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Retail Sales To Disappoint, Risk At Risk Again
Submitted by Nic Lenoir of ICAP
Early readings for tomorrow's retail sales indicate the number could disappoint. As many have pointed out already, the index of positive/negative surprises have been flashing red for the past few weeks: an indication the recovery could be losing momentum. Also, indications from retailers following black Friday were not exactly rosy. Macro economic models using available data are pointing to a possible flat number which could well rattle the market. This was confirmed by my friend Jonas Thulin, head of research for Nordea, as his forecasting arsenal points to a possibly negative number.
We also had a wide miss on Brazil's GDP to the downside this morning. Simply put, the revised number came in below the forecast of all economists interviewed by Bloomberg. I have long contended that Brazil is just another house of cards built for us by salesmen on Wall Street who have nothing to sell at home, and investors who are craving for something to bet on after last year's beating and a falsely (fraudulently?) regained sense of stability. It's even easier when what they bet on is something they know very little about other than what the salesman tells them, and that is pushed up by a pool of liquidity 100 times bigger than the actual size of the market. Maybe today's numbers will put things in perspective a little bit. Having natural resources does not justify a stock market valuation 4 times greater than at the top of the dotcom era...
In any case, with an economic picture which in our opinion will disappoint in Q1, and possibly freak the living hell out of the markets when the next wave of foreclosures hits, we have been recommending being cautious sellers of equities and risk in general when the market exhibits bearish divergence. For the past week or so we have reaffirmed our bearish sentiment, and the S&P daily chart is fairly self explanatory. Yesterday morning however we had warned against a possible bounce on the 1085 support as the short-term indicators were struggling to confirm further downside. Now that the bounce is upon us, we eel that the correction has taken its course. From the lows yesterday we have an a-b-c formation with c=a just about exactly, and we failed today on the 61.8% retracement of the sell-off from the highs. Given that daily indicators still paint a very bearish picture, we would recommend selling risk again. We note that NZDUSD has bounced and tested its 50-dma as resistance today, and AUDUSD has come back on the 0.9179/0.92 resistance zone we mentioned yesterday. Levels here to play risk aversion are favorable indeed! The only surprise would be EURUSD which has hardly retraced any of its recent weakness along with the other assets it usually correlates positively to. We will keep an eye on this pair as we would have preferred if it confirmed today's market dynamic. On the flipside we are right back close to recent lows on EURAUD, and this offers a great opportunity to buy this pair here.
Good luck trading,
Nic
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Indicators, both retail and otherwise, have been flashing red for months and months now. Market doesn't care. If "Risk is at risk" then it's only for a day before the gravy train takes us higher.
Couldn't agree more. Bad news is good news.
'Risk' is a fascinating word lost amidst unrealized gains. The higher the market goes, the more it will fall. You want a quick lesson in risk/return? Play a game of Jenga. Seriously.
After the locusts (Black Friday) comes the famine...
Thanks Nic, your remarks are clear and clever as ever!
Did somebody leak the numbers.
The market just took a drop.
We used to dream of having a house of cards.
Russell 2000 starting to look ugly
Another round of fuckage is nigh. I can feel it. 2010 will be the year that everything breaks.
Are you ready?
I am. Chumbawamba.
Fuckage. Is that a word? It ought to be.
+1
From the dictionary included with Mac OS X:
fuck |f?k| vulgar slang
verb [ trans. ]
1 have sexual intercourse with (someone).
• [ intrans. ] (of two people) have sexual intercourse.
2 ruin or damage (something).
noun
an act of sexual intercourse.
• [with adj. ] a sexual partner.
exclamation
used alone or as a noun ( the fuck) or a verb in various phrases to express anger, annoyance, contempt, impatience, or surprise, or simply for emphasis.
-age
suffix forming nouns:
1 denoting an action : leverage | voyage.
• the product of an action : spillage | wreckage.
• a function; a sphere of action : homage | peerage.
Well, I think it is a legitimate usage. Chumba uses it as an exclamation (which can either be a verb or noun) and a legitimate suffix denoting an action.
Anyway, it's really sums up the current situation.
Go fuckage yourself! :)
an indication the recovery could be losing momentum.
there has been no recovery...put the koolaid away and stop with the orwell-speak...
+1
Some fool was on Bloomberg TV the other day arguing with Tice that we are going to see an uptick in capital spending that will help drive the recovery.
Yeah, right, fool.
http://www.reuters.com/article/idUSN1018300120091210?type=marketsNews
UPDATE 1-Chevron capital budget 5 pct less for 2010I am probably a bigger bear than you but I can assure you that he is right about an uptick in capital spending. I have seen it in a HUGE way in my business that supplies components to capital equipment OEMs. Our monthly sales have more than doubled during the Sept- Nov. period compared with the early part of the year and the summer months. The low dollar has certainly helps US sales in this area.
However, you are right that this will not drive the "recovery" because the structural issues remain and the companies involved are very productive and not adding jobs. I think the main thrust of this cycle is already past.
