New Leadership: Retail - Only problem Is Facts Say Otherwise

August 11, 2008 9:17 PM

The retail space exploded higher today. Not really that surprising because money has been rotating out of commodities and energy and has to go somewhere. The problem with this is only one small thing - it makes no sense. Retail profits are falling and will continue to do so, IMO. If these stocks continue to rise, this will be the next implosion. The U.S consumer is dead in the water and to bid these stocks up like things are improving is complete nonsense. I think I have mentioned about a billion times rthat the markets have nothing to do with logic, so do not fight it - for now. But this will end very badly if we march higher into October in this sector.

U.S. consumer debt levels continue to rise at a scary pace. 10% of all disposable income now goes to pay the interest on credit cards. Real incomes have fallen for 7 years. And you want to bid up retail chains? Ha. What comedy. Retail chains will ONLY go higher long term if real incomes increase. Period, end of debate. The odds of that happening are near zero as I see things. But they are being bid up on falling oil because people will now have more “income” to spend. One small problem with that thesis, people arent spending income, they are charging it and the cards are maxed.

This “trend” will end very badly eventually. U.S. consumer spending as “leadership” is comical - at best. These companies will warn when earnings are released next quarter, if not sooner. Be careful chasing this nonsense, but do not fight the trend - for now.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary

Comments

5 Responses to “New Leadership: Retail - Only problem Is Facts Say Otherwise”

goodday on August 11th, 2008 11:25 pm

by the way …..what is your day job……i agree with you….i dont buy something unless i feel passion for it, weather it;s memories of campbell soup and cocacola when i was a kid….or stocks now. you go with your passion…still do homework….lots…..but a sense of passion about it pervails.
Tom@StockBlade.com on August 11th, 2008 11:31 pm

I got laid off last week…soooo not sure right now…. I want to work for a hedge fund, but no bs ivy league MBA, so probably no chance at that. Last i checked, W. D. Gann, the best trader in history had no MBA….it is all a bunch of nonsense
goodday on August 12th, 2008 2:30 pm

well i wish you luck. just took the usair money . i paid off the house and my wifes car. now i am left with the initial 50 grand. lcc is over 9 dollars i probable jumped out too soon. but i was thinking about if isreal bombs iran or a hurricane comes in . oil would shoot up and i will of lost my investment.
Tom@StockBlade.com on August 12th, 2008 6:01 pm

LCC is one of those stocks that is very difficult to predict as it trades inversely to oil, like UPS, etc. There is no sign of a high, but it does appear extended. But again, the stock is likely difficult to predict as oil will likely move it.

But good job, I am happy for you.
goodday on August 12th, 2008 11:18 pm

lots of typos….not aloud to type after my 3rd glass of wine…lol