Friday, December 3, 2010


Uncle Ben to the rescue once again!

The market has rallied because Fed Chairman Ben Bernanke, who is appearing on 60 Minutes on Sunday night, will not rule out bond purchases beyond the initial $600 billion.

I'd have a number of concerns about owning retail stocks.

The ISI report revealed that (a) the average of its two retailer surveys dropped (from 51.1 to 46.9), (b) its specialty retailer survey moved lower (from 51.7 to 46.7), (c) the pricing power within the surveys fell (31.8 to 30.2) and (d) their broadline retailers sales survey weakened (from 50.5 to 47.0).

A Positive Data Point

The ISM non-manufacturing report comes in line with other growth signals we have seen.

The non-manufacturing ISM was better than expected, the highest reading in six months and in line with the generally more unambiguous signals of economic growth we have seen recently. The components of the report were good, highlighted by strength in orders and employment (best in three years).

Don't Kid Yourself -- the Report Is Terrible

No use trying to sugar-coat the jobs report. It's bad.

I am reading the post-mortem from the jobs report, and, quite frankly, I find it filled with a bunch of excuses from the bullish cabal as to why it was way off mark.

Words like "aberrant" and "inconsistent with other data points" are some of the most common. And "continued fear and uncertainty of policy" is another rationale for the big disappointment.

That said, average weekly hours and average hourly earnings were flat.

That is downright horrible.

Ever the optimists, the bullish folks are spinning the report to say that it will ensure the likelihood of an extention of the Bush tax cuts, reduce the debate over quantitative easing and stop the recent interest rate rise -- all market-valuation constructive developments.

In reality, as Tony Crescenzi relates in his commentary, "The jobs data loudly remind investors that very strong structural headwinds such as deleveraging and global competitiveness stand in front of today's gusty cyclical tailwinds and that this will limit economic vigor."

Structural changes are aplenty in the "new normal," not the least of which is the "Decade of the Temporary Worker," which was manifested in strong temporary employment gains in November. (Though, again, the wrong-way bulls spin it as positive, as it has historically been a precursor to payroll growth).

Poor Jobs Report

The employment news is unequivocally negative.

Up there (in Canada), the monthly employment figures disappointed.

Are we, as a nation, without fiscal restraint? What is the downside to not addressing our fiscal imbalances? And when will the adverse effects be felt?

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