I have put a great deal of thought into the outlook for the consumer for the balance of 2012, and even if the Fed eases we are on a course toward a near-term moderation in consumer spending vs. the rates seen in July and August, with a likely re-acceleration for the holidays. (Of course, a variable to that is the election outcome and language and action regarding the coming fiscal cliff). I sense there is this wave building off in the ocean -- one that would dent sentiment -- comprised of decelerating job growth, rising food prices, weakening six-month expectations on consumer confidence and the use of savings to pay down debt incurred during must-spend periods.
Start thinking on the subject while the mere mortals attempt to handicap a single word in a Fed press release. The reality is that if the benefits of additional accommodation are diminishing, or if the Fed holds off to December to act, the market will switch gears and zero in on the outlook for the consumer and derivative stocks. As usual, I want you to be as prepared as humanly possible by staying 14 steps ahead of the crowd.
Taking No Prisoners this AM
- Lumber prices are enough off their August peak to make you go "hmm," alongside the massive advance in homebuilder stocks.
I've been rocking the mall tours recently, and here are a few non-robotic research-report observations:
- Department stores are showing too much inventory, especially in menswear to work and now women's wear.
- less "wowed" by price increases on merchandise; clearly cotton cost savings are being reinvested to maintain prices.
- I spotted my first Tesla charging station in an A-rated mall parking garage (yes, I have a picture, and it's on my Twitter account).
- Macy's (M - Get Report) is on a renovation boom. Outside of the New York City flagship overhaul, a C-rated mall-based Macy's around my way has been completely knocked down to reopen in the fall of 2013 with a more upper-end style. Macy's Roosevelt Field is now displaying higher-end luxury shop in shops (think Louis Vuitton) upon entry, and the Bloomingdale's down the hallway is also receiving tweaks. All in all, I do wonder about holiday sales disruptions if work is not completed, if these malls are any indication of activity in other locations nationwide.
- I continue to see why my top back-to-school pick, American Eagle (AEO - Get Report), announced a special dividend. I had not expected that dividend, but the company did close a lagging division and is opening stores at a slower pace, and it's a nice way to endear a new CEO to shareholders. Beyond this, American Eagle's product assortment remains the best relative to its primary competitor base.