Tag Archives: Black Friday

Holiday Sales May Be Missing In Action

I’m sure most of you are  inundated with “Black November,” “70% off” and “clearance” email promotions from the usual cast of brick/mortar/online chain retailers. It started with my inbox in October.   This is because retailers are terrified of what could be one of the worst holiday spending seasons in years.

The mainstream financial media, planted with soundbytes from Wall Street snakeoil salesmen, have already created this year’s “the dog ate my homework” excuse for poor holiday spending with the absurd notion that the period between Thanksgiving and Christmas is shorter this year.  Quite frankly, I would not be surprise if many households used Amazon’s Prime day and easy Amazon credit lines offered to buy holiday gifts early this year.

Speaking of AMZN, it warned that its expected holiday sales would be lower than previous guidance.  And Home Depot lowered its Q4 revenue estimates for the second time in three months.

Perhaps October retail sales offers a glimpse at what we can expect. The headline retail sales report promoted the idea that retail sales “rebounded” in October (recall September retail sales dropped 3%). October’s retail sales reportedly increased 0.3%. The headline number was rounded up from 0.27%. Compare this to the headline 0.36% CPI. This means that real retail sales in October (i.e. ex-inflation) declined.

Keep in mind that a survey of more than 5,400 Americans by the Financial Health Network revealed that 70% of households are struggling financially in some capacity. 17% said they can’t maintain a majority or all aspects of their finances. Another 54% said they’re struggling with at least one aspect of financial stability (likely credit card/auto debt). About 20% of middle class workers are spending more than they earn. This study confirms and reinforces other studies I’ve seen showing similar results.

Core retail sales, which are ex-automobiles and gasoline, increased 0.1%, which was worse than expected. When you think about it, aside from all of the statistical errors from estimating 16 out of 25 categories, the core retail sales ex-inflation was negative. It looks like gasoline sales drove the headline number as it was up 1.1%, which is the result of higher gasoline prices during the month.

Away from food, “core” discretionary categories suffered rather large declines from September. Clothing was down 1%, sporting goods/hobby/books were down 0.8%, furniture store sales dropped 0.9% and electronics/appliance sales were down 0.4%. Consumers also cut back spending at restaurants and bars, with sales dropping 0.3%.

The retail sales numbers for October, preceded by the big drop in retail sales in September, reflect and confirm my view that the consumer is “running out road” with the ability to assume more credit card debt for discretionary expenditures. The results of the survey above suggest that a not insignificant percentage of households need credit cards to make ends meet. This chart nicely summarizes the U.S. household financial conditions:

I suspect the Census Bureau will do its best to impose “seasonal adjustment” distortions at Trump’s behest in order to put the best possible spin on retail sales. But truth is that a majority of households are struggling with a heavy debt load and with real income after taxes that barely covers non-discretionary expenditures. Do not mistake a rising stock market as an indicator that economy is healthy. Right now the largest component of economic activity at 70% of GDP is terminally ill financially.

The commentary above is an excerpt from my weekly Short Seller’s Journal. It offers a glimpse of the type analysis presented which seeks to expose the real economic data hiding below the heavy dose of spin applied to “official” economic reports (for instance, real-time data for roughly 50% of the categories in the retail sales report is not available, leaving Census Bureau to “guesstimates” the monthly sales for those categories). And of course short ideas along with put option suggestions are posted in every issue. You can learn more about this newsletter here:  Short Seller’s Journal.

Black Friday, Fake News And Gold

Black Friday and “Black Friday” weekend have largely become irrelevant.  Every retailer in the U.S., from auto dealers to furniture stores to online tennis apparel shops have been advertising “Black Friday” sales since November 1st.

We have no doubt that the Census Bureau will concoct phony holiday sales for November (reported December 14) and December (reported in January).   But the truth – the non-Russian influenced truth – is that retail sales spending per capita this holiday on an inflation-adjusted basis is going to be less than in 2015.

