This brings me back to the question of retailers and the stock market. I say it boils down to jobs. At some point, job creation must happen significantly faster than population growth (last month population increased 210,000 versus 165,000 new jobs).
In our universe of contradictions, it's easy to believe in things that don't make sense. One is the so-called jobless recovery. People mostly feel like if they have a job they will not lose it, and while they are making less, they have fewer bills than they did a few years ago (this is one of the biggest concerns of the Federal Reserve, lower incomes are integral to a deflationary sinkhole), and there is enough cash left to hit the mall every now and then. This has been good enough but doesn't speak to growth. This is the way so many companies posted less-than-expected top line numbers this earning season. This must change quickly.
In the meantime, the best way to play it has been on the bookends. Rich people are spending money, not as much as they would or could but still making lots of retailers, doormen and charities happy. Last night Whole Foods (WFM) posted strong earnings results and guidance that allayed fears about the economy and that assuaged concerns that comments from CEO John Mackey (compared Obamacare to fascism) that would derail sales. It didn't happen, the store is just too damn cool and if you can afford it, you must shop there.
I like to go and bring my own plastic bags to piss off the cashiers.
Those folks with declining incomes are setting their sights lower, hence, the rise of dollar stores.
Stock of the Day
Disney posted strong earnings results, but with shares already at a record high the stock is indicating a little lower. As a shareholder, I wouldn't fret (this stock is very close to making our Never Sell List). Yet, I think as a proxy there's a mixed message.
The parks segment enjoyed the strongest revenue change and largest percentage improvement in gross margin. There's no doubt a lot of that came from American visitors, but a large part of that story is the global economy and all the visitors it's creating for America. Last year President Obama signed an executive order to increase tourist visas and even that isn't enough to capture all the new demand, mostly from nations America used to send aid to.
I visited Yellowstone about four years ago and met a guide that spoke Mandarin, and for good reason, as it seemed as if half the park were visitors from China. This trend is only going to increase. It has positive implications for America (and negative too from the standpoint they're embracing what used to be our jet fuel), but mostly it speaks to the global economy that's largely dismissed or overlooked by the media.
The market is looking for a reason to take a break. Sure, the bias remains to the upside, but there seems to be desperation for something tangible to send stocks higher. I'm seeing a lot more downgrades than normal, and good earnings aren't helping SODA, DIS, and others. Truth be told, I was hoping for a pullback weeks ago, but we still increased our allocation to stocks. That's because you must ride these parabolic spikes. That said, we'll send alerts to take profits on a couple of ideas this morning and hold our powder for the first few hours of trading.
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