Leading into the holiday period, the data — and by data, I refer to actual sales numbers, and not surveys, gut feelings or instincts — was strongly suggesting that the 2010 orgy of consumerism known as the holiday shopping season was likely to be stronger than expected.

The first clue I had of this was the Amazon sales from TBP. The embedded code of each link allows me to track click-throughs and purchases. All year long, it has been running significantly higher than 2009. (I’ll post some charts later this week).

Of course, plenty of people were stuck looking backwards. They gave tortured reasons as why this was not going to be a decent season. Call it a classic case of confirmation bias, these were the folks who simply refuse to acknowledge any improvements in the economy. These analysts seem to be shell shocked from the collapse; you should feel free to to do what you like, but once I recognize someone is caught in a negative loop, I tend to avoid their work until they prove they have some objectivity.

Why were the improved sales not a surprise to those people paying attention to the data? The negatives — weak job gains, housing overhang, consumer deleveraging, terrible municipal finances — were already well known all year. Even Oil over $90 was a not a big deal — it seems to have been in the $75-85 range for so long that gasoline over $3 had little shock value.

The newest data included more positives: Improving job market, equity gains, and an upcoming two percentage-point cut FICA payroll tax holiday in 2011. The 90.2% of the workforce that have jobs feel more secure (if they didn’t get laid off by now, they probably won’t). There is also a sense of widespread Recession fatigue; people are tired of living in bunkers, and are coming out to play again.

Lets consider the actual data, and what it might mean going forward:

• U.S. retailers’ 2010 holiday sales (excluding automobiles) jumped 5.5% — the best performance in five years, versus 4.1% in 2009 and down 6.1% in 2008

• Total holiday sales were $584 billion from Nov. 5 through Dec. 24, with notable increases starting as early as the second week of November

• Online seasonal sales up 15.4%; This is against an ongoing rise in online sales

• Apparel grew 11.2% over 2009 (-0.4%), with Menswear up 10.5%, and Women’s Apparel plus 5.6%

• Electronics lagged in dollar terms, growing 1.2% vs a 4.6% decline in 2009. Declining flat panel TV prices is a suspect

• Furniture sales were plus 3.8% vs minus 2.2% in 2009.

• Jewelry gained 8.4%

• Luxury (ex-Jewelry) grew 6.7% versus falling 0.9% last year.

Two last interesting datapoints worth mentioning:

Via the WSJ: 2010 consumer spending was 68.6% of the economy. This reflects an increase — yes, an increase –  from 66.5% in 2007. The reasons are 1) A sharp decrease in businesses spending; 2) The ongoing contraction of housing within the overall economy — currently at its lowest level since World War II.

Last, the US still has too large of a retail footprint — 40 square feet of retail space for each person; that is the most per person in the world. As I first noted in several speeches back in 2008, that needs to come down appreciably.

All told, a pleasant improvement over prior years . . .


Anecdotal Evidence: Shoppers Out in Full Force (November 21st, 2010)

Improving Holiday Sales Reflect Economic Recovery (November 29th, 2010)

SpendingPulse 2010 Holiday Wrap-Up Report
MasterCard Advisors’ SpendingPulse, December 27, 2010

Category: Consumer Spending, Psychology, Retail

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “Retail Sales Increase Most in 5 years”

  1. Petey Wheatstraw says:

    From TBP Quote of the day (above, right column):

    “There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.” -John Kenneth Galbraith

    I’d say that this would be a great number, if not for the very high probability that it was financed by consumer indebtedness (and, bank finances being what they are, ultimately, by an increase in our national debt).

    The future and the past, being what they are, require that we look to the past in any attempt to foretell the future.

    We have initiated the action, but the reaction has yet to manifest itself. Until then, the irrationally exuberant will dismiss the realist as nattering nabobs of negativity.

    Our incredibly wonderful present was purchased with debt, which we agreed, but will be unable, to settle in the future.

    I predict, based on recent past events, that we have planted the seeds of “whocouldaknowed.”

