future in terms of the deflation on this indicator. But for now, producer prices continue to contract and as best as I can tell, they will continue to do so for the immediate future.
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April 14th, 2009 at 2:54 pm
The retailers are one group that are not going to be able to fudge the earnings this time.
We are going to see a lot of bricks and mortar retailers go BK this summer.
This is not good for the banks, or the REITs either. QID and SRS.
April 14th, 2009 at 2:56 pm
Thong sales in the NY area were way off…
April 14th, 2009 at 3:00 pm
The idiocy and lack of any common sense by the MSM continues to know no bounds. I continue to find THIS trend rather “shocking”. WTF is it going to take for these people to get a freaking clue?
Does anyone have any retail short ETF ideas? There’s no way that Best Buy should be anywhere near their 52-week high.
April 14th, 2009 at 3:00 pm
Right on cue – an hour left in the trading day, and here comes the push. I looked at my clock and watched it hit 2 p.m. and then looked at the indices – of course they’re struggling to come back! It’s the final hour……
April 14th, 2009 at 3:05 pm
Manny:
As you know, I am just waiting in short term cd’s…but I agree with your point of view and much of what you write…However…sometimes we little guys just can’t fight the market…even though we believe that whoever or whatever is buying the market is wrong…
I do sleep very well each and every night…
April 14th, 2009 at 3:06 pm
Don’t know how much I buy this PPT thing anymore, if they are that predictable than there would be hedge funds moving big money to profit off them and counter the trend. Think a good part of these 3pm moves is more of a base psychological thing, no one wants to hold their shorts overnight.
April 14th, 2009 at 3:07 pm
I agree, Bruce. That’s why I’m slowly moving much of my portfolio over TIPS. Still have a big chunk in a high yield savings fund making no money, thanks the to fed but at least I’m not losing it. If we get more of a “rally”, however fake and manipulated it may be, I’ll be mostly selling much of my remaining longs into it. What’s the point of staying in when everything is so obviously manipulated?
April 14th, 2009 at 3:07 pm
Well, BR, one restaurant doing big business in Seattle was Todai. I see they have a location in Manhattan/Murray-Hill. If you and/or Mrs. B-P enjoy fresh seafood, sushi, salads, fruits, etc., this buffet-style “all you can eat” may well be worth checking out. Dinner in Seattle was $28 + tax, and was worth every penny!
http://www.tripadvisor.com/Restaurant_Review-g60763-d636680-Reviews-Todai_Sushi_Seafood_Buffet-New_York_City_New_York.html
April 14th, 2009 at 3:22 pm
@ Mannwich
to your question-
Proshares SZK- ultrashort consumer goods
Proshares SCC – ultrashort consumer services
April 14th, 2009 at 3:24 pm
Thanks ahab. I’m going to check them out. Do you have any opinion on either?
April 14th, 2009 at 3:31 pm
Mannwich-
never traded either- pretty much been in the SDS and QID camp. Have steered clear of banks- but might take another look before the week is out.
here is all proshares ETF’s – longs and shorts
http://www.proshares.com/funds
April 14th, 2009 at 3:39 pm
Mannwich–
If I could find it, I’d give you a reference, but for now, you’ll just have to take my word that about two weeks ago the WSJ actually ran an article in the Money and Investing section about the 3:00 pm lift stocks had been seeing. They attributed it to hedge funds waiting on the little guys to get cleaned out in the morning. There was even a chart of sorts showing how well you could do just by placing orders right before 3:00 pm. I’ll try again to find the article, but their on-line stuff is damn near impossible to navigate, especially if its more than a day or two old.
April 14th, 2009 at 4:01 pm
Ah, here is where it gets fun!! Not only did retail spending drop more than expected, its drop offsets the reduction in inventory–so even though inventory levels dropped by a tenth or something, the reduction in demand will mean that additional layoffs are probably forthcoming as inventory to sales ratios are still expanding! Thank you Rosenberg at ML for your continued work on staying on the story.
