Thursday, May 14, 2009

It's always been a matter of Trust

Greetings good citizen,

The markets ‘tanked’ again today, accompanied once again by what has become a very ‘familiar’ refrain…less than expected. Understand the markets have been climbing steadily on ‘better than expected’ news.

Worse, the media pundits have pounced upon this ‘better than expected’ news to declare the recession ‘over, finished, kaput!’

I don’t know about you good citizen but I’m sick and tired of this Kabuki Dance being performed by clueless cheerleaders that have no idea what they're talking about!

There’s no need to slap ‘em upside the head, reality tends to make fools out them regularly!

So we arrive at tonight’s offering where we learn many of the ‘green shoots’ economists were pointing to weren’t what economists thought they were.

There’s a simple rule of economics at play here good citizen, when you slash payrolls (either wages or headcount, and they’ve been slashing both…which is why so many companies ‘beat expectations’) you reduce the number of people that can buy stuff!


Wall Street Falls Sharply on Drop in Retail Sales
Published: May 13, 2009

With consumer confidence rising and other encouraging [but badly misinterpreted] signs percolating through the economy, forecasters optimistically predicted that retail sales would stabilize in April.

They were handed a disappointment on Wednesday. The government reported that retail sales fell again as consumers spent less on gasoline, appliances and groceries, signaling that they are not likely to begin spending in droves anytime soon.

Investors on Wall Street, who have been getting accustomed to positive surprises amid the economic gloom, did not like the numbers. Stocks fell sharply, adding to losses from earlier in the week, as investors hammered shares of industrial producers and consumer-geared businesses. [If investors are really so stupid they were ‘unaware’ that the meager gains in corporate profits were not from increased sales but from slashed expenses, it is truly time to abandon capitalism! We really can’t trust these people and they obviously don’t know what they’re doing!]

At the close, the Dow Jones industrial average was down 184.22 points, or 2.18 percent at 8,284.89, while the wider Standard & Poor’s 500-stock index fell 2.69 percent or 24.43 points at 883.92. The Nasdaq was 3 percent or 51.73 points lower at 1,664.19.

The Commerce Department reported that retail sales fell a seasonally adjusted 0.4 percent last month. Economists predicted that sales would be flat, their declines halted by stability in consumer spending and some signals that traffic in stores was improving.

“There’s weakness across quite a large number of categories,” said Nigel Gault, chief United States economist at IHS Global Insight. “We had huge declines during the fourth quarter, and then we had a couple of decent months of rebound. But now we’ve reversed most of that.”[Geez Nigel, four tenths of a single percent wiped out most of the gains of the past two months? Granted, they did revise March’s numbers down today and they’ll probably revise them down again, just like they add to the previous unemployment numbers EVERY FREAKIN’ MONTH!]

Sales at retailers ranging from clothing shops to bookstores to restaurants were down 10.1 percent from a year ago, and sales for March were revised down to a decline of 1.3 percent.

In April, consumers spent slightly more on automobiles and car parts, and more on home-improvement supplies, sporting goods and books. But sales at electronics and appliance stores fell 2.8 percent from March, and sales at gasoline stations fell 2.3 percent.

The numbers showed that consumer spending, which accounts for 70 percent of the economy, seems to be bumping along at lower levels. Or, as Ian Shepherdson of High Frequency Economics wrote in a research note, “Greens shoots withering...” [And there’s the big ‘El-Kabong’ (hit on the head) good citizen, if 70% of the economy is people buying shit, where is the ‘recovery’ going to come from when everybody is broke?]

Last week, 30 of the country’s largest retailers, discounters and clothing chains reported that their sales in April grew by an average of 1.2 percent, according to Thomson Reuters, largely because of warm weather, strong sales at Wal-Mart and the fact that Easter fell in April this year. [Understand good citizen the economy has been in the dumper since December 2007…so a 1.2% increase, year over year, doesn’t mean Jack! We’ve also experienced some hellacious inflation during that time, which has doubtlessly been ‘overlooked’.]

While higher-end retailers like Saks continued to suffer and Abercrombie & Fitch posted a year-over-year decline of 22 percent in sales at stores open at least a year, many stores said the picture at the cash register was looking a little less grim. Sales at Aeropostale rose 20 percent, and Target swung from nine consecutive months of losses to a 0.3 percent gain in April. [Did you notice this little ‘bait and switch’ good citizen? Target isn’t in the same league as the other stores mentioned. All we see here is how shoppers are moving down the value ladder in search of lower prices!]

Consumers are still cautious about spending money, and they are putting more away into savings accounts as the recession plods on. [Liar! Did you know paying down debt is considered ‘saving’?] But retail analysts say spending has stabilized since late last year, when consumer spending plunged as the financial crisis broke out.

