Right Again: Bad Retail Sales Numbers Not Such a Big Deal
I originally submitted this article on 4/14/09 following the release of poor retail sales data in response to overwhelmingly unjustified bearish sentiment on Seeking Alpha. Due to site maintenance very few pending articles have been published on Seeking Alpha today, but I’ll post mine here anyway, with a screen shot to prove how yesterday I was right in that retail sales doom and gloom was overblown.
It’s great being right almost all the time and making effortless money in the stock market with POT, MA, and GOOG stock as overrated experts commiserate over the mental recession and fake credit crunch.
On April 14th the Commerce Department reported total retail sales fell 1.1% last month, compared with February’s revised gain of 0.3%, which was less than analyst expectations of a gain of .3%. This news reversed the one month rally on renewed pessimism regarding the viability of a future economic recovery.
However, what isn’t being reported is how insignificant these retail numbers actually are. For one, if this entire rally is moot because of these numbers why did stocks only fall 1.7% instead of much a much greater amount, say four or five percent? Surely according to the bearish punditry these numbers prove the economy is in really bad shape, and really bad news entails a really bad sell off. So why did stocks hold up relatively well?
The reason has to do with the fact that the huge funds that move the market were anticipating poor numbers. Keep in mind that retail sales are a lagging indicator. What this means is that the large sell off between February and and early March were in anticipation of poor economic data. Now as this data unfolds the response is tepid because better economic data is expected months down the road.
Another reason why this data should be taken with a grain of salt is that retail sales tends to be volatile as you can see from the chart below:
Even during the 2002-2007 bull market retail sales dipped periodically.
In conclusion, retail sales isn’t an infallible economic indicator. Even in bull markets monthly retail sales number can be negative. In addition, large funds realize this which is why the stock market sell off yesterday was tame. I anticipate the rally will resume, and better economic news is anticipated.
Google a Huge Buy Before Earnings
Wow it’s shaping up to be yet another green day on Wallstreet as European markets surge higher. You can’t stop this rally. This fake credit crunch and recession is so painful. I keep making money with my Google, Potash, and Mastercard stock. For the love of god make the pain stop. I have no credit and no liquidity. Pleeeaaase help me.
That aside, Google is set to report its earnings after the closing bell on Thursday. As always it will be a knockout despite all the boo hoo hoo recession fears, which is why I hiiiighly recommend buying google now and making money later when the stock surges 20 to 40 points in the after hours. The charts below shows how Google can retest 600 with relative ease in the longer term, and 440 in the shorter term:
Why is Google such a great buy?
Mainly because it’s immune to the media generated recession, and it still has huge growth and revenue. For the past few quarters Google has smashed estimates and this is despite a supposed recession. Although the Google management acknowledge the existence of a recession, there is no concrete evidence the company has been impacted in any material way. In addition, in the coming months as corporate and economic outlook continues to improve advertisers will raise their online advertising bids, further bolstering Google’s top line.
A falling dollar doesn’t hurt either. Long term, the dollar is doomed due to increased risk taking, resumption of the Goldilocks economy, and deficit spending. Google is a beneficiary of a rising Euro because a large portion of its sales comes from Europe, and a falling dollar makes US goods more competitive abroad.
Google, Facebook, and Twitter are at the forefront of the smartist era of web 2.0, globalism, spendism, paymentism, and consumerism. Google is leading humanity’s transition from a type zero to type one civilization, and will eventually control all mediums of information on planet earth and have a market cap exceeding a trillion dollars.
Historically, Odds Strongly Favor Bulls
As the most overhyped recession and bear market since the Great Depression comes to a close it is time to tally the score. How well have bears fared in recent history? Not so wall as it turns out. Between 1982 and 2009 bears enjoyed a total if 4 years, yes, a whole four years of sustained selling out of a total of 28 years. That is a success rate of just .14, which is marginally better than the broken clock, but far under performing a coin toss.
Even if you add in Black Monday, 1990 recession, the Asian financial crisis of 1997 you can see they are merely blips and add just six months at most of sustained selling.
But what about the periods in the 60’s and 70’s when the market languished? As it turns out bulls were victorious when you factor in dividends. Sure the markets were flat for almost a quarter century, but a three percent dividend yield compounded over two decades amounts to an eighty percent increase in principle. There was a bear market in 1974 but like the vast majority of bear markets it was very brief, lasting a little over a year.
Statistically, the odds of making money on the long side far exceeds that of the short side.
Another Great Week
I’s great being ned. Its great being right. Its great making money effortlessly with buy & hold as ‘experts and gurus’ fret over inconclusive charts and lagging economic data. The DJIA ended its forth week on a positive note, closing just 130 points shy of my 8,200 target. This was even after a 2.5% selloff earlier in the week.
On seeking alpha there is still concern that Obama is going to raise taxes and impose regulation, which will hurt the recovery, but there is no guarantee any of this will happen. Obama is no Herbert Hoover, and he is very politically savvy. He is fully aware that as the stock market and economy recovers he will have less political pressure to rise taxes, especially in close proximity to an election season. In addition, to raise income taxes he has to get it though the senate where it will fail.
On Wednesday Fred Wilson from seeking alpha wrote an article that embodies the bearish argument
http://seekingalpha.com/article/130418-the-markets-may-be-better-but-not-necessarily-safer?source=commenter
I always find it funny how all these bearish authors say the rally is inevitable yet never go long. If it’s so obvious why are you complaining? Just make money.
Here’s my response:
At this very moment in time like taking the derivative and setting it equal to zero, yes the economic picture sucks, but the market looks waaaay ahead and sees the possibility of a recovery. A lot of people shorted on the way down, and now these shorts have to cover or risk insolvency, which is fueling the wall of worry.
This ‘bounce’ is actually pretty substantial and not as easy to dismiss. The S&P 500 is up nearly 200 points or thirty percent from its low. That is probably enough to put the final nail in the coffin for this bear market.
Also, you mentioned deficits. Rising deficits aren’t necessarily bad for the economy or stock market as shown by the post WW2 recovery and the debt fueled recovery of 2002-2007 or Reagan;s deficit spending. Deficit spending on tax cuts and other stimulus does work.
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Still recommending buy the dips of globalist, smartist stocks (Goog, Aapl, Rimm, Mastercard, Postash to name a few) that benefit from deficit spending, a falling dollar and rising commodity prices, cause that is where we are headed. The deflationary spiral is now bunk thanks impart to recent economic data showing a rise in core prices, as well as a steady rally in commodity prices.