Already the National Retail Federation has announced that spending per person over Thanksgiving weekend was $289.19, down 3.4% from $299.60 last year.  Gallup released a survey of shoppers and determined that Americans intend to spend an average of $752 on holiday gifts this year, down from $830 in 2015.   Gallup, looking for a “silver lining” in the survey, stated that this matches the average for the last seven years since 2010.  Of course Gallup fails to note that on an inflation-adjusted basis, the number for 2016 would be significantly below the average.

Turning to the “fake news” witch hunt, Gallup blames the results above on unseasonally warm weather.  This is a perfect example of propagandized fake news.   The average household is spending less money this year because the real median household income is lower now than in 2007.  Consumers faced higher gasoline prices in October and November which cut into disposable spending budgets, as well as facing the prospect of huge increases in their health insurance premiums.

The establishment has implemented a full-court press in the hunt for “fake news” purveyors.  This is the clearest sign that the alternative media bloggers have touched the raw nerve of truth and the elitists do not like it.   The latest attempt is from Jeff Bezos’ Washington Post, which featured an organization called PropOrNot, which purports to use “manual and automated” analysis to determine that several hundred Alternative Media websites were “Russian propaganda outlets.”

If the Washington Post is reporting it, it must be authentic, right?  The truth is that this is nothing more than the rebirth of Joseph McCarthy’s 1950’s communist witch hunt – the Red Scare.   “McCarthyism” is defined as, “the practice of making accusations of subversion or treason without proper regard for evidence.”   It also means “the practice of making unfair allegations or using unfair investigative techniques, especially in order to restrict dissent or political criticism.

In truth, the U.S. Government is the biggest purveyor of fake news in an effort to control the flow of information made available to the masses and to coerce their perception of reality.  It’s yet another form and implementation of insidious propaganda in a manner quite similar to the use of propaganda by the Nazi Party.

Finally, there are many indications that the systematic and methodical take-down of the precious metals sector since mid-August has reached its limits.  Today, for example, the mining stocks experienced big rally on huge volume.  The volume in many stocks was triple the 10 and 90-day average volumes.

In today’s episode of the Shadow of Truth, we dissect some of the important events as they unfolded over the long Thanksgiving weekend and explain why we think gold has bottomed:

Black Friday Was A Bust Despite Rabid Retailer Promotions

America’s annual Black Friday shopping extravaganza was short on fireworks this year as U.S. retailers’ discounts on electronics, clothing and other holiday gifts failed to draw big crowds to stores and shopping malls…Suntrust Robinson Humphrey analysts were more blunt, calling Thursday a “bust”. “Members of our team who went to the malls first had no problem finding parking or navigating stores,” he wrote in a note.  LINK

“Black Friday” was actually “Black Friday Week” and “Black Friday Weekend.”  Despite promises from the Fed and the Obama Government that the economy is doing well, the nation’s retailers can smell a brewing holiday season disaster.  This is why they all seemed to “leap frog” each other backwards to start their “Black Friday” sales first.   It was textbook market cannibalization.

The media’s propaganda artists will paint the “picture” that the early start to “Black Friday” pulled sales away from the Thursday/Friday hog feeding, and this is true to some extent. They’ll also promote the narrative that online sales diluted mall traffic.  This is also probably true.  But online sales are only 6% of total retail sales.  Furthermore, online sales measured overnight Thursday to late morning Friday were projected to grow 19% over last year but only increased 15%.

The biggest irony is that the National Retail Federation is already blaming lower sales growth this year than originally projected on “stagnant wages and sluggish job growth.” This is in stark contrast to the storyline about employment and income coming from the Government and the Fed.

There’s money to be made knowing that retailers will be struggling to make their numbers this year.  All of them will be forced to sacrifice margins in their quest to move inventory and hit revenue forecasts.  Most of the ones who have reported Q3 missed both and their stocks got hammered.  There’s still some retailers who will report Q3 and have “cliff-dive” reactions from the market yet to come.