    Once again, we have foolishly tightened the noose of debt around our own necks, and in doing so, have played into the hands of the Corporatocracy.

    We’re fixin’ to find out if a hangover can kill us all. If it doesn’t, the severity of the discomfort might make us wish it would.

  2. derekce says:

    It’s surprising to me that jewelry was so strong with the run up in gold and silver prices. Is this a sign of inflation expectations?

  3. Winston says:

    I think you hit on one important aspect of the holiday shopping frenzy:

    “There is also a sense of widespread Recession fatigue; people are tired of living in bunkers, and are coming out to play again.”

    Clothing sales increase is a no-brainer. That’s a staple item. Other categories that would definitely fall under the “discretionary” heading (jewelry, luxury) show improvement. Overall, I agree this is a net positive – especially when one considers that consumer debt has been on the decline for three years.

  4. ES says:

    I tend to agree that this is recession fatigue. Plus, sales and promotions started in November and were much more enticing than last year. I think may be retailers had more inventory to move? I bought nothing last year but this year some sales were irresistable. However, the sales are being pulled back by the retialers so I think January won’t be any good.

    The statement that 90% of the workforce is workign is highly misleading and unbecoming a serious discussion. It all depends on how you measure the workforce doesn’t it? How many millions dropped from the workforce last 2 years? I ‘d rather see statisitcs on how much of the population has independent income and how much it is. I think it is under 60% of the population and keeps decreasing.

  5. rktbrkr says:

    the jewelry increase reflects the higher component cost of the jewelry

    clothing sales reflect big theses increasedincreases in cotton and other materials

    $3 gas getting to the mall this year is a sign of recovery vs cheaper gas last year,these increased costs reflect the success of BBs cash printing express

  6. Mike in Nola says:

    Just what we need, another phase where Americans don’t make anything, but buy imported stuff with borrowed money. That is certainly a recipe for sustained recovery.

    I’m still skeptical of the profits this has generated. Someone has to be eating some costs to enable the deep discounts I’ve been seeing.

  7. cognos says:

    Low home prices are GOOD for the economy.

    Price “bubbles” are not inflation… they are deflationary… because they burst. Commodities, homes… it doesnt matter.

    So here we sit with home prices down 30-40-50%… still plenty of income. 95% of full employment. Where’s it going to go? Discretionary income is actually huge.

    It should continue to grow from here.

  8. louis says:

    People I know bought things from pent up demand. You can only hold the addict away from his things for so long. As more people continue to “strategically” shed debt, the more crap they will buy.

  9. [...] I Want for Christmas (Jobs and Wages Version) Posted
    by Paul Vigna on December 28, 2010 Economy Barry Ritholtz over at
    The Big Picture takes another shot at the bears who remain stuck
    inside their…, this time chastising them for missing a strong
    holiday sales season, where sales were up by the [...]

  10. imflyboy says:

    Barry maybe you can comment. I had a discussion with a co-worker who’s a regular ZH reader. When I mentioned that those who sat on the side line the last year and a half missed a nice rally and a chance to make some gains, his reply was “What market rally?” He then went on to spew the typical ZH lines of fiat money, govn’t printing money blah blah blah. Another co-worker chimed in with hyper-inflation.As far as I can tell neither view point is supported by evidence. It seems to me certain people have an interest in predicting doomsday. I’ve read that ZH could make 25K per month in ad revenue and I contend that they have an interest in getting readers to come back to the site with ever more desperate and sensational posts. While some of what ZH says may have value, it seems the bias’ people have causes them to seek sites and publications that reinforce their world view. While that may make you feel right or confirm that you’re doing the right thing it seems like a great way fail at building true wealth, which is the point of investing.