Now that the market has “built in” good earnings across the banking spectrum, these pups should trade down on fact–following the up on rumor, down on fact thesis. Just as in the bleakness of Feb, the bulls said “all the Bear’s cards are on the table”, we can now say that “all the Bull’s cards are on the table” with only earnings and news to refute their blind hopes. The beauty is that they ran the market up to within 10 points of heavy upside resistance and they’ve made options cheaper by getting the VIX down to mid-30′s at one point.
April 14th, 2009 at 4:09 pm
Agree that it is almost Bear time. Just a warning not to bend over in front of JPM earnings.
Dimon seems like one of the smarter weasels out there, but after he is done all that remains is C.
April 14th, 2009 at 4:09 pm
Mannwich @ 3:24
For me personally, QID, SDS and FAZ is quite enough choice. Also, I’m short QQQQ in my taxable account.
April 14th, 2009 at 4:12 pm
@ Mannwich said,
Does anyone have any retail short ETF ideas? There’s no way that Best Buy should be anywhere near their 52-week high.
why not just short some of the individual names using puts instead of looking for an ETF? I have been buying puts the last two weeks as I’m getting bearish now again and I have a net long account and had planned on holding several of these companies for a couple of years, so I’ll just buy puts, buy some more fixed income, keep more cash on hand than normal and enjoy the summer. I’ll overweight equity again in September/October, unless something needs to change that.
You can’t really buy and hold any of those ETF’s, and I know you aren’t much of a day trader so if you are getting bearish on a certain sector, I think the best way to capitlize is to just use options.
Further, that zerohedge link has been floating around here, if what he says actually plays out, then you won’t want to be in any leveraged ETF’s because both long and short are going to be all over the place and you had better be able to pick the right moment to buy or sell. then again, I’d have an easier time taking that site seriously if the name of the poster wasn’t Tyler Durden.
check out shorting Macy’s for example (M) In the big Macy’s close to my house, everything is marked down 50-80%. And I mean everything, suits, shoes, t-shirts, watches, perfume, make-up, and the small kitchen appliances upstairs. I get a flyer from them in the mail every day about some once in a lifetime weekend sale, the only problem is that people are going to catch on that the once in a lifetime sale is every week. Jos A. Bank is really good at this. I don’t believe for a second that stock (M) should have more than doubled off the low nor do I think the 52 week high of around $27 was an indication of the real value of the company. If the store close to me is any indication of that company nationwide, they also are going to have serious inventory problems. I never looked at the stock but this might be a good starting point for shorting ideas. I agree with lefty above, I think lots of retail companies are going BK in the next 2 years. Like the banks, we’ve just got too many of them. I’d look for lots of debt on the balance sheet and then I’d just use some ground floor observations to see what the sales are like at the company. I’d also try to look at retailers that have a large exposure in some of the weaker real estate markets, or some of the higher priced markets, that haven’t gone down yet. IMO that’s about as much homework as you will need to do on something like this.
For me I’d focus more on apparel for retail than something like BBY and I’d focus not high end, but that teenage middle ground like Abercrombie, or Coach. The new line from parents to that age group is either that thrift is the new “in thing” or “I don’t have a job so I can’t give you money for $80 jeans”
April 14th, 2009 at 4:17 pm
@Mannwich,
I just put up a post on here in response to your question but for some reason it’s not showing up.
I wouldn’t use ETF’s to short here, especially in you are trying to short retail.
IMO, you are better of using options to short something like M.
April 14th, 2009 at 4:19 pm
Thanks ben22. I might look into doing that. Might just short an individual retailer or two here.
April 14th, 2009 at 4:21 pm
Good grief, Bloomberg just had Brian Wesbury on a short time ago. Why do these channels trot out the same usual suspects who’ve gotten it wrong over and over and over again? What is the deal with this? Is it a contrarian indicator race between the MSM? I am flummoxed by this.
