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May 12, 2005
Today's itinerary, Thur., May 12, 2005, 7:11 AM
I am getting ready to go out of town to visit my parents for the day; hence, I will have to miss most of the action. But, duty calls.
Maybe the prospects of facing my day ahead has led me to over react with respect to my early morning assessment of capital markets. Time will tell. But I can't overlook the correlation between the extreme emotional intervention by family/personal matters on the calm, rational perspective one needs to trade capital markets, particularly at potential cycle juncture points.
This morning, the important U.S. retail sales report will be issued for April-05. If I don't get a chance to comment, have a look at the negative retail sales number for April 2004 that the current number is replacing. That means even if the number to be reported today is not so hot, it will still (unless disastrously low) lead to a rising year over year number.
What does this mean? It simply means that you can visualize those Talking Heads who yammer on today about an exciting YoY trend as being dressed in a clown's suit with the red bulb on their nose flashing every time they open their mouths.
There is a saying in the securities business that, "If their lips are moving, they're lieing." Today there will be a lot of lip action. In one way, it's fortunate I can be away and miss the show.
As presented by Haver Analytics/Econoday,
"Retail sales is the measure of total receipts at stores that sell durable and nondurable goods. Consumer spending accounts for two-thirds of GDP and is therefore a key element in economic growth.
Why Do Investors Care?
Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2002 and 2004.
Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report."
I think the Haver Analytics work is as good as any on the Web. You should check it out.
Posted by Posted by Bill Cara on May 12, 2005 07:11:18 AM | Category: 25 Cons Discretionary