Don't Buy into Consumer Confusion

Based on the hype of headlines from Black Friday through the holiday weekend and Cyber week, you would think consumers had been surprisingly free-spending of late. As that superficial view stirred my stomach into an acidic storm, I was compelled to take a closer look, plus an antacid tablet.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Consumer Confusion

Over the course of the last few weeks, we received data on the state of the consumer mindset, on November chain store sales, including the activity through the big bargain days, and motor vehicle sales. If you perused the headlines covering Black Friday and Cyber Monday, you noted so many “records” you might have gotten your old DJ equipment spinning again. It’s my belief that the press on the subject single-handedly stirred the stock market into a reckless rally. Investors bought into a phantom American buyer, while ignoring Fitch’s downgrade of the American outlook and S&P’s cutting of U.S. banks with international exposure and its warnings to France and Germany. The market also blew off a panic-stricken economic warning from the OECD as well. Neither did it mind that the European Union and U.S. Congress look set to stay divided until the end of us all!

The week ago period brought with it the monthly chain store sales data for November. Thomson Reuters reported that same-store sales for stores open for at least a year rose 3.1% in November year-to-year (3.2% based on ICSC data). Surprisingly enough, the growth was only about in line with analysts’ expectations, based on Thomson Reuters’ data. Furthermore, when taking into account population growth, the rate itself is not so impressive. Actually, the more I think about and analyze it, the less impressed I am.

Over the course of the last several years we’ve seen a move of shoppers down the ladder of value, with an increasing portion of America’s spending occurring in discount store chains and even deep discount or “dollar” stores. Indeed, Costco (Nasdaq: COST) noted 9% same-store sales growth for November last week. Wal-Mart (NYSE: WMT) does not report monthly, but we expect that given its decision to stay open on Thanksgiving and to start sales at 10:00 PM, it appears it did relatively well. Looking for shoes, I perused a Wal-Mart store and was surprised to see a passable pair of sneakers selling for just $15. If not for my concerns about long-term mobility and osteoporosis, I may have indulged in some frugal futility. Shoes, however, are a critical tool for a motivated entrepreneur, and cannot be sacrificed for savings.

At the other extreme, the luxury retail market has been recovering since panic eased among the richest of the rich post that March 2009 scare. There was also a brief period around the time Bernie Madoff topped the headlines, in which some of the rich were especially careful not to flaunt their wealth. However, in November, Saks (NYSE: SKS) posted same-store sales growth of 9.3% and Nordstrom saw sales soar 5.6%, each exceeding analysts’ expectations. With securities and alternative investment markets stabilized and much higher off those aforementioned panic-level lows, the rich feel free to spend again.

There’s now a deeper division though between the rich and the poor, leaving the middle ground retailers scrapping for profits. You’ll find department stores sourcing more goods at lower cost and driving more sales via creative marketing. Macy’s (NYSE: M) seems to have gotten ahead, doing well in recent years after a soft patch around the aforementioned economic turmoil. In November, Macy’s, which operates its stores by the same name and upscale brand Bloomingdales, saw same-store sales growth of 4.8%, also above expectations. However, J.C. Penney (NYSE: JCP), which held to its laurels and refrained from Thanksgiving infringement, suffered because of it. Its November same-store sales declined 2.0%. Still, opening early didn’t save Target (NYSE: TGT), which posted November chain store sales growth of just 1.8%, short of expectations. Perhaps the bad publicity around its Thanksgiving Day Grinch game plan and its disgruntled petition-signing employees kept shoppers away.

November’s sales growth may only highlight that shift we’re talking about in the number of shoppers desperate for value. In other words, many shoppers may be done now. They may have filled not only their holiday needs, but may very likely have cured all their current needs. We could very well see that illustrated in a dearth of shopping that could occur through December and into 2012 as a result. The latest ICSC Weekly Same-Store Sales data supports this view, as week-to-week sales dropped a sharp 2.3% in the post Black Friday period.