April 14th, 2009 at 4:25 pm
This is what I have been doing in my own accounts for about two weeks now buying puts. I’ve flipped bearish so I’m buying puts against my net long portfolio, raising some cash and buying some bonds to head into the summer with, TIPS mainly like some other people here but I own a little bit of HY as well. To me, there are a lot of reasons to flip bearish right now, but a real simple one is that I believe going into today roughly 85% of the stocks on the S&P were trading above the 50 day MA, last couple times this has happened it set up a big down move. The market completely ignored the liar report from GS today, this thing is getting really tired.
macy’s as I mention above, seems like an ideal candidate to short right now. That stock has more than doubled from the lows, and the 52 week high of ~$27 is not representative of the real value, that was way overblown IMO. In the store close to me, everything in it is marked off 50-80% so margins are/will be squeezed big time. I also think they will have an inventory problem.
I would suggest focusing on apparel instead of a company like Best Buy for retail short opps. If I wanted to get real short retail here I’d start by finding the companies with the most debt, then look for those that have heavy exposure in the worst real estate markets, or in markets that are exposed to higher than average job losses that haven’t had a real estate meltdown yet. Then I’d narrow those down to the one’s that had the biggest stock increase since the run up and I’d short those.
April 14th, 2009 at 4:28 pm
Jeff,
w/this: “Why do these channels trot out the same usual suspects who’ve gotten it wrong over and over and over again?”
remember.
Scarcity is Everywhere found. Even the Supply of Ho’s has its Limits..
April 14th, 2009 at 4:32 pm
I actually haven’t seen Wesbury on tv in a long time. That guy is so clueless. He writes up a little one pager on that first trust site I think every Monday or Friday. It is so funny going back and reading them now, lots of people got this thing wrong, he happened to make them all look good though by getting it REALLY wrong.
April 14th, 2009 at 4:35 pm
hoffer-
Ho’s? are you talking about gardening instruments- rakes and such.
April 14th, 2009 at 4:38 pm
Quality advice there from the benster. Retail is very heterogeneous and HD etc were already beaten down. The results from the women’s apparel trade have been pretty awful.
@ Bruce: Actually thong sales are holding up well in NYC, as Manhattan realtors retool for pole dancing.
April 14th, 2009 at 4:40 pm
retool…..
April 14th, 2009 at 4:43 pm
INTC down after hours.
Quelle dommage.
April 14th, 2009 at 4:45 pm
leftback @ 4:38
“thong sales are holding up well in NYC, as Manhattan realtors retool for pole dancing”
Any good derivative plays?
April 14th, 2009 at 4:46 pm
ahab,
yes, but, no, that would require an “e”, as in Extirpate, as in what should happen to the Presstitutes that Jeff was giving rise to.. (:
http://www.theleftcoaster.com/archives/005584.php
http://crooksandliars.com/2008/05/01/military-general-propaganda-story-col-allard-admits-conflicts-of-interest/
April 14th, 2009 at 4:47 pm
See on CNBC they brought back Joey “back of doughnuts” Battagilia.
April 14th, 2009 at 4:47 pm
bag of doughnuts..this what happens when it finally rains a couple of inches!
April 14th, 2009 at 4:54 pm
INTC down. AMD and TXN going along for the ride.
Expecting former realtors to be going down as well if the spring selling season goes badly.
I wonder how thongs are in Southern California? It’s much warmer there.
April 14th, 2009 at 4:57 pm
So what you’re saying is that there is a real economy out there separate from the momentum trading of Wall Street?!
April 14th, 2009 at 5:09 pm
is there a Joe Battagilia or are we talking about Joe Battipaglia? I always though Battipaglia was pretty much on the money with his comments on Kudlow- I haven’t caught the show in a while because I can’t stand to hear Kudlow talk about Goldilocks and mustard seeds- he is especially unwatchable when the market is rally mode- which means that he doesn’t give a shit about the economy or market fundamentals as long as the stock market is going up- if he did he would send a word of caution with every market move up- something like: Watch the fuck out- you may lose all your ass by being long.”
