The day becomes more solemn, and serene
when noon is past- there is a harmony
In autumn, and a luster in its sky,
Which through the summer is not heard or seen,
As if it could not be, as if it had not been!
The Indian Serenade By Percy Bysshe Shelley
The Dow cracked 16,000, and there wasn't any fanfare. There was no confetti or balloons, and the New York Stock Exchange didn't book Kool and the Gang to get down from the balcony. The most unloved, most stealth rally in history continues to rock, but the news is barely a blip on Main Street's radar.
Ironically some market bears argue a giddy Main Street is the main reason the market is higher, and a sure indication it's about to go down in flames. Yet there isn't the slightest sign of abnormal joy, or any joy for that matter as the higher the market goes, the more solemn investors become.
It's not unlike that Indian serenade in Shelley's poem, where summer is not heard or seen, and as if this rally could not be (as if it has not been). As someone with contrarian tendencies, I'm always on the lookout for manic behavior, though it's not here - yet.
Individuals are coming back to equities, but mostly through the (delayed) Bond Rotation - nobody's emptying out their piggy banks - yet.
I always thought the hype game, the Fed printing, and all the other behavioral red flags would begin north of Dow 16,000; so, it's going to be interesting to see if the record -breaking rally becomes more parabolic.
Retailers...It's the Execution, Dummy
Much was made yesterday of earnings from retailers and its implication for the broader economy. I heard commentators on television get too cute with the results, and too general with their observations. Just because companies are large, and household names, doesn't mean they're "good operators," and yesterday's action underscores this important point. Sure, all retail CEOs that came up short blamed the consumer, the possible government shutdown, and global warming. Okay, I made up the last reason, but weather is in the bag of excuses when all else fails.
The fact is retailers that missed big this week, and saw their share price plummet, have been executing poorly throughout the year. Their misses and warnings don't reflect consumer problems as much as their own inability to take advantage of whatever potential the street perceives them to have. Target (TGT), Abercrombie & Fitch (ANF), and Dollar Tree (DLTR) haven't been executing - that is the bottom line. On the other hand, Home Depot (HD), Lazy Boy (LZB), and Williams-Sonoma don't have a single earnings miss between them for the past four quarters.
The stock market punishes failure, especially repeated failure, and that's the main story from retail.
Abercrombie & Fitch (ANF) beat the Street's EPS forecast, but US sales were down 18% and US comp store sales declined 14%.
Real wages are lower, and that's before the damaging effects of inflation. While savings are too low for a society woefully unprepared for retirement, it's not because people are now buying what they can't afford.
Revolving credit (credit cards) debt has decreased three successive months: -2.6% July, -1.2% August and -2.9% September. People are using debit cards more and more, but only on the necessities: they are spending only when they have to. On this point, the consumer has never really recovered.
2009 -8.8%
2010 -7.6%
2011 +0.2%
2012 +0.4%
When it comes to retail there will be defined winners and losers, and that's what free markets are all about. Sure, it would be great if there were so much money sloshing around that all retailers were cashing in, but that's not the case. It's why the Fed keeps pumping, and Main Street keeps praying, and the economy keeps yawning.
Last night after the closing bell Ross Stores (ROST) posted earnings results that were in-line with consensus, but management pointed to "intense competition, and a promotional selling period," and took a "more cautious outlook for the fourth quarter." It should be noted that the company had only beaten consensus once in the four previous quarters. The stock was hammered.
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