January 8th and January 9th are going to be two very telling days in my eyes - retail sales data from the stores comes in on the 8th and the employment report will be coming in the next day. If the bulls brush off what I envision will be reported both those days, we'll have to toast them with Kool Aid.
I still see denial everywhere (or it could just be myself in denial of the coming surge in spending that will commence July 1, 2009 - ahem, sort of like the surge in spending I was promised last year at this time that would commence July 1, 2008)... here are some facts to be ignored as people try to make a bull case of the impending recovery in '6 months'. This is a preview of what's going to be reported Jan 8th.
- SpendingPulse, a macro-economic report tracking retail and service sales nationally, today provided summary results for the 2008 holiday shopping season (November 1 - December 24, 2008).
- While total retail sales are down in the 5.5% to 8% range for November and December, there were a few signs of relative strength. Sectors that sell food, such as grocery and general merchandise stores and some sectors of the restaurant sector helped keep total declines in the single digit range.
- Excluding gasoline, total sales were down 2% to 4% this holiday season compared to the same period in 2007. "A difficult economic environment combined with unfavorable weather during the last week of shopping made 2008 one of the most challenging holiday shopping seasons in decades."
- eCommerce continues to be an area of relative strength. Mr. McNamara pointed to the poor weather in the final two weeks before Christmas as possibly shifting sales volume to the on-line channel, as customers had difficulty traveling to brick and mortar locations. Overall eCommerce sales declined only 2.3% compared to the 2007 holiday season. (what they are leaving out is a year ago ecommerce sales were up 22% - this is a disaster considering ecommerce has been organically growing for a decade and should not, this early in it's life, be seeing negative comps)
- Total apparel sales declines stabilized in the -19% to -21% range over the same period last year, only slightly higher than the 19.5% year-to-year decline through the first week in December, and the 19% decline in the first half of November.
- The electronics and appliance category continued to have an especially difficult season, with declines of over 26% against 2007. "Sales above $1,000 have been a consistent drag on this sector throughout the season," observed Mr. McNamara.
- Another high-ticket sector, luxury sales showed the largest year-over-year declines, with sales down by more than 34% over last year. When jewelry is excluded, luxury sales are down slightly over 21% compared with 2007.
This speaks to my larger bear case of the lack of demand... I think the bull case overstates the demand from consumers for cars, homes, boats, Harleys, whatever - if interest rates are 7%, 5%, 3%, or Uncle Ben sets all rates to 0% with his magic wand. Economically threatened people do not willingly take on more debt. I think this can be best illustrated by gas sales - in any other period over the past 25 years if you dropped gasoline prices by 60%+ in 5 months you'd see usage skyrocket. Now? gasoline sales are no better than when it was selling for $4. So inherently you parallel the drop in cost of goods that they are attempting with houses (lower gas prices are no different than letting people borrow at much lower rates) and yet demand has not reacted. People need to ask why in between swigs of said Kool Aid.
As you read this I cannot stress enough this is why you need to ignore the pom pom section of financial TV which breathlessly talks about "foot traffic" as if it means a darn thing. Further, we had historic discounts this year - even more debilitating than the huge drop in sales is this effect on profits. Profits are all that matters - I can make sales go up 100% year over year if I give away product (as some retailers were essentially doing) Again, we're calling for 5 major (name brand) retailers to be out of business by Memorial Day; names everyone knows. That does not take into account of the many thousands of small "one off" type of mom and pop stores that HAVE BEEN and WILL BE closing their doors with zero publicity- they will not get the press but small business is the heart of America's strength and employment.
- Small businesses are a driver of the U.S. economy. In the past decade, small businesses -- those with fewer than 500 employees -- have created 60% to 80% of the nation's net new jobs each year, according to the Small Business Administration. More than half of Americans are employed by a small business, and these companies are responsible for more than half of the nation's nonfarm private gross domestic product.
WSJ: Slump Batters Small Business
- For many small businesses across the country, these are scary times. The dramatic pullback in consumer spending is only the latest blow threatening to push some strapped small businesses out of existence. Customers are paying their bills late, cutting off cash flow, the lifeblood of a small business. Even healthy companies are being choked by the lack of credit lines and bank loans. Others are still reeling from several years of high raw-materials prices.
- After spending nearly 20 years building her own business, Cookie Driscoll thinks it might be over. Ms. Driscoll owns C. Cookie Driscoll Inc., of Fairfield, Pa., which sells animal-themed gifts and office-promotional products. In the past year, she has seen nine of the mom-and-pop shops that buy her goods shutter -- often without paying their outstanding invoices. Her bank revoked her credit line. She expects revenue to be under $60,000 this year, down from a peak of nearly $230,000 a few years ago. She is taking almost no income from her business and paying bills with the last $16,000 from her retirement account. (that is just sad to hear) "I'm as close to a panic as I've ever been," says the 57-year-old Ms. Driscoll. "This is the most terrified I've ever been in my life."
- Many small businesses may not have the luxury of waiting it out. The smallest companies are often first to feel all the pressures, struggling with higher costs, unwilling lenders and disappearing consumers all at once. Ms. Driscoll, in Pennsylvania, is one of those. The trouble started, she says, with rising health-insurance costs. Then came higher electric bills. Two years ago, she stopped heating her office, wearing sweaters and a coat to work in winter. Last year's soaring gas prices brought shipping surcharges. Those ate into Ms. Driscoll's bottom line.
- In a recent survey from the National Federation of Independent Business, more than a quarter of small business owners said the current economic downturn is threatening their ability to survive. Nearly half of respondents said slow or lost sales are their most immediate problem.
- William Dunkelberg, NFIB's chief economist. "We've never seen sales trends as weak."
- Many are frustrated that Washington is bailing out some of the largest companies and banks. "Our members are angry that the federal government is giving taxpayer money to big companies that have been horribly irresponsible while small businesses are not getting the money they need to keep their doors open," (but that's the system we created - you have to pay for a politican to be re-elected; if you do so - he/she makes the rules for you. If you are too small, well you can go into the corner and choke; no skin off their nose)
Lesson in America - get too big to fail at any cost possible, including risk bearing activities that can threaten the entire financial system. Lobby as much as possible, and pay off... err contribute... to politicians. You win. Everyone else? You're on your own. Cramerica - for the corporation, by the corporation.