April 14th, 2009 at 5:10 pm
jim Goldman CNBC just mentioned the economy might be bottoming (during his Intel report) in the 3 or 4Q, 3Q is only 45 days away
Everybody else is pushing the recovery back into 2010 but Jim says 3Q?
April 14th, 2009 at 5:16 pm
Battipaglia has been pretty reasonable in recent years and one of the saner voices on Kudlow during 2007.
He was, I gather, something of a mindless Permabull in the dot com era where he earned Barry’s wrath and his nickname Baggadonuts.
Market will be down again tomorrow and then we will get a Dimon bounce. Beware the ghost of JP Morgan. After that we can probably sell the crap out of it again.
April 14th, 2009 at 5:16 pm
Melissa Lee is cute but why in god’s name is she on fastMoney?
April 14th, 2009 at 5:32 pm
@ rktbrkr-
I have to disagree and agree- to first your observation and then your question.
April 14th, 2009 at 5:42 pm
rktbrkr- She’s not all that cute, and I believe she’s on fast money cause she agreed to read emails on air and to bring fast money into the golden age of twittering, as per Susan Krakowers wishes, you know her better as one of the top gun cnbc producers who use Olympic 100 metre dash clocks to time the guest segments down to 1/1000 of a second. They haven’t quite got it down to a science though, as I’ve actually heard several guests actually complete a full sentence before being told they were out of time.
April 14th, 2009 at 5:45 pm
Sorry for using the word ” actually” twice in my last sentence on the prior post. I’ve been using BR’s original editor from McGraw Hill.
April 14th, 2009 at 5:52 pm
I wrote a long spiel about how Ritholtz is wrong in being “fundamentally optimistic” about the economy, but I will save these thoughts for the day job.
All I really wanted to know was: What happened to otto?
April 14th, 2009 at 5:58 pm
Think Otto got laid off by the PR firm…
(or more likely reassigned to a new case, he seemed pretty good at his job.)
April 14th, 2009 at 6:02 pm
rktbrkr – She turns me all the way up. She’s been downplaying it lately but those lips are 4 stars. She went to Harvard.
April 14th, 2009 at 6:11 pm
I believe otto was temporarily put on probation here at TBP. I hope Barry didn’t ban him outright though. We need some healthy disagreements on this site.
April 14th, 2009 at 6:19 pm
Something about otto just didn’t track legit.
April 14th, 2009 at 6:20 pm
I think otto and franklin411 are really the same person.
April 14th, 2009 at 6:26 pm
otto’s other name is Tiny Tim. franklin’s is Blankfein….
April 14th, 2009 at 6:28 pm
That was my other theory.
April 14th, 2009 at 6:29 pm
The otto persona is scripted with a backstory to provide verisimilitude. The franklin persona tracks much younger, IMO, quicker-on-the draw.
April 14th, 2009 at 6:30 pm
Father-son combo?
April 14th, 2009 at 6:35 pm
Mannwich — SCC trades pretty thinly; it can make you break out in a cold sweat trying to sell more than a couple hundred in a hurry.
swmod52 — hmmm… moreso than Betty on Bloomberg?
http://www.newsbios.com/images/liubetty02_30_2.jpg
or, better, Lucy?
http://www.eforu.com/gallery/lucyliu/gallery1.html
April 14th, 2009 at 6:41 pm
No Otto was definitely senior, franklin411 might work for him though.
Think they both were/are a little too active to be PR flacks honestly, although I certainly wouldn’t be surprised. The relevant contrast though is to the sort of responses you see when an anti Larry Summers post pops up on a big financial blog. That stuff is clearly professional, nearly instantaneous strongly worded defenses of the man by new commentors. They don’t seem interested in dialog though, just establishing a strong statement in defense of man early in a thread. I would suspect they see engaging in longer dialogs as an unproductive use of their time.
