The headline retail sales report, released today by the Census Bureau, showed a rather unexpectedly large 0.8% jump from October. The Wall Street brain trust was expecting a 0.3% increase. Of course, 99% of stock market investors and 100% of the financial media never looks at the details below the headline reports. To do this, one has make an effort to scroll down to page four of the report. There you will find this table (excerpt):
You’ll note that I highlighted this “(*)” in yellow. From the footnotes to the report, this “(*)” means this: “Advance estimates are not available for this kind of business.” For purposes of the advance estimate, the Census Bureau “imputes” the data. In other words, the CB fills in a guesstimate. According to the CB propaganda, over 30% of the data used in the monthly estimate is
a guess “imputed.” The beauty of this is that the CB has leeway to report a fictitious number for the advance estimate and then revise the original estimate when it reworks its numbers in the annual “benchmark revision” of the data,. By then no one bothers to look or even cares the degree to which the original advance estimated was flawed. The market only cares about the headline number when it’s reported. I would bet a roll of American Silver Eagles that CNBC’s Steve Liesman has no clue about this aspect of the retail sales report.
My point here is that the headline report is a fairytale. Furthermore, the headline report is based on nominal numbers. In this case, gasoline sales – for which data for the advance estimate is available – were responsible for one-third of the 0.8% headline increase from October. This increase is largely attributable to gasoline price inflation. In truth, the actual “unit” volume of sales in November vs. October is largely a mystery. Yes, online sales have been strong, but online sales represent less than 10% of total retail sales.
Interestingly, the stock market agrees with my analysis of the retail sales situation. The XRT retail ETF was down nearly 2% today (Thursday). The RTH retail ETF was down 0.6%. RTH was down despite the fact that AMZN, which represents 18% of RTH’s assets, was up nearly 0.9%.
Government economic reports are notoriously manipulated and thus a highly unreliable indicator of economic activity. The reports have become little more than propaganda tools used to “goal-seek” the political agenda of both the Government and the economic agenda of the Federal Reserve.
As the publisher of a newsletter that is based on shorting stocks – the Short Seller’s Journal – I have featured several retail stock short ideas this year, some of which have been the best-performing shorts. As a market bear, I love to see contrarian like this:
The graph shows the jump in investor dollars (largely retail investors) tossed at the retail sector (XRT) in November (top panel). The bottom panel shows the short-interest in XRT, which is at its lowest since mid-2015. Short interest dropped 22% over the last month in XRT and is down to 1% of total shares outstanding. Investors are exceedingly bullish on retail stocks and I believe this exuberance is absent fundamental justification (December 3rd, Short Seller’s Journal).
The next issue will of the Short Seller’s Journal will continue to introduce short ideas from the retail stock sector. Click here for more information about this unique newsletter: Short Seller’s Journal subscription information.