Analysts are waiting to see how the discounting that drove sales may have impacted profit margins. Also, given the early starting hours at the nation’s discounter, Wal-Mart (NYSE: WMT) and its rival Target (NYSE: TGT), their sales may have actually taken a bite out of economic value, not to mention bitten into the sales of department stores and specialists.

Yet, according to the popular press, consumers are feeling better for some unexplained reason. The most recent Conference Board reporting of Consumer Confidence showed a dramatic improvement, but from dire levels in October. The Board showed its Consumer Confidence Index gained to a mark of 56.0 in November, up from an obscene 40.9 in October. Much of the gains came in future expectations, which jumped to 67.8, from 50.0 in the prior month. I’m always wary of gains that come due to the volatile expectations query, since they are based on hope and prayer. Perhaps the holiday cheer got to some foolish folks, or too much eggnog fogged the view.

The press will point to the improvement in the unemployment rate in November, but half of that superficial gain was driven by a large drop in the workforce. While some speculate that this is due to demographics, or the retirement of our aging population, I say it’s more likely due to the depression of our long-term unemployed. The strict requirements of the check circulators can easily lead a depressed fellow to fall out of favor. Once cut off, he’s out for good, yet just as unemployed as he was the day before.

But motor vehicle sales surged in November, they’ll say, as Toyota (+6.7% NYSE: TM), Chrysler (+45%), GM (+6.9% NYSE: GM), Ford (+13% NYSE: F) and Nissan (+19% OTC: NSANY) reportedly did especially better than last year. Overall, the annual rate of motor vehicle sales was 13.6 million, up just a bit from 13.3 million in October. Domestic vehicle sales ran at an annual rate of 10.3 million, up from October’s 10.1 million pace, but short of expectations for 10.4 million, based on Bloomberg’s survey of experts. Given that interest rates are incredibly low, and the aging of vehicles on the road through the economic slug, I do not see a blockbuster pace of activity here. The improvement is notable, but not so awesome.

In summary, I suggest investors temper their enthusiasm tied to the latest consumer data. Instead, money minders might look at what is unfolding economically speaking across the Atlantic, where 20%+ of U.S. exports are sold. Political gridlock, both in Europe and in the United States, threatens to test the rating agencies, who hold too great a power at this critical juncture. Their untimely threats against European bookends, and their overhanging threat clouding the American sovereign rating, are not just reflections of current reality. They are also determinants of future upheaval. While the markets may rally on appetizing actions taken in Europe, the longer term seems, at least to me, to hold an unsavory entree’ in store. Therefore, take the latest consumer data lightly, and instead look at what might kill those hopeful expectations and spending in the near enough future.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumer Wisdom Disagrees with Market Speculation

The stock market was inspired by what appears to be a constructive European action and better than expected GDP growth for Q3, but the consumer mood, of which we received three measurements last week, still spells trouble.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relevant Tickers: NYSE: XRT, NYSE: WMT, NYSE: PIR, NYSE: ETH, Nasdaq: HOFT, NYSE: HD, NYSE: LOW, Nasdaq: AAPL, NYSE: BBY, NYSE: LTD, NYSE: CHS, NYSE: ANN, NYSE: GPS, NYSE: M, NYSE: JCP, NYSE: JWN, NYSE: TJX, NYSE: KSS, Nasdaq: COST, NYSE: TGT, NYSE: WMT, Nasdaq: WTSLA, Nasdaq: HOTT, NYSE: AEO, NYSE: ARO, NYSE: ANF, NYSE: SAK, NYSE: TIF, NYSE: TLB, NYSE: LL, Nasdaq: BLDR, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: LZB, Nasdaq: SCSS, NYSE: ZZ, NYSE: FBN, NYSE: NTZ, Nasdaq: SHLD, NYSE: DDS, Nasdaq: BONT, Nasdaq: CPWM, Nasdaq: BKRS, Nasdaq: BEBE, NYSE: BKE, Nasdaq: CACH, Nasdaq: CMRG, Nasdaq: CATO, NYSE: CBK, Nasdaq: CTRN, NYSE: PSS, Nasdaq: DEST, Nasdaq: DBRN, NYSE: DSW, Nasdaq: FINL, NYSE: FL, Nasdaq: GYMB, NYSE: GES, NYSE: JCG, NYSE: JNY, Nasdaq: JOSB, NYSE: NWY, NYSE: JWN, NYSE: MW, Nasdaq: SYMS, Nasdaq: PLCE.

