I find this an interesting chart. I think it gives an insight into the “typical” consumer right now. It shows gasoline (UGA) rising at the same time that the new higher payroll taxes are taking money out of the wager earners pockets. Just as these happen, restaurants (YUM – KFC, A&W, Taco Bell; DRI Darden – Red Lobster, Smokey Bones, Olive Garden) turn down. Now Walmart has had an email leak out where a mid-level exec says February was the worst start in a very long time… So a lot of retail has run up on a “recovery story”, but the facts on the ground are not in line with that story (if the Walmart story is to be believed).
Going out to dinner is one of the easiest things to ‘give up’, so in an economic “pinch”, drops first. Gasoline has very low price elasticity of demand (i.e. you need to buy gas to get to work, price be damned). In between is “consumer discretionary” – that new TV, new clothes, and a new BBQ for the patio… You can stretch the old shoes and shirts for a while, put up with the existing TV, and skip the BBQ (or use that $20 metal / charcoal one; not the $300 gas w/grill and burners…).
You can see the big “gap down” at the right edge today in WMT.
Also interesting is the peculiar “match” of gold GLD to higher end restaurants typified by DRI while folks can ‘downscale’ to lower end restaurants like YUM “for a while”… Yum “rolls over” later.
So have “higher end” folks just stopped / slowed down buying gold, and downscaled or cut back on dinners out? Looks like it to me. I know we have. In fact, the spouse asked that I make a home made dinner of her favorites for her this Valentines Day, where in the past we did the ‘fancy restaurant’ thing. Frankly, I think my effort was just about as good. ;-) Lamb, hand mashed / riced potatoes, small peas, homemade bread w/real butter, a nice Pinot… and then a ‘movie’ that was “African Queen” on the home entertainment system instead of $20+ for a theatre move out and something not as good… but you folks didn’t get a posting yesterday as “I was busy” ;-) ( So if you want a posting on “special days”, pony up enough donation to cover the dinner out instead ;-)
So what’s this all mean? It looks to me like general retail is overpriced. We need to watch a wider set of stores to see if they start to roll over too (if so, it’s a short opportunity). If the consumer is already “tapped out”, even the middle-high end consumer, the whole idea of a consumer lead “recovery” is DOA under a higher taxes scenario. (That could, then, ripple back upstream to things like “consumer electronics” and Korea / Japan / China…) We need a ‘confirm’ from some added retail players to assure the thesis; and that it isn’t just “folks with more income leaving WMT” for COST Costco or even Sears…
To me, it looks like we have several things rolling down together (restaurants and WMT) that indicate the consumer ‘stretched it’ to make Christmas work, and now is dealing with the “New Normal” of smaller paychecks from higher taxes and bills that have come due. You can’t spend what you don’t have (at least, once the credit cards are maxed out…) and it is just a matter of time for the higher end folks and then the U.S. Government to discover that truth.
Inflation is sending more money into the “must buy” of basic food and gasoline. Less into discretionary. That’s biting too.
Nothing conclusive yet, but It’s time to keep an eye on “Duck and Cover” strategies. (That do NOT include gold or silver as they are falling fairly fast right now.)
Some real time charts
The above chart as a live chart:
A collection of retail:
XRT - Retail ETF SPY - S&P 500 benchmark WMT - Walmart COST - Costco (one step up from Walmart) BBBY - Bed Bath and Beyond (Home goods) M - Macy's (Mid-higher retail) LTD - Limited Brands (Fancy wear) HOTT - Hot Topic (Teens & Tweens) TIF - Tiffany (very high end jewlery) HD - Home Depot (fix vs buy home repairs)
With RSI at “near 80″ and MACD setting up a crossover to the downside, not looking all that good for XRT or broad retail. Home repair and “teens” spending tend to hold up a bit better during economic problem times (as teens get their allowance anyway and folks DIY home repair instead of calling the repair company…)
SLV Silver & Metals vs SPY and DRI
Looks like both gold and silver in established downtrends, in sync with DRI. Platinum and Palladium held up better, but also looking a bit ‘flattening’ at the ends. (To be expected if car sales fall off). All in all, the S&P 500 looks “out of line” with what is happening in retail and metals. Looks like time to be cautious and look to cash, but who’s cash? With Euro, Yen, and $US all in a race to inflate, it’s looking like Swedish Krona and New Zealand $ are the best places to be. Strange, that.
FXS - Swedish Krona GLD - Gold ETF UUP - $US "up" bet ETF FXC - Canadian currency ETF FXA - Australian Dollar ETF FXE - Euro ETF FXF - Swiss france ETF FXB - British Pound ETF FXY - Japanese Yen ETF
In short, it looks like finding smaller out of the way countries and currencies is the “place to be”. From Latin stocks to smaller currencies. Just avoid the big boys who are pissing in each others currency beer…