  11. • Electronics lagged in dollar terms, growing 1.2% vs a 4.6% decline in 2009. Declining flat panel TV prices is a suspect


    • Jewelry gained 8.4%

    ?, no mention of higher PM prices?

    talk about selective perception, no? (:

  12. b_thunder says:

    ok, so we have sales growth. however, unless this growth is repeated year after year after year, and the growth is backed by a hefty profit margin, the current share price of the same Amazon is extremely overvalued. same is true for most of the market.

    i understand that in the end what matters is the share price, and not whether it got where it is by the right or wrong reasons. well, i don’t manage OPM, so i don’t have to answer to anyone. i think this is a 1-hit wonder, a relief rally after 2 years of cutting back, somewhat helped by higher inflation. so i don’t have to “chase” it up and then jettison it later. i’m not buying AMZN @ 180, or @150, or even @120. i would buy it at it’s “normal” PE of 12-15, or $30-40 where it traded in 2005/2006

  13. daf48 says:

    Adjusted for real dollars? Credit? Addiction?

  14. cognos says:

    imflyboy -

    100% correct. People have been selling “armageddon” for 1,000s of years. By the size of the Vatican, it works. The sheep love to buy the “doomsday” story. While Rothschild said, “buy to the sounds of cannons”. Risk takers (esp after the big dip) make money.

    Looks like a classic recovery to me… jobs up steadily (if lagging), retail sales up big here, earnings have beat expectations for 8 straight Qs now and look set to surpass prior peaks next year, still total disbelief in equities. They are a fraud. The economy is a fraud. Liquid financial instruments are totally unloved.

    I noticed Doug Kass went “net short”. Did he count on CNBC yesterday? One trader said, “every single person on is calling for the correction”.

  15. cognos says:

    b_thunder -

    AMZN is doing 5-10X the quarterly earnings it did in 2005/06.

    If 5-yrs from now, it grows earnings 7x again… the PE will be about 8x at todays price (or 24x at 3x the stock price).

    There are some sharp analysts saying AMZN earnings growth will accelerate bc of kindle and scale dynamics.

  16. Mike in Nola says:

    Cognos: Interesting spin now that it appears home prices are continuing down, as some others have predicted.

    Low prices don’t help all those who are underwater, or who need to move and can’t unload their houses without taking a loss or having the bank write off the diff. You also have many who were stampeded into buying by the tax credit and now own depreciating assets.

  17. mikemohr says:

    “Jewelry gained 8.4%” that is because of gold prices. Chinese fake Jewelry has dropped in prices.
    The data is manipulated just like the stock markets. The real data is about unemployment which stands @ 17% and has not improved.
    The real data is about people losing their pensions and postponing retirements.

  18. MayorQuimby says:

    Interesting how inflation by category lines up with the increase in spending.

    I see this as very bearish actually – especially in light of flat employment. Either people paid more cash for the same things, used credit to buy the same things or they bought cheaper items like tv’s.

    ‘”Looks like a classic recovery to me”






  19. crunched says:

    Imflyboy, cognos… I just hope for your sakes you don’t have any money invested in the market you’ll really need to live on in retirement. Because it likely won’t be there when you need it.

    Blaming ZH for trying to warn people that this rally and the markets are a total sham is like blaming your doctor for trying to get you to stop smoking. If you really understood demographic trends and how disastrously the M1 and M2 moneys supplies have been skewed, you’d understand there is a vicious day of reckoning on the horizon. The banks know it, and that’s why they’re sitting on their money.

    Pay no attention to retail sales… they are completely distorted by the Fed’s actions. And pay zero attention to the talking heads on CNBC, their jobs depend on the stock market going higher. Desperate, is the best way I’d describe their programming at this juncture.

    The only thing to pay attention to is unemployment and bank lending. Both measures are currently in the toilet and show no sign of moving any time soon.

  20. b_thunder says:


    is it 5X or 10X 2006 profits? there’s a difference. also if the last 3 years taught me something, it’s that
    a) nobody can predict 5 years into the future
    b) those people/institutions that really “move stocks” do not care about anything past the current and next quarter. otherwise we’d never, ever have bubbles in any market.

    even if they do grow earnings 7X in the next 5 years, i’d sleep a lot better if i had my $$ in something other than AMZN common. to wait 5 years for the stock to “grow into its PE” is something i do not want to be part of.

    btw, another analyst says that pretty soon every active reader in the USA will have a kindle. and then what? will they buy another one? 2-year replacement cycle ?