April 14th, 2009 at 6:41 pm
Can’t I go to class without y’all worrying about my eternal soul?
April 14th, 2009 at 6:44 pm
I actually liked Otto’s banter- hope he didn’t give up on the site- I disagreed with him most of the time but I have to agree with Mannwich that it was good to get the other side- a bit “arrogant” at times though.
@ KJ Foehr-
I checked SCC earlier- exactly- not a lot of volume- all retailers though, in answer to Mannwich’s earlier question.
April 14th, 2009 at 6:48 pm
Just ribbing you a bit, ole franklin.
April 14th, 2009 at 6:48 pm
franklin is a young lefty with a thing for Geithner, Otto was older because he indicated he was in Berlin (West Berlin actually) in the sixties. Otto appeared to be into RE because I think he mentioned he had some rental properties that he was refinancing- probably retired.
April 14th, 2009 at 7:03 pm
you have to check this out- look at the difference in these two headlines- CNBC vs. Bloomberg
http://www.cnbc.com/id/30208585
http://www.bloomberg.com/apps/news?pid=20601087&sid=abxniWdsSqJY&refer=home
April 14th, 2009 at 7:45 pm
Much thanks to Barry for being virtually the only one to post on what I thought was today’s biggest story. The mustard seeds were an illusion and the threat of deflation ain’t over yet.
April 14th, 2009 at 7:59 pm
@Franklin 411:
Actually, I like having you here…most of the bubbas I run with think similarly to the way I do…I appreciate your point of view…it won’t change mine, but I will at least think carefully about what you say, if you have good points.
And if you are Otto’s son, well, someone has to be…
April 14th, 2009 at 8:06 pm
@ahab
One of the reasons why I avoid CNBC. That just doesn’t make sense.
April 14th, 2009 at 8:41 pm
@ AmenRa
sad isn’t it
April 14th, 2009 at 8:46 pm
@ahab
Similar to last week when Maria announced Alcoa beat estimates…until someone reminded her that numbers in parentheses are negative and that Alcoa missed estimates.
April 14th, 2009 at 9:05 pm
repost from another comment on here:
Reggie Middleton on Goldman Sachs earnings has a good breakdown of GS earnings and how they have more risk than people expect.
April 14th, 2009 at 9:43 pm
@all:
No worries!
April 14th, 2009 at 10:14 pm
I appreciate all the different points of view, keeps everyone honest. I notice a tendency of Kool-Aid being passed out once a group devolves to consensus.
INTC is disappointing me, I was planning on what to do with my being taken to cash on it. It’s a $13-14 dollar stock that I thought wouldn’t make it to $15. Then the rally lasted longer than I thought.
April 15th, 2009 at 12:18 am
I just wanna know ..what’s glod gonna do? Had some small success with the PM miners as a “quasi-hedge”, after getting a trifle burned on SDS.
April 15th, 2009 at 7:32 am
Amenra, even after she had been clued that Alcoa’s numbers were losses maria still insisted they beat forecasts, she should be back delivering pizzas. Can’t wait to read CNBC headlines that all banks are healthy and then buried in the text “more US funds are expected”.
April 15th, 2009 at 8:45 am
http://money.cnn.com/2009/04/10/news/economy/retail_malls/index.htm?postversion=2009041411
Malls shedding stores at record pace
“Unfortunately for retailers, it’s only going to get worse, according to Reis’ forecasts….”
April 15th, 2009 at 10:42 am
On the inflation front, it’s worth pointing out that deflation is probably worse than this estimate. Half of the non-food, non-energy increase was due to tobacco (per AP), and the price of tobacco jumped 11% because a new federal tax on it went into effect (the tax was passed as part of the Children’s health insurance bill).
So, deflation is probably worse than these numbers suggest.
Just a little more happy news.