Most Attractive Deal in Town

I always find it interesting when I read articles and reports day after day that say that the country needs a boost or spark and when its announced headlines blare: “China Surprises Everyone!” That was the case yesterday morning with moves from the People’s Bank of China (PBOC) including cutting the one-year benchmark rate 40 basis points to 5.6%. The PBOC announced additional actions as well, all in an effort to spark the economy which has been a listless 7.5% for too long.

I say that somewhat tongue in cheek, but the fact of the matter is China is a victim of its own success and must keep the engine roaring, even if it means a deadly battle with inflation at some point, but for all the China-bashers out there, that country has done a remarkable job tamping the brakes at the right time and reaccelerating at the right time. A more dangerous position is that of Europe where years of anti-growth policies have taken a toll and the biggest threat is deflation not inflation.

Today, the European Central Bank (ECB) announced it has begun to buy assets, although it’s not clear if that includes government debt and it doesn’t include equities (and no, our Fed doesn’t buy stocks even though all those folks are incredibly wrong about what the market was going to do, vis-a-vis, the Fed are now calling the PBOC, ECB and BOJ an extension of our Fed- oh brother!). Yes, the markets like it when stocks are the most attractive deal in town, but we have other reasons for stocks being higher and more than likely this rally continuing.

Main Street

Main Street is coming back, or at least they’re opening their wallets and purses. This evidenced by earnings from retailers this week and data on housing and other signs that point to a rebound in confidence that either comes with higher salaries or the presumption of higher salaries.

For the most part, we are seeing strong retail sales throughout the entire range from stores where rich people shop, to stores where folks on tight budgets shop.

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Yesterday, William Sonoma comparable store sales surged by 8.7%, the street was looking for 5.7%

By the same token, Dollar Tree saw comparable store sales climb by 5.9% from a year earlier, the change was 3.1%

This morning saw more of the same for Ross Stores (ROST) and Foot Locker (FL) as they are a couple of retailers up huge. GameStop (GME) and Gap (GPS) disappointed and also lowered guidance for the fourth quarter and the fiscal year. Some investors are concerned that due to weather and other external factors, retailers may not experience the level of robust holiday shopping they originally expected.