  21. louis says:

    To me this recovery is a matter of authenticity. Has the economy really recovered on it’s own after the write downs? Or is it a case of recovery by manipulation. The powers that be have ignored the underwater issue, banks have been allowed to write down debt, all moves by the fed have led to a market rally. Where is the real economy at? Unemployement still high, benefits loss by those still employed, housing sucks, foreclosures, etc.. But Kindle sales are up so we are OK again?

  22. Bill W says:

    It was a strong holiday season, no doubt about it. Anyone
    who went out to a mall and walked around should have been able to
    tell you that. Personally, I’m surprised how strong holiday sales
    were. I got that one wrong. I’m still pretty bearish going forward,
    and I think there will be give back in the coming months. I still
    believe that pockets of strong data will be followed by pockets of
    weak data as the economy continues to grow below trend.

  23. cognos says:

    Mike in Nola -

    50% of home owners (more now)… have zero mortgage.

    Roughly 1/3 of households rent.

    So at lest 65% of households have no mortgage or are renters and therefore positively affected by the low home prices. Further, think about it… “more affordable prices for the same good”… thats a good thing, right? High home prices are just a transfer payment from the young to the old or from the “up-n-coming” to the “established”.

    Assume then that 1/2 of the homeowners with mortgages are at risk of being “underwater”… this is 16% of households. Still that is over stating things.

  24. Transor Z says:

    This is, hands down, the single greatest period of American prosperity.*

    *Note: “Periods of American prosperity” defined as economic cycles with ZIRP in place and active Fed participation in equity markets

  25. imflyboy says:

    @crunched. I haven’t blamed ZH for anything, just question the motive of a guy who makes major coin off getting people to come back to is site. Just like everything else, it needs to be taken with a grain of salt. Unfortunately it seems like a lot of the folks who frequent the site will believe nothing else. As the markets go higher they look to ZH to reconfirm their bias that it’s all about to collapse.

    As far as the comment about having money I’ll need in the market, where would you suggest I have it? I hear this over and over but have yet to get a response.

  26. MayorQuimby says:

    The real economy is on QE life-support. It’s semi-comatose. And QE simply prevents it from healing itself.

    Inflation was never supposed to happen in the first place hence:


    “so as to promote effectively the goals of maximum employment, *****stable prices*****, and moderate long-term interest rates.”

    Inflation is created by people ‘borrowing’ money into existence. 95% of this money goes to the top 5%. They refund the apparatus by putting the money in bonds. Eventually the system grows too top-heavy and collapses – which is why inflation was SUPPOSED to remain at ZERO. This 2% target is COMPLETE BULLSHIT FABRICATED BY A POLITICAL CLASS HELL BENT ON DEFICIT SPENDING TO OBLIVION. Well – the bottom is broke and the top has all the created money. Now the collapse is inevitable. Delay it if you want but it will happen.

    And an entire POPULATION of individuals who seem to be able to support their luxurious lifestyle by clicking on a mouse and trading fantasy stocks all day long (aka fund managers, money managers, day traders) – will all be out of a job.

    I can’t wait.

    “Investor”….the word itself makes me chuckle every time I hear it.

  27. cognos says:

    b_thunder -

    You are obviously not a very good stock investor. First, most of the great stock investors I know in the hedge fund community are ALL about 5-yr compund earnings growth. They are all about buying AAPL, GMCR, or MA out of IPO. They were in the fertilizer plays (CF, MOS, POT) for the l-t compound growth. PCLN for the same. They were short subprime… probably a few years too early.

    Second… AMZN does not make money on kindles. They make money on e-books for $20 that cost $0.01. Duh!

  28. Ted Kavadas says:

    There is a lot that can be said about the current retail sales figures…

    One chart that I have found particularly interesting is that of Retail Sales Per Capita Adjusted for Inflation. This chart shows a significantly different picture than that of the conventional (unadjusted) retail sales chart.

