Thursday, January 12, 2012

Morning Update/ Market Thread 1/12 - Retail Sales Debunked Hype Edition...

Good Morning,

Equities are mixed this morning after an overnight spike that appears to be a manipulated attempt to force the market over key resistance… that attempt has so far failed. The dollar is lower, bonds are flat, oil is higher, gold continues its impressive move higher, and unfortunately food is moving higher as well.

Weekly Jobless Claims rose right back to the 400k level, reported at 399,000 for the past week, a 7.3% jump from the prior 372k. Note how Econoday says this was a 24,000 jump, when in fact it was an increase of 27,000 over the prior report… here they subtract the 3k revision higher to make it sound better than it was, but they do the exact opposite when numbers are in the other direction, always trying to make it sound better than it actually is:
The long sweep of improvement in initial jobless claims hit a bump in the January 7 week, up a very steep 24,000 to 399,000. The goods news is that claims are still under 400,000 for a ninth time in 10 weeks. But otherwise the data, which the Labor Department stresses is free from special factors, point to a step backward for the jobs market with the four-week average, up a sizable 7,750 to 381,750, ending five straight weeks of improvement (prior four-week average revised to 374,000). Details also include a 3,000 upward revision to the December 31 week to 375,000.

Continuing claims also rose, up 19,000 in data for the December 31 week to 3.629 million. Here the four-week average is unchanged at 3.605 million with the unemployment rate for insured workers also unchanged, at 2.9 percent.

Though the data are clean from special factors, the first week of the year is typically the highest week for claims. This factor brings into play seasonal adjustment questions. Still, today's report is a disappointing start to the January employment picture.

As if any of the jobs numbers are even close to reality… they aren’t.

The Retail Sales report disappointed as well, coming in at .1% in December versus the .2% prior month and .4% expected. First, let me ask you how that .1% increase compares to all the massive hype around the Christmas shopping season? Remember all those supposed records set? Mobs breaking down doors with people running each other over? Was that reality or just spin?

Here’s the spin:
December retail sales advanced but less than expected but part of the slowing was due to upward revisions to November and October. Retail sales in December edged up 0.1 percent, following a 0.4 percent rise in November (originally up 0.2 percent) and 0.7 percent gain in October (previously up 0.6 percent). The December figure came in lower than the consensus forecast for 0.4 percent. Excluding autos, retail sales actually fell 0.2 percent in December after increasing 0.3 percent in November (originally up 0.2 percent) and increasing 0.5 percent in October (previously up 0.6 percent). The market median forecast was 0.4 percent. Gasoline sales dropped 1.6 percent after a 0.9 percent increase in November.

Sales excluding autos and gasoline in December were flat, following a modest 0.2 percent increase in November (originally up 0.2 percent). Econoday's survey panel now includes a consensus for this series which was 0.4 percent for December. Within the core (excluding autos and gasoline), gains were led by building materials, clothing, and food services & drinking places. Weakness was led by a drop in electronics & appliance stores.

Retail sales on a year-ago basis in December posted at up 6.5 percent, compared to 7.0 percent in November. Excluding motor vehicles, sales were up 6.0 percent on a year-on-year basis, compared to 6.8 percent the prior month.

Today's report is disappointing but hardly a disaster. Consumers are still spending and front loaded a bit in November. But some subsectors apparently did a bit of price discounting (likely electronics among others) and we may see that in quarterly earnings.

On the news, equity futures dipped somewhat as initial jobless claims also were a little higher than expected.

Retail Sales are massively overstated. Raw Retail Sales are measured in dollars. Retail Sales measure sales only at stores open for the past year – they fail to account for stores that have closed. These two errors are huge.

Once again for a picture of reality we turn to Shadowstats where John Williams has produced the following chart correcting for true inflation – the reality is so far from the hype it’s not even funny. What it is is sad, embarrassing, and pathetic. Real Retail Sales, according to his corrections, have been negative since about 1992, 20 years ago! And his chart doesn’t account for substitution bias which makes this even worse:

Once again, money printing/ credit creation do not equal productivity or employment once you are past the debt saturation point. Yes, you can make dollar denominated statistics appear as if they are moving higher, and you can also lie and fail to account for all the printing in your statistics… but the disconnect between reality and the spin is growing massively by the day. So much so, that I think there are very few who believe it anymore, and that is exactly what loss of confidence is all about – it follows the breakdown of the rule of law.

I, Nathan Martin, no longer consent to the lies.