My debut issue of my Short Seller’s Journal features one stock that plunged 20% after it BlogLOGO_retailreported.  This stock is still a short but I detail the reasons to wait for a bounce.  The second stock featured reports this Thursday before the open.  I explain why I think there’s a good chance this company will miss its numbers and take a dump.  You can access my report by clicking on the image the right or on the link just above.

 

The U.S. Economy Is Collapsing – Americans Are Out Of Money

Wall Street, fearful that consumers are running out of cash heading into the crucial Christmas retail season, are selling off retail stocks and everything else sensitive to consumer spending.  – New York Post

The retail sales report for October was much worse than expected.  Not only that, but the Government’s original estimates for retail sales in August and September were revised lower.  A colleague of mine said he was chatting with his brother, who is a tax advisor, this past weekend who said he doesn’t understand how the Government can say the economy is growing (Hillary Clinton recently gave the economy an “A”) because his clients are lowering their estimated tax payments.  Businesses lower their estimated tax payments when their business activity slows down.

In September the Fed released its Consumer Expectations survey which showed a collapse in consumer income and spending expectations.  This does not occur in an economic system which is experiencing growth.

The price of oil traded below $40 briefly this morning.  The propaganda machine would have you believe that OPEC is driving the price down to put the U.S. shale industry out of business.  This has to be one of the most idiotic rationalizations for a negative economic occurrence I’ve ever seen (that, and “the bad weather ate my homework”).   The price of oil is collapsing because demand for oil is collapsing.   Demand for oil is collapsing because economic activity globally, including and especially in the U.S., is collapsing.

Once again the Empire Fed Manufacturing survey for November continued to plunge deeper into negative territory.  It missed Wall Street analyst expectations once again by a wide margin.  The index fell to negative 10.74 vs the -6.34 forecast.  The average work week fell for the fourth straight week.   I have news for everyone, if the average work week falls, it means people are making less money.   Less money translates into a disaster for holiday sales.

Retail sales this holiday season are setting up to be a disaster.  Already most retailers are advertising “pre-Black Friday” sales events.  Remember when holiday shopping didn’t begin, period, until the day after Thanksgiving?  Now retailers are going to cannibalize each other with massive discounting before Thanksgiving.  Anybody notice over the weekend that BMW is now offering $6500 price rebates?   The collapsing economy is affecting everyone, across all income demographics.

Last week we saw the stocks of Macy’s, Nordstrom and Advance Auto Parts do cliff-dives after they announced their earnings.  I mentioned to a colleague that the Nordstrom’s report should be the most troubling for analysts.  Nordstrom in their investor conference call said that they began seeing an “unexplainable slowdown in sales in August in transactions across all formats, across all catagories and across all geographies that has yet to recover.”  

Nordstrom caters to the “keep up withe Jones'” middle class household who works hard to project an image of prosperity but uses credit cards, auto loans and home equity debt to keep the gerbil wheel spinning.

That game has hit a wall.

Amazon stock is down over 2% this morning without any meaningful news reported that would have triggered the selling.   But anyone who reads my AMAZON dot CON report will understand why AMZN is the most overvalued stock in the S&P 500 now:

USA Today:  Amazon breaks barrier: Now most costly stock  –  “The online retailer’s shares are now trading for 942 times diluted earnings over the past twelve months – making them most expensive in the Standard & Poor’s 500.”

Someone sent me a copy of Wall Street’s 2013 consensus analyst earnings estimates for Amazon in 2014/2015.  Back then Wall Street was forecasting that AMZN would earn $2.58/share in 2014.  The high-end estimate was $4.55.   AMZN reported  a 52 cent per share loss in 2014.  The consensus forecast for 2015 was $5.44 with $9.22 on the high-end.  On a trailing twelve month basis through Q3 2015, AMZN has reported earnings per share of 70 cents.

Amazon stock is going to crash – it’s just a matter of time…