Consumer Wisdom Disagrees with Market Speculation

The Dow Jones Industrials Index was up 3.1% from the close of trading Wednesday through the conclusion of the week. The catalyst was of course the announcement of the planned action in Europe to resolve the Greek debt crisis and to solidify European banks moving forward.

Solid economic results here at home helped the market along as well. GDP was reported up 2.5% for the third quarter, marking a significantly more robust rate of growth than the second quarter’s 1.3% struggle; though GDP benefited from a deteriorated U.S. savings rate. Durable Goods Orders, ex-transportation, were reported up 1.7% in September. On Friday, Personal Outlays (spending) was noted up 0.6% in September, exceeding expectations for a 0.3% increase; though it benefited some from higher prices. Still, the news was mostly perceived to be relatively strong across important economic metrics, and it supported the market’s burst on the European fix.

All that said and done, we received three measures of the consumer mood last week, and none reflected the nascent enthusiasm of stocks. Of course, the measurements were all taken ahead of the news breaks of the week’s catalysts. Still, how much better off are consumers today versus when they were surveyed? I suspect they are still knee deep in it. Furthermore, it’s my belief that Europe might yet implode, and if it does not, it still faces a struggle. In the States, I’ve already outlined the flaws of the economic drivers, and call attention to a still burdensome unemployment rate, unfair trade environment and handicapped capitol. Let’s not forget the rising tide of civil unrest. By the way, did you know Wall Street Greek warned about civil unrest in the U.S. well before the first few protestors gathered in Manhattan?

As far as American consumers see it, the economic situation remains troubled. I’m inclined to believe their opinion more than the speculative market that drove stock prices higher Thursday but failed to build upon the move Friday. Furthermore, too many high flying and recently reliable companies are warning about the road ahead if not failing to satisfy today, with Apple (Nasdaq: AAPL), Netflix (Nasdaq: NFLX), Cree (Nasdaq: CREE), eBay (Nasdaq: EBAY), VMware (NYSE: VMW), Amazon.com (Nasdaq: AMZN) and IBM (NYSE: IBM) letting shareholders down in one way or another this quarter. And while some investors may have forgotten this important fact last week, I remembered that the last Challenger Jobs Report showed a significant number of announced corporate layoffs, and that unemployment and economic growth seemed more likely to deteriorate than to improve based on Goldman Sachs (NYSE: GS) and other economists’ updates of the last several weeks.

Consumers are feeling ill; there’s no doubt about that. Early last week, the Conference Board reported its Consumer Confidence Index dropped dramatically in October, to a mark of 39.8, from a poor base of 46.4 in September. The main components of the index, which comprise the views of the present situation and expectations for the next six months, declined in union. The consumers’ view of the present situation was simply horrible, with the representative index down to 26.3, from 33.3. The Expectations Index collapsed to 48.7, from 55.1, clearly illustrating lost hope. According to Lynn Franco, Director of The Conference Board Consumer Research Center, "Consumer confidence is now back to levels last seen during the 2008-2009 recession.”

Bloomberg reports its Consumer Comfort Index weekly, so it offers a very relevant and fresh view of the consumer mood. Bloomberg’s index fell to minus 51.1 in the week ending October 23, from negative 48.4 the week before. Not only was it the worst reading in a month, but it reflected levels not seen since the Great Recession, which we are supposed by many to have recovered from. Do you notice a recurring theme here yet?

