- settling the big retail debate; and
- paying the piper
Retail Faces Defining Week Posted at 6:23 a.m. EDT on Friday, Aug. 16 The biggest debate in retail will be solved next week. Right now, there's a definitive split out there. The stock intelligentsia believes that the public is still spending, but only on the house, not the body. In other words, apparel's weak, much weaker, but home goods are strong. The debate gets settled next week when Home Depot ( HD) and Lowe's ( LOW) report. I have to tell you that I am truly worried about retail here. Our country seems, overnight, to have become a nation of savers. The borrowings are way down and the money's not being spent at the mall. People seem to be hunkering down at precisely the moment they shouldn't be, when jobs are coming back. There are two explanations. One is that Washington wrecked things with the taxes and the sequester and people are feeling it, especially when the tax of higher gasoline is upon us. Another is that they are still spending, but they are spending it on their homes now that homes are going up in value. Anyone who has been on a Home Depot call knows that home spending has been below average for years and years now. Maybe that's changing.
The Piper Is Being Paid Posted at 11:57 a.m. EDT on Thursday, Aug. 15 You don't want rates to climb at the same time earnings are coming down. You want rates to climb because earnings are going higher. You don't want the consumer spending less and the 10-year note going to 3%. You want consumers spending more and the 10-year going to 3%. So what we have right now is a combination that should, unfortunately, if you are a bull, take us down to let's say 1643 on the S&P 500, give or take a point (thank you Matt Horween for your levels.) It's too difficult to shrug off both Cisco ( CSCO) and Wal-Mart ( WMT) on the same day. I can excuse Cisco, as I did earlier, by simply pointing out that there really is no big guide-down and plenty was robust. Wal-Mart's tougher, especially in light of Macy's ( M) miss yesterday. You can't have the biggest department store miss and the largest retailer in the world miss and not think that the boogeymen of higher taxes, higher gasoline prices, unemployment insurance, rising rates, furloughs and the sequester aren't at last dinging the strong consumer. We know the housing stocks have been clocked despite incredible -- and ridiculously high -- homebuilder sentiment, the strongest since 2005. Boy is that worrisome. We also know that auto sales simply can't be as robust as they have been with higher rates and lower disposable income. Where is the leadership going to come from? I can't find any to speak of. Very worrisome. The piper's being paid.