    For those interested here is the link to my recent blog post containing the chart:


  29. cognos says:

    Here is the ultimate ZH contradiction-

    So, there is going to be hyper inflation and a loaf of bread will be $100.

    But real estate will collapse and prime beautiful buildings in Manhattan or homes in Malibu must be over-valued.


    Cannot have both. IF there is going to be hyper-inflation. The absolute BEST play would be to be massively leveraged into real-estate. No where else can one get that amount and scale of leverage.

    Leveraged long stocks would also work in hyper-inflation (stocks own real estate and product pricing).

  30. mathman says:

    On the other side of our good Mayor’s comment of 10:45 (another drag on the supposed “recovery,” the phabulous “health care bill”):


  31. cognos says:

    OR… there are a few ZHers in the “deflation” camp. At least these guys are logical. The depression is always and everywhere a “deflationary” phenomenon.

    IF thats true and massive deflation is a problem (pop demographics, modern wealthy society aka Japan)…

    THEN… a) buy l-t treasuries; b) the Fed is not doing enough. QE2 should be $200B per month.

    It’s all just illogical nonsense. Very much like “rapture” or maybe “Jonestown”. Not gonna happen.

  32. Petey Wheatstraw says:

    Jonestown didn’t happen? Maybe it didn’t happen to you, cognose, but to those who drank the Kool-aid (by choice or by force), it really doesn’t matter — they’re dead, for real. Our reality is a bit different, in that the poison is in the water supply.

  33. cognos says:

    Nah, thats not the point.

    The point IS – why did they drink the kool-aid?

    Because they were afraid. They were sold FEAR. And they wanted to buy it. It is sold in church every Sunday. It is sold by politicians and by parents.

    What is so damn scary about losing 20-30-40% of your money? Im not THAT scared of that. And typically it just sets up 100%, 200%, 300% upside.

    Its “risk capital”… the whole point is to take some risk and try to earn outsized returns. Generally those returns accrue to long-biased, smart investments, even leverage… the exception to this tends to be at the end of very frothy 5-10 year bull runs.

  34. constantnormal says:

    How about a longer-term chart of consumer spending?


  35. MayorQuimby says:

    “They were sold FEAR.”

    On the contrary – people are sold SUNSHINE by CNBC and TPTB. Look at any tv commercial filled with gorgeous, tanned, smiling exuberant people. Cha-ching!

    The truth is normally somewhere in the middle.

    But these aren’t ‘normal’ times are they? Of course not.

    So the bulls need to throw out their 20th century rule book. What is in jeopardy isn’t the potential loss in paper assets or a negative ROI-

    What’s at stake today is our country, our way of life, our future and our mental and physical well-being. If you think the next 50 years will look anything like the past 50, then I say good luck with that. I sincerely hope you’re right.

  36. constantnormal says:

    It bothers me when people use headlines including phrases like “the most in 5 years” when the 5-year period in question just happens to include the most severe economic disruption in the past 80 years … it all smacks of a trip on the HappyTalk Express.

    Looking at the FRED PCE chart going back to 1960, it looks like we have recovered to the same rate of consumer spending increases as we had in the 1991-1998 interval, but without any significant improvement in the underlying ability of the domestic economy to support that level of spending, what with employment still in the tank, jobs still going overseas, foreclosures still consuming the housing industry, and wage increases? Not so much, outside of the financial industry.

    I wonder how long this rate of increase can be sustained. From the perspective of the middle classes, it would seem highly likely that it spending is to continue, it will have to be debt-financed. Good thing that Ben is keeping rates low, eh? Of course, it won’t be so good if consumers load up on debt and THEN rates rise, will it? Kinda like the same plight Uncle Sam is in.

    Maybe the financial industry can carry the economy. Nice time to be a supplier of caviar and Dom Perignon.