Shoppers may not be returning to their old spendthrift ways, but they are returning to the malls, and they are willing to buy when they see bargains, analysts said. Consumer spending rose at a 2.2 percent annual rate in the first quarter, but much of that increase was the result of a sharp increase in January that tapered off in February and March. [This is such a counterintuitive phenomenon with so many people losing their jobs or having their wages cut that we should suspect these spending figures have been ‘adjusted’ for the lower number of consumers as well as the diminished amount of discretionary income, I mean WTF, they ‘adjust’ the crap out of everything else to make it look better than it really is!]

“What we’ve got is a consumer that’s roughly stabilized, but not a consumer who’s ready to come back and drive the economy,” Mr. Gault said. [Considering the scope of the unemployment situation, it may be more honest if they provide us with that consumer’s name, he sure as hell can’t be talking about US shoppers in general!]

Richard Moody, chief economist at Forward Capital, said the 18-month recession might profoundly change the way Americans spend. Declines in housing values and stock portfolios have erased trillions in household wealth, and tightened lending has erased the illusion that consumers could live substantially beyond their means by tapping home-equity loans and other easy lines of credit. [So, have the Aliens finally landed and started spending up a storm or are these increased spending figures a figment of the pundit’s imaginations?]

With the unemployment rate at 8.9 percent, its highest level in 25 years, many consumers are likely to keep their heads down and save more to guard against losing their jobs, economists said. For retailers, the new American thriftiness means stores will have to keep offering fat discounts and two-for-one sales to entice shoppers through the front door. But analysts said many retailers have trimmed back their inventories to match lower levels of demand, so they will likely not have to slash priced by 80 percent or more simply to clear their overstocked shelves.

Underscoring the effects of that belt-tightening, Macy’s surprised analysts by reporting a smaller-than-expected loss for the three-month period ended May 2. On Wednesday Macy’s reported a loss of $88 million, or 21 cents a share, compared with a loss of $59 million, or 14 cents a share, for the period a year ago.

Macy’s said in February that it would drastically change its structure by consolidating its four large divisions into a single organization. To cut costs the company trimmed its 2009 capital expenditure budget and reduced its quarterly dividend. And sales got a lift thanks to the new “My Macy’s” initiative, in which the merchandise in stores is tailored to appeal to customers in a particular region.

Yet despite effective cost cuts and bright spots in certain categories, retailing executives tamped down investor’s hopes of recovery being around the corner.

“We’re just not ready to say ‘Mission accomplished,’ ” Terry J. Lundren, president and chief executive of Macy’s Inc., said on Wednesday during a question and answer session with investors. While pleased with the performance of stores that have been piloting the “My Macy’s” initiative, Mr. Lundgren noted in the conference call: “I’m just not satisfied at all with our minus-9 results.”

Liz Claiborne — the apparel company that owns name-brands like Kate Spade, Juicy Couture, Lucky Brand and Mexx — also urged investors to adopt more realistic expectations.

“In spite of a more generally optimistic tone in the news and in some industry reports,” William L. McComb, chief executive of Liz Claiborne, said in a statement on Wednesday, “we see the environment as still fundamentally promotional, with a reserved consumer and significantly reduced traffic.”

The company posted a loss that was worse than what analysts were expecting. For the three months ended April 4, Liz Claiborne lost $91.4 million, or 97 cents a share, compared with a loss of $31.02 million, or 33 cents a share, for the period a year ago. Comparable sales declined by double digits at Juicy Couture, Lucky Brand and Kate Spade. At Mexx, sales fell 7 percent.

The first three months of a retailer’s fiscal year are typically the least important; it’s the last three — the ones around Christmas — that mean the most. Liz Claiborne said it expected its results to improve by the third quarter, mainly because of $70 million in cost reductions announced in February. For now, though, the company said consumers are still in hiding and that stores are continuing to try to thrush them out with impressive discounts.

“This year is just barely under way,” said Mr. Lundgren of Macy’s. “It’s the first inning.”

First inning indeed! The Greater Depression is going on its second year with no relief in sight. Costs continue to rise while paychecks fall and nothing is being done to address this self-reinforcing situation.

If we don’t get some meaningful debt relief and get it damn soon, there won’t be an economy left to save…not here, not anywhere.

All commerce operates on cash flow, businesses that fail to attract sufficient ‘paying’ customers will not remain in business very long.

Worse, this article in one more confirmation of an even deadlier malaise, one where trust is destroyed, simply put good citizen, civilization, a.k.a. life as we have come to know it, is based on trust…and that trust is eroding faster with every passing day.

Hell, the news industry is currently on its financial knees as we speak because no one wants to pay to be lied to!

Troubling times indeed good citizen!

Thanks for letting me inside your head,


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