On Friday, the University of Michigan, in conjunction with Thomson Reuters, reported its Consumer Sentiment Index for the close of October. This measure varied from the other two in that it projected improvement. The Michigan Index gained to 60.9, from a sour 57.5 mark at the start of the month. However, it was only up slightly against September’s close, when the index measured at 59.4. The current situation component of this index improved slightly to 75.1, from 74.9, but that’s a negligible change. What was telling was what happened in the expectations component of the index. It improved, yes, to 51.8 from 49.4. However, it improved from a near 30-year low, which was marked at the start of the month. The point is that while the expectations index showed improvement, it was from a historical trough, and those expectations remain at a point reflecting very tough times.

The measures these indexes produce should not be given too much weight for their direction, whether they show improvement or deterioration, but they should be watched closely for absolute value, trend and magnitude of change. The trend of course depicts a more meaningful direction than one month’s change, and the magnitude of change, given a margin of error, matters more than slight directional movements. Of course, the absolute value of all three indexes was poor, despite the differences of the three. What I see in these indexes is a situation that still spells trouble, and given the distance Europe must yet travel to truly survive its crisis, and the soft or tangential drivers of U.S. economic data improvement, I think consumers are wiser today than the market was for one day last week.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Surprise! Surprise? Retail Sales Demise

Was anybody really surprised to learn that retail sales stalled in August? Apparently economists were, given their consensus forecast for growth of 0.2%, based on Bloomberg’s survey. Census Bureau data reported Wednesday showed retail sales actually stuck around the same mark set in July. Considering the damage DC and S&P brought to the stock market and consumer confidence through the summer, there should be no surprise about August retail sales dribble. The job now ahead of our government is how to restore confidence before an economic death spiral gains momentum.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relevant Tickers: NYSE: XRT, NYSE: WMT, NYSE: PIR, NYSE: ETH, Nasdaq: HOFT, NYSE: HD, NYSE: LOW, Nasdaq: AAPL, NYSE: BBY, NYSE: LTD, NYSE: CHS, NYSE: ANN, NYSE: GPS, NYSE: M, NYSE: JCP, NYSE: JWN, NYSE: TJX, NYSE: KSS, Nasdaq: COST, NYSE: TGT, NYSE: WMT, Nasdaq: WTSLA, Nasdaq: HOTT, NYSE: AEO, NYSE: ARO, NYSE: ANF, NYSE: SAK, NYSE: TIF, NYSE: TLB, NYSE: LL, Nasdaq: BLDR, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: LZB, Nasdaq: SCSS, NYSE: ZZ, NYSE: FBN, NYSE: NTZ, Nasdaq: SHLD, NYSE: DDS, Nasdaq: BONT, Nasdaq: CPWM, Nasdaq: BKRS, Nasdaq: BEBE, NYSE: BKE, Nasdaq: CACH, Nasdaq: CMRG, Nasdaq: CATO, NYSE: CBK, Nasdaq: CTRN, NYSE: PSS, Nasdaq: DEST, Nasdaq: DBRN, NYSE: DSW, Nasdaq: FINL, NYSE: FL, Nasdaq: GYMB, NYSE: GES, NYSE: JCG, NYSE: JNY, Nasdaq: JOSB, NYSE: NWY, NYSE: JWN, NYSE: MW, Nasdaq: SYMS, Nasdaq: PLCE.

Surprise! Surprise? Retail Sales Demise

Back to school or back to broke? The back to school shopping season tends to heat ahead of Labor Day, but this data is adjusted for seasonal variation, and so should not be seen as worse for it. And how bad is it really? On a year-over-year basis, sales were 7.2% higher. Even after adjusting for inflation, that’s not shabby growth. However, gasoline station sales increased 20.8% on a year-over-year basis, thus reflecting the rise in gasoline prices through the period. This leads one to wonder if gas padded the numbers. However, if we measure retail health excluding gasoline, it still doesn’t look that bad. Most of the categories listed in the report show better than inflation rates of growth on an annual basis. That said, and like I’ve often stated in the past, we slow before we stop and we stop before we reverse course.