  37. crunched says:

    Imflyboy… where to have your money? Cash and Gold. Or
    somewhere like CWB or PHD… at least until there is some more
    clarity. Bonds are at the latter end of a long bull run… so
    trying to hedge against inflation there is a big risk, unless
    you’re in your 20′s, and even still… Then, probably the best
    risk/reward moving forward is… Just buy the f****** dips. But not
    the daily dips, the monthly dips. A chart of the 1970′s on the Dow
    should serve as a good guide.

  38. carleric says:

    Stan Weinstein only had two investing rules: Don’t fight the tape and don’t fight the Fed so….I am net long but a little less convinced than Barry. Personally I think the mo-mo boys and chart monkeys are only fooling themselves and it will all end badlybut when this happens is not really knowable…stay hedged, keep tight stops in place, don’t listen to money mangers who all have a “love the undervalued market” agenda….you have to remember they are trying to sell you something….its your money and they want it….

  39. constantnormal says:

    Hey, Ted Kavadas — great post. That chart of real per-capita PCE is great. Shows that this stuff about “the best in 5 years” is nonsense. We’re back to mid-1999 levels.

  40. MayorQuimby says:


    How’s that rate-suppressing QE working out for Bernanke so far?!

    Don’t fight the Fed will eventually turn into “Fade the Fed”.

    Fed has no control over the physical world. It never has. All it has is the power to create and control certain illusions for certain periods of time.

  41. constantnormal says:

    @cognos 12:08 pm

    “What is so damn scary about losing 20-30-40% of your money? Im not THAT scared of that.”

    Man, you crack me up. Clearly, it is not your money you are talking about.

  42. cognos says:

    MayorQuimby… still a bear… behind 20-30-40% over the last year through bearishness. Behind by much, much more over 2 years.

    When does it end?

    When are all the bears here wrong? How many more good eps Qs and job growth months does it take? Will you rationalize next year and say, “the market is only up 15% (again)… now will come the turn?”

    Will the market give you that chance?

    Things all look pretty normal to me in the world economy. We are not producing $100B/yr in Apple products by magic. BMW is not sold out for 6-month waits on the 5-series worldwide by magic. China, India, and Brazil are not growing 10% real by magic. We are all wealthy and productive. Our only problem might be too much wealth and too much productivity. But that is just a money supply issue.

  43. MayorQuimby says:


    I’m not behind. I have CASH. Plenty of it. Bulls have paper assets that they ASSUME will be convertible into a certain amount of cash. But then there’s that day you wake up and you can’t get anyone to buy your electronic paper assets any longer. Oh well.

    “When does it end?”

    Simple. When the economy can stand on its own two feet, the debt levels of the nation are back to historical norms and all of the bad debt has been expunged from the system.

    When that happens, I pull out my wallet and put my cash to work.

    But not before.

    “When are all the bears here wrong? How many more good eps Qs and job growth months does it take? Will you rationalize next year and say, “the market is only up 15% (again)… now will come the turn?””

    I don’t care if SPX is 2,000 or 200. My decision to buy has nothing to do with ‘the herd’, with price.

    You let OTHERS tell you what the price of something is. When I walk into a pizzeria and it says a slice is $5.00 I walk right out. You’re the one gobbling up $5.00 slices of pizza!

    “Things all look pretty normal to me in the world economy”

    Again – look at these charts and THEN say that with a straight face:





    Finally – higher prices of ANYTHING – stocks, bonds, clothes, pizza – is all bad. You may have cashed out with a 30%/$50K profit but:

    a: You won’t be able to do that every year and eventually valuations will normalize.
    b: At the same time, the rich dude made $500K or $500 mil. HIS purchasing power increased by MILLIONS, yours by thousands.
    c: Your profits will be put to work when you buy something which will subsequently decline in value once the QE games and cheap money stops – and eventually it will stop. Net gain? Zero.

    Eventually – the whole ridiculous make-believe ponzi economy will collapse and I will be the dude jumping with glee when the fools on CNBC are silenced for once and for all.