Ya they are PILING trillions into a cash for unicorns deal going down in the 186th disctrict of texas. And no it's not just a bunch of gay guys glueing dildos on steers. That idea was totally rejected.
It's the illusion of stimulus while they simply give out food stamps, pay unemployment and pile bad bank loans onto the government tax payer balance sheet.
WE WILL SPEND OUR WAY OUT OF THIS MORASS. GUARANTEED! I don't care about the "burden" it places on my grandchildren...I'll be dead! Besides, they'll kick the can, coddle the books and otherwise create statistics that will pass that burden on. Who better teachers than us?
Politico is reporting that the congress wants to raise the debt ceiling by another $1.8 Trillion now so they won't have a backlash during the 2010 elections.
http://www.politico.com/news/stories/1209/30417.html
pork me with a spoon!
thehill.com/homenews/administration/71353-mark-penn-got-6-million-from-stimulus
The Critters are trying to hide it away in the Defense spending bill and Santa's trick bag.
The Bond market will fukk up this party real good in Q1.
Incumbents will have a hard time erasing memories when mortgage rates go galactic.
Based on what do you claim that Brazil valuations are 4x that of the dot-com era (presumably US dot com era)? There is a strong domestic story there in terms of a normalization of a triumverate of FX, inflation and interest rates (the latter being the key upside to an under-invested, under-levered domestic economy).
The 4x nominal is not a claim, it's a fact...
The point is that the index is heavely weighted on Petrobras, Vale and a few other large companies that does not represent the country's economy as a whole. Expect large movements in the index, mostly down, in the event of sovereign defaults elsewhere (take profit/cover loss).
I just had to share this incredible scam that a friend of mine just emailed. Even in times like these, when you think nothing could surprise you, here is another example of people that will do absolutely anything in order to enrich themselves. You just have to wonder how our species has managed to survive this long.
Apparently, there is a legitimate financial services company in New York City that, for a percentage, will take your money and forward it to one of several third world countries where they will find men, women, and even children, who will work for practically nothing.
Then what they do is take the difference between what labor-value the workers actually produce, and their paltry wage, and distribute it to the banks, who are fronting their operation, to several governments who insist on taking a cut, then the company takes their share, and then they send you what’s left.
In other words, for doing virtually nothing, the company, the banks, governments, and even the investor, all get money, from millions of poor third world peons.
Wow, what a scam!
Isn't that basically how the entire US-China relationship has worked for the past 10 years?
Yes, what a scam. And what a shame that the American people support serfdom for and from others through their elected representatives.
Barack Obama used the word “I” 51 times in his Oslo speech. He has a dream—and that’s to throw John Adams in the dustbin of history for a global plantation where borders are broken down and everyone is averaged out to the lowest collective denominator--in wages and healthcare, in morality and standards for law, in dirth of opportunity and education.
Americans must sharpen up and wake up to what it means to be globally arbitraged under global governance. When we’re talking freedom we must realize Obama and his central planners use abstract examples and reasoning, such as labor and costs, to change the subject and confuse.
When we talk about the sacrifices people have made to build this society, about the principles our founders established for justice, for the rule of law, for a contract society, for representative government, for control of potential government abuse, for a bill of rights, we must realize these people are talking power and money for themselves. Americans built a border around America to protect these principles. The Obamas and the Bushes and the central planners are tearing America's border and her heritage asunder.
Barack Obama was not elected as some sort of global gadfly. He was elected as chief executive of the United States of America. He was elected to protect America and her people, her liberty and her justice.
People voted for change without asking exactly what change. Now we all know and will have to fight to the end to have it all back.
TD, speaking of fail, have you seen the results for the HAMP program.
FAIL, FAIL, FAIL.
+1
as most of us knew it would.
looking forward to the FHA implosion in 2010, though it will not be announced until after the midterms. gonna play out just like fanny and freddy...
Silly Nic. Don;t you know that even a miss is OK is la-la land? The administration plays games with the numbers. Even if they do miss, you have the media and the pundits all lining up behind them spinning the miss as huge positive. They are all on the green shoot express.
Hopium: hope filled delirium preached by the White House and Swallowed whole by the American Sheeple.
It's only a miss if the administraion allows the MSM to report it.
.
wake up people. the markets at totally rigged. The retail sales number will mean nothing to the markets if it sucks, and less if it's good because that will simply mean it's a lie. ALL FARCE ALL THE TIME. Time to get out of this rotten business.
"I have long contended that Brazil is just another house of cards built for us by salesmen on Wall Street who have nothing to sell at home, and investors who are craving for something to bet on after last year's beating and a falsely (fraudulently?) regained sense of stability."