The month-to-month 0.0% growth rate proved harder to digest because July’s growth was revised downward to +0.3%, from the initially reported 0.5% rise. The July data was reassuring to investors when reported, so this is like a rug has been pulled out from under us. Still, the stock market was higher through early afternoon trading Wednesday on the appeasement of investors by an Italian vote of confidence for its government and on the reassurances of Angela Merkel and other European leaders regarding a feared Greek default.

Surprising motor vehicle sales weakness cost the overall growth performance, as the rate excluding auto sales was a better +0.1%. Motor vehicle and parts dealers’ sales were reported down by 0.3% through the month. This was consistent with data reported at the start of September, with domestic auto sales estimated running at a 9.4 million annual rate, down from 9.5 million in July. Total auto sales were down to a rate of 12.1 million, from 12.2 million in July.

Significant softness was also seen in apparel sales (clothing & clothing accessories), which was reported down 0.7% month-to-month. And the August drop was preceded by a decline of 0.3% in July. Clothing is perhaps one of the more discretionary spends made by consumers. Department stores did especially poorly, with those sales down 0.3% month-to-month. That news has not hurt the stocks of the big boxes today, with shares of J.C. Penney (NYSE: JCP) up 4.1%, Macy’s (NYSE: M) up 2.8%, Kohl’s (NYSE: KSS) up 2.2% and Nordstrom up 0.3% at the hour of publishing here. Grocery store sales, an area of necessity, rose 0.5%; though food sales, like gasoline, may reflect rising pricing as well (Kroger NYSE: KR up 0.3%). Spending at restaurants and bars (food services and drinking places), which are certainly discretionary for most of us, declined by 0.3% in August; and that followed the 0.4% decline in July. Shares of Brinker International (NYSE: EAT) and Darden Restaurants (NYSE: DRI) are up 5.3% and 2.4%, respectively, nonetheless. This discretionary spending drop-off should make DC and S&P feel a little guilty, if either has a conscience, but it looks like investors in these companies expected worse news today.

Nonstore retailers, which is basically online business now (once dominated by catalog), saw a sales increase of 0.5% in August and a strong 10.4% increase year-over-year. This continues to be a market share story, as the web keeps grabbing business from the street. Perhaps a sign of renewing decline in housing, furniture and home furnishing stores saw a sales drop of 0.2% in August, and have only modest growth of 0.2% to report on a yearly basis.

Sporting goods and other hobby stores posted strong growth of 2.4% in August, and I continue to believe this is due to a little understood phenomenon among the tally takers. Heading into the school year, student athletes and musicians must restock on equipment and supplies for their game and music playing efforts. It’s my view that the seasonal adjustment has not been accounted for here, as I recall this happening in years past as well.

In conclusion, the decline in August, following a moderated growth rate in July, can be directly attributed to Washington D.C. and to Standard & Poor’s in my opinion. The two perhaps equally responsible entities managed to scare the consumer, both employed and unemployed, into their bunkers. The capital destruction that occurred in the stock market on dire debt ceiling debate and the prospective economic collapse threatened by a downgraded sovereignty kept Americans focused on preservation of capital, and perhaps food as well. Hopefully, American confidence can be restored as quickly as it was damaged, but it appears a self-feeding down spiral is more likely.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Bizarre Circumstances Boost Mortgage Activity

A bizarre set of circumstances have manifested over the past several weeks, presenting a scenario only a scant few might have foreseen. The downgrade of American credit by Standard & Poor’s threatened to raise the cost of borrowing for the U.S., similarly to what we saw happen to Greece. Instead, fear of the broad global ramifications of the downgrade drove money into U.S. treasuries, driving up the price on demand and driving down the yield, or the cost of borrowing for the United States. This in turn has had beneficial impact to rates across the board, including for mortgages. So, what might have harmed the housing market from a rate only perspective instead is helping home financing affordability.



Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.



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Bizarre Circumstances Boost Mortgage Activity

The Mortgage Bankers Association (MBA) Wednesday reported that its Market Composite Index of mortgage activity jumped by 21.7% through the period ending August 5, continuing a strong trend that has accelerated through the last few weeks. The catalyst has been clear, decreasing mortgage rates. In fact, record low mortgage rates inspired a slew of refinancing last week alone.



