The Sales Bonanza Built on False Hopes

There appears to be a lot of hope in the market built around smoke and mirrors reporting. The market is extremely vulnerable right now and there are not a lot of safe areas to invest in at the moment. Lots of false signals, so the fall back should be cash until the smoke clears and a discernible trend can be identified. In yesterdays post I showed a long term trend chart for the SPX with a best guess on where its is heading. Today you will find a chart by Doug Short at www.dshort.com that clearly displays the way markets tend to revert to the mean over time. I would highly recommend you visit his site, one of the best I've found, and review the logic behind the chart. Study that picture if you have time as it will help explain why the markets even with good news are now pushing sideways to lower. Also note the data points next to his chart. Sobering.

We also noted that the Black Friday retails sales estimates were boosting the confidence in the market. Well the details are out and shown below with comments from Barry Ritholtz at The Big Picture. Things are certainly not as robust as the media would suggest they were and in fact his comments mirror mine concerning the logic of expecting heavy sales from a tapped out consumer. Today's market got an early  boost from comments, more like whispers, that the Fed is close to unleashing QE3.  The market closes lower as the Fed's QE3 big gun remains in the holster. The game of kick the can continues.

GLD  vs SPY

Just to emphasize the lack of safe areas to put money to work in, we have the chart on the left. It is a comparison of Etf's that represent Gold when compared to the SP 500. Gold is headed down and so is the SPY.With all the anxiety over the Banks, Europe, MF Glolbal  and the non functional Government in the United States, we would expect gold to be moving in the opposite direction to the markets. Clarity does not exist for the time being and it requires patience and possibly just sitting on the sidelines especially if you don't feel comfortable with the wild swings in trading ranges the market is working through.

Retail Sales Disappoint on False Black Friday Reports  (TheBigPicture.com)

 

By Barry Ritholtz - December 13th, 2011, 10:28AM

Last month, I published a post on the nonsense that is Black Friday sales (No, Black Friday Sales Were Not Up 16% (not even 6%). That evolved into a Washington Post article, Did Black Friday save the season? Beware the retail hype.

Today, we learn that many breathless forecasts from NRF to ShopperTrak were so much hot air and empty hype: Sales were flat to up only modestly. Total U.S. retail sales in November gained only 0.2%, following a 0.6% October. Even that month was revised downwards.

Retailers themselves may pay the price for their massive discounting: Not only might their quarterly earnings be affected by the margin pressure, but they continually train investors to hunt for discounts. Retail therapy and sport shopping are being replaced by extreme couponing and sites like Living Social and Groupon.

We are left to ponder what those folks who were lining up late at night at Wal-Mart and Best Buy for bargains were doing. No, it was not a sign of “shopping enthusiasm,” it was a sign of extreme economic distress. No one who can afford otherwise goes out Thanksgiving night to stand in the cold with a crowd, to fight the stampeding, pepper-spraying mob for a discounted X Box.

Here is your simple formula:

Thanksgiving Thursday night shopping + record food stamps = Bad Economy

Chart from dshort.com 

In the last 10 years the stock market:

• Lost 43.4% of its value early in the decade, and 56.8% in 2009
• Ended the decade down 2.0% from where it started
• $10,000 invested "buying the market" was worth $9,800 after ten years

Details from Investment Timing       Software site.