With all due respect to your technical analysis, allow me to differ on Brazil. Sure there have been and always will be "hot-spots" for hot money flows but I think this is not the just the case. Every so often, some country manages to break away from emerging market status and join the league of the "developed" markets. In many cases it is more a case of smoke and mirrors but the result is all-the-same astounding. The market which was pricing assets by double-digit discount factors re-prices them with mid-single digits - boom. I won't argue whether it's justified or not, I care about the result. After all, is it right in discounting Japanese assets with a 1-2% factor? I said that in may cases it is a matter of perception aided by smoke & mirrors. I should add that this is not the case in Brazil. A huge dynamic country rich in resourecs but also with an indigenous industrial base deserves a closer look. The fiscal side looks better than most of the G-7 countires while the external sector is seeing strong FDI. The currency is overvalued? Well it is more a case of the dollar being undervalued. Also, I can tell you that GS and Jim O'Neil don't know what they're talking about on currencies. If you think the equity market is frothy (and so do I), fine. Buy yoursef some real gov. Bonds yielding around 10% and chuck them away. If my scenaruio is right, you're looking at a 40% return just on the bond appreciation plus you get a nice income.
What you just described fits another country to the last dot - Indonesia in 1996. And bonds yielding 10% too. Some of you guys sitting in the west thinks you know a country just by flying into the EM once a year, wined and dined by rich vampire squids showing you only the best and what they want to peddle. Brazil, and other resource-rich emerging markets would all collpase once the china bubble deflates, and that is for next year when hyperinflation hits. And your 40% appreciation of govt bonds, once good advice - sell them now.
I would like to agree with you... but there is no way that they can miss the giant watermelon that is being pitched to them for tomorrows numbers. They only need a 0.6% increase from last month. And to boot they only need a little more than that to trump the numbers from last year... which will produce a large CNBC party that the collapse has been defeated. Even though any number that comes out tomorrow will be significantly below Nov 2007 numbers... all they care about is year over year.
There is an article on this at the Naked Hedge Fund with some charts
I have long contended that Brazil is just another house of cards built for us by salesmen on Wall Street who have nothing to sell at home, and investors who are craving for something to bet on after last year's beating and a falsely (fraudulently?) regained sense of stability."
With all due respect to your technical analysis, allow me to differ on Brazil. Sure there have been and always will be "hot-spots" for hot money flows but I think this is not the just the case. Every so often, some country manages to break away from emerging market status and join the league of the "developed" markets. In many cases it is more a case of smoke and mirrors but the result is all-the-same astounding. The market which was pricing assets by double-digit discount factors re-prices them with mid-single digits - boom. I won't argue whether it's justified or not, I care about the result. After all, is it right in discounting Japanese assets with a 1-2% factor? I said that in may cases it is a matter of perception aided by smoke & mirrors. I should add that this is not the case in Brazil. A huge dynamic country rich in resourecs but also with an indigenous industrial base deserves a closer look. The fiscal side looks better than most of the G-7 countires while the external sector is seeing strong FDI. The currency is overvalued? Well it is more a case of the dollar being undervalued. Also, I can tell you that GS and Jim O'Neil don't know what they're talking about on currencies. If you think the equity market is frothy (and so do I), fine. Buy yoursef some real gov. Bonds yielding around 10% and chuck them away. If my scenaruio is right, you're looking at a 40% return just on the bond appreciation plus you get a nice income.
"freak the living hell out of the markets"
Don't know if it will happen, but it would be nice.
I would like to agree with you... but there is no way that they can miss the giant watermelon that is being pitched to them for tomorrows numbers. They only need a 0.6% increase from last month. And to boot they only need a little more than that to trump the numbers from last year... which will produce a large CNBC party that the collapse has been defeated. Even though any number that comes out tomorrow will be significantly below Nov 2007 numbers... all they care about is year over year.
There is an article on this at the Naked Hedge Fund with some charts
There is no way in hell that retail sales don't suck.
However, they will be scrubbed to show unbelievably positive signs.
The problem for the ministry of truth (Dept of Commerce in this case) is that if the numbers show that the American consumer is alive and well (which he/she isn't) the dollar could rally and break the 5 month downtrend.
I'm waiting for the day when all this manipulation of information by government, spread by media outlets like CNBS and Bloomberg, has the unintended consequence of huge dollar rally and subsequent equity sell off.
But it won't happen, so I'll wait and watch as AMZN hits my new price target of $156.79.
The real problem will be the loss of distribution channels after Christmas and the empty properties in the malls.
In the "dubai-esque" city of Calgary, a hairstylist at a popular mall here told me that foot traffic is down about 50%. She also sales, in a typically very busy season, are down 50% from 2008. If this oil town is feeling it - then we are likely headed for some rotten numbers.
The Ministry of Truth is married to the Ministry of Free Markets
tomorrow will go precisely as planned
and Government F*cking Sachs will net several hundred million dollars on their (ahem) prop desk
Just keep pumping the markets up. It smells like the short the CRE REITs moment is FAST approaching.
But Cramer says buy buy buy the retail sector! (http://www.cnbc.com/id/34364233)
So much for disappointing retail sales!
The retailers are using a lot of different tactics to increase their sales and bottom line. Inventory depletion then building it back up. 1Q down the next one up. The other thing I noticed is they are packaging items (grocery) in the same way but reducing the contents while keeping the price the same.