Today come reports that the gloom and doom peddlers are still at it, looking a gift market in the mouth. The S&P is showing a heartbeat lately. But wait a minute, they say. We’re not out of this yet. This is merely a pleasant meadow we’re skipping through on the way to the next abyss.
As always, they have numbers to back up whatever it is they’re dispensing. That should not surprise us. Economist types always have numbers. They had plenty of numbers while they were running the market up. Now they have all kinds of numbers while they’re trying like hell to drive it down.
The current crop of numbers pertains to retail sales. Sure, the banks look like they may be doing better… but retail sales have fallen and apparently can’t get up. Retail sales drive the economy. So of course the market’s dead cat bounce is a mere bagatelle, an island in the midst of troubled waters that is itself sinking into the Sargasso Sea of despond.
I’m going to use a little economics now on those who continue to cry the blues. Don’t worry, you don’t have to be stupid-smart to get it.
Fact 1: The banks are doing better. Part of this is that they’re not giving away feckless money anymore, at least for now. But another big factor is that America, which was on a spending spree for a long time, has taken a deep breath and started saving more. Remember when all of Punditry opined that we need to save more? Well, we are. Good for us, right? You might think so. Instead, they’re all creepy about it, because…
Fact 2: Since people are saving more… guess what. They are spending less! Duh. Since they are spending less, retail is down from the nosebleed heights of the last several years. We’re still spending, of course. Wal-Mart (WMT) is still up, although perhaps not as much as was expected by the expectorators. But we’re not spending like drunken sailors anymore. We’ve come ashore.
Conclusion: If savings is up, spending is down. Wow! What an insight!
I’m going to tell you a little story and then take off for the weekend. I know a guy who works in a company that has a small debt problem. They have debt and debt is not popular these days. So he talks to a trader friend of his and asks, “Why is our stock so low?” And the trader says, “Well, you have this debt problem that will pop up in 2012 and you have to solve it immediately.” And my friend says, “Well, what if we issued some bonds now? That would solve the debt problem.” And the traders says, “No, that would solve it, of course, but then everybody would criticize you for doing it at this time.”
Moral of the story? You just can’t win with some people. Knowing that, my feeling is that it might now make sense, as the showers of April turn to the flowers of May, to stop listening to certain gusts of the idiot wind and take a nice walk with more pleasant company.