  44. MayorQuimby says:

    Oh and the $TYX is over 4.5% once again. If that keeps rising, the Federal Reserve is effectively insolvent btw.

    What a freakin’ mess.

  45. carleric says:

    Mayor Quimby

    QE2 isn’t working and noone should be surprised. However, that doesn’t mean that traders aren’t falling all over themselves to buy, buy, buy because QE2 has put an artificial floor under equities….I am net long and hating it….figures lie and liars figure….92.5% employment? Talk about drinking the kool-aid….I think John Williams (Shadow Statistics) paints a much more realisitic and factual picture of the world but no chart monkey can ever be bothered with facts….it is all about some squiggly lines on a piece of paper…God, how pathetic is that?

  46. cognos says:


    Ill try again at 1,350. Prob before Q1 ends.

  47. [...] it was a good holiday shopping period.  (Big Picture, [...]

  48. MayorQuimby says:

    Pretty pathetic.

    Long or short – once again – it’s about HUNDREDS of millions of people working as part of a sustainable economic system. I believe the current system is completely unsustainable and therefore when it collapses (partially hopefully or fully) – none of this will matter.

  49. MayorQuimby says:

    All that this recent cheap money bubble will accomplish is that the top will be able to purchase an even GREATER % of the nation’s corporations, land etc.

    Think about it – a bubble means cheap money enters the system and helps those at the injection point MOST and FIRST. By the time you made your $50K profit, Buffett has made $500 mil and purchased 3 start-ups and a railroad. You bought a depreciating HDTV and a hot tub. Property taxes and living expenses will eat up your $50K profit in 2 years. But Buffett takes the profits from the railroad and start-ups and rolls them into bonds keeping him liquid, safe and expanding his empire. You run out of cash and profits. Buffett increases his cash, land, wealth and political influence.

    This is what happens with cheap money and this is why it FAILS every time.

    Credit MUST be initiated by THE BOTTOM – by working, by innovating. Credit being FORCED into the system by the top results in the top effectively STEALING more everything from the bottom.

    Until the bottom shows how poor it is by cutting spending and defaulting on loans. When that happens, all the paper pretend wealth evaporates and everyone loses.


  50. imflyboy says:

    @crunched I’m not in my 20′s (35) but I’m guessing I’ve got a longer time horizon to retirement than most here. I wouldn’t discount having some gold but I wouldn’t have agree that cash/gold are the only things to hold. While gold has done great lately it was flat for a long time. I guess the question is whether it continues to climb or goes the other way. I think the idea that it’ll only go up is similar to what people were saying about tech stocks, housing ect. I’m still a noob but I enjoy the discussion and hope it turns out ok for all our sakes!

  51. Jojo says:

    Wall Street and hangers on may be flush and secure but didn’t some major percentage of those 90.2% OFFICIALLY still employed people have wages and/or hours cut in 2010? Yet they were still feeling SECURE enough to go out and spend wantonly? And if I happened to work for a local or state government, I wouldn’t be feeling all that secure about my job or pay level continuation in 2011.

    Also, how much PROFITS did these increased sales actually generate? Sales revenue is one thing. Profits are another.

  52. DrungoHazewood says:

    I don’t understand all these people who say QE2 didn’t work. It looks like it worked great, as this Summer we were in big trouble as far as deflation is concerned. Is it better for stocks to be plummeting while bonds rise? People have the danger zone for interest rates and gas prices way too low. And no respect for time. If things are going to fall apart, it takes way longer than you think. Europe is all ready for bailing out Portugal and Spain, so don’t be surprised if we barely dip on any European trouble. Italy maybe more difficult, but that’s further down the line.

  53. wildebeest says:

    “Lets consider the actual data, and what it might mean going forward:

    • U.S. retailers’ 2010 holiday sales (excluding automobiles) jumped 5.5% — the best performance in five years, versus 4.1% in 2009 and down 6.1% in 2008 …”

    This is data published by Mastercard Spending Pulse Survey. I don’t know their methodology but given that it is called “Survey” it seems reasonable to assume that they take their data and extrapolate to all retail sales? There must be some degree of sampling and extrapolation, i.e. Mastercard didn’t do 584 billion in transactions.