With the average contracted rate on 30-year and 15-year fixed rate mortgages falling to 4.37% (from 4.45%) and 3.52%, respectively, the MBA’s Refinance Index reflected a 30.4% increase in activity against the immediately preceding week. Last week’s data also showed a strong improvement. Through this latest period, the share of refinancing activity to total activity increased to 75.6% from 70.1%. This record low rate strike has broken through the threshold for many to find economic value in refinancing. Starving mortgage brokers are not in need of more reason to make their phone calls to spur activity either, something we noted they were missing earlier this summer.



This week, mortgage applications tied to the purchase of homes proved inconsistent with refis. The MBA’s seasonally adjusted Purchase Index decreased 0.9% against the week before. This data is as impacted by weather as it is by rate changes, so perhaps the extreme summer heat and summer generally is keeping activity down, excluding the impact of great economic uncertainty, high unemployment, low consumer confidence and intense fear levels.



It’s paradoxical that this fear factor is actually offering a stimulant to the housing market and an economic value-add to consumers’, who are lowering their cost of financing. Perhaps this is the reason Fed Chair Bernanke was quiet on Monday and somewhat disciplined on Tuesday.



Americans should take advantage of this opportunity to lower their cost of debt by finding refinancing opportunities where available. I also believe that prospective home buyers with the job and money in hand would be well served to enter the real estate market now, especially with the vast pool of distressed property available at this dark hour. An important reasoning for my suggestion is my longer term expectations for rates. I do not expect the cost of capital to hang around current levels, or even remain low on a historical basis, for much longer.



Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumer Confidence Rose but Much has Changed

Consumer Confidence rose in July according to the Conference Board, but the Index was measured on July 14th, when America still expected its representatives in Washington to act responsibly. I have a feeling if the survey were taken today, it would return a significantly different result.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relevant Tickers: NYSE: XRT, NYSE: WMT, NYSE: PIR, NYSE: ETH, Nasdaq: HOFT, NYSE: HD, NYSE: LOW, Nasdaq: AAPL, NYSE: BBY, NYSE: LTD, NYSE: CHS, NYSE: ANN, NYSE: GPS, NYSE: M, NYSE: JCP, NYSE: JWN, NYSE: TJX, NYSE: KSS, Nasdaq: COST, NYSE: TGT, NYSE: WMT, Nasdaq: WTSLA, Nasdaq: HOTT, NYSE: AEO, NYSE: ARO, NYSE: ANF, NYSE: SAK, NYSE: TIF, NYSE: TLB, NYSE: LL, Nasdaq: BLDR, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: LZB, Nasdaq: SCSS, NYSE: ZZ, NYSE: FBN, NYSE: NTZ, Nasdaq: SHLD, NYSE: DDS, Nasdaq: BONT, Nasdaq: CPWM, Nasdaq: BKRS, Nasdaq: BEBE, NYSE: BKE, Nasdaq: CACH, Nasdaq: CMRG, Nasdaq: CATO, NYSE: CBK, Nasdaq: CTRN, NYSE: PSS, Nasdaq: DEST, Nasdaq: DBRN, NYSE: DSW, Nasdaq: FINL, NYSE: FL, Nasdaq: GYMB, NYSE: GES, NYSE: JCG, NYSE: JNY, Nasdaq: JOSB, NYSE: NWY, NYSE: JWN, NYSE: MW, Nasdaq: SYMS, Nasdaq: PLCE.

Consumer Confidence Rose but Much has Changed

The Conference Board Index, produced through a survey by The Nielsen Company, showed an improvement in July, to 59.5, up from 57.6 in June. Economists didn’t venture far from the prior month’s mark, perhaps a sign of uncertainty among the forecasters, as they set the bar at 57.0.

The reading was mostly higher, though marginally so, due to expectations for the next six months, not due to the current situation. And Lord knows, if the “current situation” were representative of July 26th (the midnight hour), well then we might be looking at a fractional result. The Present Situation Index fell to 35.7 from 36.6, and the Expectations Index gained ground to 75.4 from 71.6.

