Never mind. Government bean counters now say it didn’t happen. Specifically … we just learned that …
Sales didn’t rise 0.2% in January. They actually dropped 0.4%.
The “core” sales figure that’s used to calculate GDP? It didn’t surge 0.6% as previously reported. It climbed only a third of that, or 0.2%.
Sales estimates were revised down for electronics … appliances … building materials … personal care … and department store.
|The surge in retail sales seen earlier this year never really happened.|
February’s figures weren’t very good, either. They dropped 0.1%, with declines in eight out of the 13 categories the Commerce Department tracks.
Auto sales also fell 0.2% for the second month in a row. That very much fits with my view that the car and truck business is going to get much tougher as used-vehicle supply surges and credit conditions tighten.
I don’t usually make such a big deal about a single report. Other data on wholesale inflation and home builder sentiment today was largely in line with estimates.
But these retail revisions are so huge, they simply shouldn’t be ignored. That’s especially true when you consider that retail sales are a key driver of the consumer-led U.S. economy.
The Federal Reserve is also meeting today and tomorrow, so data like this bears watching. The Bank of Japan stood pat overnight, choosing to do nothing even as it admitted growth remains lackluster. That watered down some of the enthusiasm the European Central Bank engendered with its bazooka-gram last week.
|“This is a whole new market environment… characterized by increased volatility, more wild swings and an increasing need for caution.”|
Overall, I’ll repeat what I’ve been saying for a while now: This is a whole new market environment. It’s one characterized by increased volatility, more wild swings, and an increasing need for caution when it comes to investing strategy. And if the next batch of economic data confirms that things aren’t as rosy as Wall Street thought, you can bet things will get even hairier out there.
So what do you think? How is the American consumer really doing? Are you spending more, spending less, or about the same? Why do you think we are seeing such huge revisions, and does that call into question the accuracy of government data overall? Hit up the comment section and let me know!
Companies borrowing gobs of money to buy back shares at sky-high prices? Let’s just say you weren’t the biggest fans of that use of precious capital.
Reader JR suggested executives are buying stock for their own selfish reasons, not to reward outside shareholders: “Are the buybacks supporting stock prices for massive stock-option grants that have been awarded to executives and board members? An undercover way of passing borrowed money to those in control of the company without upsetting the stockholders?”
Reader Joel agreed, saying: “Stock buybacks are the latest form of M&A gutting from the inside. We will find fewer corporations, fewer jobs, and more GM-style taxpayer bailouts. As stockholders, we no longer have any say other than to walk.”
Reader Tom also picked up on that theme, writing: “Why wouldn’t they buy back their stock back? They get loans for 0% interest. Then they buy back their stock, which causes it to sell for a lot more than the company is, or ever will be, worth.
“Then the CEO and those responsible for the buyback get padded salaries of vulgar amounts of money. The only losers are the buyers of that particular stock, who are paying many times what it is actually worth.”
As for what impact the buyback wave will have on the broader market, Reader Badger10 said: “I believe ‘the powers that be’ have tried everything to keep this market at higher levels. Continuing higher debt doesn’t sustain growth. The market needs to correct to lower levels with reduction of debt a primary consideration.”
Lastly, Reader Carl said: “As baby boomers retire, the wealthiest (i.e. oldest) of the individual investors switch from buying to selling. Companies don’t retire, and see opportunities to buy back under good terms. That doesn’t explain it all, but it’s one piece of the puzzle for why individuals are withdrawing and companies are buying.”
I appreciate everyone weighing in. I would much rather see companies raise dividends than buy back stock, especially in a low-rate world where investors are hunting for income. Borrowing money to retire shares, while handing out stock-option grants like Halloween candy, just smacks of a huge conflict of interest.
I also believe the buyback bonanza wouldn’t be happening if companies believed there were better ways to spend money. So it’s a negative signal for real, underlying economic and earnings growth. If there’s good news somewhere, it’s that the artificial buyback bid will go away as the credit cycle continues to turn negative – as it has been gradually doing since last summer.
Any other comments I didn’t cover, and that you want to share? Then make sure to hit up the discussion section.
Voters are hitting up the polls today in key states like Florida, Illinois, and Ohio, as well as North Carolina and Missouri. Donald Trump is hoping for victories in the big states, which would put him well on a path to the Republican nomination. He is currently leading with 460 delegates, and needs 1,237.
The European Central Bank’s decision to add corporate bonds to the slag heap of assets it can buy via Euro-QE has had one side effect. European companies are rushing to sell billions and billions of new debt securities, and investors are lapping it up. But given how far into the credit cycle we are and given how we still haven’t seen the kinds of major bankruptcies that typically herald the crescendo-like end of a negative cycle, I don’t believe the strength will last. We will see.
Meanwhile, as I mentioned earlier, the Bank of Japan didn’t follow up the ECB with its own batch of fresh moves. Instead, it kept interest rates unchanged at negative-0.1% and didn’t boost the size or composition of its long-running QE program.
It also admitted that the economy is continuing to struggle and that inflation expectations are weakening – tacit admissions that all of its past efforts have failed. The Japanese yen rose in the wake of the policy meeting, and it’s getting closer to a secondary upside breakout – though not quite there.
Russian President Vladimir Putin has world leaders guessing about his intentions after he announced yesterday that his country would pull out the “main part” of its forces in Syria. It plans to maintain an air base and naval presence in the war-torn country. But the move surprised officials, considering how Russia has been actively supporting Syrian leader Bashar al-Assad in his fight against rebels around the country.
What do you think Russia is up to? Are you surprised the BOJ didn’t follow the ECB further into the monetary policy twilight zone? How do you think today’s primary votes will shake out, and what do you feel about the projected results? Let me hear about it below.
Until next time,
P.S. I hope you saw my earlier updates about the 2016 Money, Metals, & Mining Cruise. But just in case, it’s set to sail July 10-17 from the Port of Anchorage, Alaska.
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I’d love to see you on board, because I’m going to be sharing my wisdom, forecasts, and investment recommendations. I’ll also be joined by several other noted experts on the gold and metals markets. They include Brien Lundin, president of Jefferson Financial and host of the New Orleans Investment Conference … Rick Rule, founder of Global Resource Investments … and Brent Cook, a renowned exploration analyst and geologist.
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