    Why should that survey be any more credible that others e.g. ICSC Retail Store Sales, Redbook Chain Store Sales? Isn’t the US Census Bureau survey likely to be the most credible?

  54. MayorQuimby says:

    “I don’t understand all these people who say QE2 didn’t work. It looks like it worked great, as this Summer we were in big trouble as far as deflation is concerned. Is it better for stocks to be plummeting while bonds rise? People have the danger zone for interest rates and gas prices way too low. And no respect for time. If things are going to fall apart, it takes way longer than you think. Europe is all ready for bailing out Portugal and Spain, so don’t be surprised if we barely dip on any European trouble. Italy maybe more difficult, but that’s further down the line.”

    You have it completely reversed.

    1. QE2 is failing. It’s intention is to lower interest rates which would increase refi activity and make housing cheaper. Instead rates are rising. Equity markets are not a gauge of economic health (see October, 2007).

    2. Is it better for stocks to be plummeting while bonds rise? Both irrelevant. One has to look at WHY things are moving.

    3. There is no ‘danger zone’ for gas prices or interest rates. Every PENNY removes money from the consumers’ pocket.

    4. Deflation/inflation is also irrelevant. If you cut the money supply in half – everything is 50% cheaper (along with your salary) and you get the same tv for the same amount of work.

    Inflation is favored by countries with debt since it allows them to turn fractional lending into an ponzi. But all ponzi’s end as you and Mr. Bernanke are about to witness.

  55. Dan B says:

    “Online seasonal sales up 15.4%; This is against an ongoing rise in online sales”

    So this internet sales thing looks like it might stick. Given that, can anyone tell me why we continue to subsidize sales by Amazon and all others, while we make state and local governments ever more dependent on revenue from real estate property taxes? Self compliance doesn’t work in financial services and it doesn’t work in reporting sales tax owed on purchases. When do we make these companies compete on a level playing field by collecting tax on their sales?

  56. DeDude says:

    It is classic ideologogery to consistently find ways to deny/explain data that does not fit the preconceived conclusion. This is different from true critical thinking where the bar is set equally high for data that support and data that contradict a specific world view.

    ZH is a site mostly with and for the ideological bears. This site also has a number of ideological bears although the host is not one of them. They were attracted before the crash when Barry was one of the few contrarian voices delivering ammunition for the bear case. My guess is that as Barry and reality becomes less bearish they will eventually either convert or move to ZH where they can feel more comfortable clinging on to their beliefs. The may eventually get their Armageddon, but until then they will be losing a lot of upside (just like ideological bulls lose when things fall).

  57. MayorQuimby says:

    Sigh….you don’t lose anything but not partaking in a bubble. I never bought a house in 2004 – did I lose when houses went up 10% for 2 years in row? Of course not.

    But you keep going long buddy. In fact – I want every bull out there to double down and increase their margin accounts. And don’t ever sell anything.

  58. DeDude says:

    If you buy and hold forever you make money by participating in the upside and lose it again on the downside. But then any advice (including “don’t put your money in stocks”) would be mute, because all assets cycle. However, most people here have a more active approach and use things such as asset allocations (and shifts between asset classes) to try and get something more out of their investments.

  59. MayorQuimby says:

    “But then any advice (including “don’t put your money in stocks”) would be mute, because all assets cycle.”

    Step out of what you’ve known in your lifetime. What is threatening our country goes way beyond normal business cycle theory. Once again – have a look:







    BR: I do believe the mayor has just said “Its different this time…”

  60. tradeking13 says:

    BR, you’re starting to sound like Cramer with the “90% of the workforce is still employed” garbage. 10% unemployment is an atrocity that should not be marginalized.

  61. [...] backs this up. Consumer confidence takes a slight dip But retail sales increase the most in five years. Las Vegas shows signs of surging. Home prices weaken, and one  economist expects them to drop [...]