The component measure covering survey respondents’ views of current business conditions offered an intriguing result that perhaps reflects the broader divide that seems to be developing in the nation. The number of Americans seeing better opportunity and deteriorated opportunity both increased, illustrating a polarization of views. With regard to employment, those seeing an improved employment environment remained at an extremely low level, while the number of folks finding jobs harder to get increased to an even more significant number.

In conclusion, the absolute level of the Consumer Confidence Index is bad enough to begin with, so the small change for the better should be discounted. Secondly, the date of measurement and its distance from the current date matter this time around. That said, depending on what happens between August 2nd and now, and contingent upon the wisdom and restraint of S&P (NYSE: MHP) and Moody’s (NYSE: MCO), August’s index measure could be wildly higher or reflective of the Apocalypse, in this analyst’s view.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumers Souring on the Economy

Consumer Shock

Two separate consumer confidence measures offered a consistent message over the last several days. Consumers are souring on the economy. Global economic recovery, combined with the pressure applied from Middle Eastern unrest, has a difficult environment further burdened by rising gasoline and other prices.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Consumers Souring on the Economy

Both the University of Michigan/Reuters measure and the Conference Board's measure published on Tuesday concurred that inflation is the main concern of consumers today. It has them very worried about the affordability of gasoline and food and other goods over the months ahead. As higher necessary gasoline expenditures cut into pocket books, other spending is threatened as well.

The Conference Board's latest take for March showed its Consumer Confidence Index fell to 63.4, a notable decline from February's measurement of 72.0. The mark was the worst in three months in fact. As we have discussed here previously, most of the last year's gains in confidence have been counted in the expectations portion of the survey. The outlook of consumers had improved, surely benefiting from a rising stock market and positive economic data. We continue to be suspicious though of the reported gains in employment, and we've suggested the true unemployment rate is closer to 9.4% then 8.9%. Expectations, however, are easily spoiled, and vulnerable to swift change, as seen in the monthly collapse here.

Last week, Reuters/University of Michigan reported its Consumer Sentiment Index fell to 67.5, from 77.5 in February. That was the lowest reading for the index in more than a year. The expectations index here fell to 57.9, from 71.6 in February; this was the lowest level for consumer expectations since March 2009. The Conference Board's report issued today showed its consumer expectations measure fell to 81.1, from 97.5.

In both cases, the surveyed consumers indicated it was inflation concerns that bothered them most. Inflation expectations moved higher in each report, and the reason is clear, as gasoline has been highly pressured by the events in Libya, Bahrain and the Middle East and North Africa generally. However, even before the turnover of government in Egypt, commodity prices had been steepening. In fact, higher food prices were at the core of the unrest in Tunisia, since the impact is felt more sensitively by these third world nations, where food costs represent a greater proportion of income than in the U.S.

The Conference Board's report has not proven positive upon close inspection, even before today's news. While it has noted better relative results, on an absolute level, the survey displays a clearly miserable state of affairs. For instance, consumers claiming business conditions are "good" increased, but only to 15.1% of those surveyed. Those claiming business conditions were "bad" decreased, true, but only to 37.0%, from 39.3%. And some 44.6% of consumers said jobs are "hard to get", while just 4.4% said jobs were "plentiful".

Study of the numbers shows a pitiful confidence environment, that much is clear. Just 20.6% of consumers expect business conditions to improve over the next six months, and that is down from a still sad 25.2% last month. The numbers are not any better with regard to the jobs outlook or for income expectations. Representing 70% of the American economy, consumer spending is threatened, as is the housing recovery and GDP. Thus, concern is heightening about the possibility of another recession, and the likelihood of QE3 is increasing.

I noted Larry Kudlow Tuesday pointing to manufacturing strength and Jim Cramer spoke recently of the good health of the American multinational. Both statements are true. However, manufacturing alone will not survive the American economy, and the good health of American multinationals will neither support significant US job growth.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE), Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), J.P. Morgan (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.