The Big Picture | November 2006

« October 2006 | Main | December 2006 »

Blog Spotlight: Mish's Global Economic Trend Analysis

Thursday, November 30, 2006 | 07:00 PM

Another edition of our new series: Blog Spotlight.

We put together a short list of excellent but somewhat overlooked blog that deserves a greater audience. Expect to see a post from a different featured blogger here every Tuesday and Thursday evening, around 7pm.

Second up in our Blogger Spotlight: Michael Shedlock and Mish's Global Economic Trend Analysis. Mike is one of the editors of The Survival Report, covering stocks and the economy. He also writes for the Daily Reckoning, and co-edits Whiskey & Gunpowder. He also runs stock boards on the Motley Fool, Silicon Investor, and TheMarketTraders. He is an avid photographer, when not writing about stocks or the economy, with over 80 magazine and book covers to his credit.

A Mortgage Broker's Synopsis

The following post is an email from Michael J. Dorff, a mortgage broker with Trans World Financial about the state of affairs in Orange County California. Monday evening I will have an update from Mike Morgan to share:

Continue reading "Blog Spotlight: Mish's Global Economic Trend Analysis"

Retailers' Massive Discounting

Thursday, November 30, 2006 | 03:30 PM

in Consumer Spending | Economy | Retail

One of the issues we have been discussing has been how widely and deeply Retailers will be discounting, and what it means to the overall economy.

The most recent review of price cutting is that they are both deep and broad. Our quick survey of both brick and mortar coupons and online savings codes shows that discounting is ramping up dramatically. This will likely pressure for Q4 profit margins.

Attached are 2 PDFs we scraped together (from various shopping fiends we know); These represent almost 40 major retailers discounting for the first post Black Friday weekend's sales events.

Download Gap, Banana Republic, Old Navy.pdf

Download 6 Store, 30 online coupons.pdf

As you can see, the price cutting is quite dramatic

Retailers are nervous, judging by the considerable price cutting thats going on:

~~~

UPDATE: November 30, 2006 4:25pm

Google Checkout has gotten into the Holiday discounting spirit!

>
A sampler of various Store Sample coupons (not including Google):

Blaming Soft Retail on all the Wrong Things

Thursday, November 30, 2006 | 09:51 AM

in Consumer Spending | Data Analysis | Earnings | Retail

The latest retail sales data is out, and its rather mixed:

-Gap fell 2 percent. They expect pressure on profit margins to continue into December.

-Abercrombie & Fitch sales fell 3 percent in the month;

-American Eagle Outfitters (Charts) posted good numbers -- plus 14% -- but was below expectations for a 14.8% gains;

Pier 1 Imports saw sales tumble 15.3%, despite aggressive discounting / advertising;

Ann Taylor blamed warm weather for sales falling 4.3%, especially "sweaters, outerwear and cold weather accessories."

Wal-Mart, JC Penney and Costco Wholesale all missed estimates. Those stocks are down 1.1%, 2.9%, and 1.9%, respectively. Bebe Stores was even worse, falling 9% after it fell short of estimates.

- Sources: Warm weather chills holiday sales,
Shoppers Await Better Bargains

Meanwhile, all manner of silly blame casting is going on as to who or what is responsible for the problematic retail sales. With over half of the reporting companies missing expectations, it is rather silly to blame all of this on Wal-Mart.

In most years, Retailers blame Snow in the Winter in the Northern climes; this year, they are blaming the weak sales on warm weather. Apparently, it is never managements fault, nor does anyone blame the tiring consumer or a weakening housing / Mortgage App slow down, it is the weather - REGARDLESS OF WHAT THE WEATHER IS.

Considering what the most recent retail sales data looks like, it is no surprise that the sector is flailing about looking for something -- or someone -- to blame:

~~~

If you want a clue as to what is really going on, try this compare and contrast:

Wal-Mart Trips as It Changes a Bit Too Fast

Tiffany Profit Increases 23%

There's your answer . . .

~~~

One more thing: The WSJ has a good interactive chart that allows you to track the performers of a dozen top retailers:

Its a public URL, No subscription required.

Sources:
Weak November Start Hurts Retailers
As Wal-Mart Presents Grim Forecast
WALL STREET JOURNAL ONLINE NEWS ROUNDUP
WSJ, November 30, 2006 9:18 a.m.
http://online.wsj.com/article/SB116482943779235988.html

Build Your Own Chart: A dozen major retailers
WSJ, November 30, 2006
http://online.wsj.com/public/resources/documents/info-retail06-061130.html

Warm weather chills holiday sales
Parija B. Kavilanz
CNNMoney.com, November 30 2006: 9:41 AM EST
http://money.cnn.com/2006/11/30/news/economy/
novretail_sales/index.htm?postversion=2006113009

Oil!

Thursday, November 30, 2006 | 07:01 AM

in Commodities | Energy

Given yesterday's pop to $62 in Crude -- up from $53 when last month's Futures' contracts expired -- its worth taking another look at energy sector.

I am friendly with David Kotok, Chief Investment Officer of Cumberland Advisors. Like me, David remains Bullish on the Energy Sector, and has had some rather astute comments on Oil recently. Back in September, he wrote:

"Many folks are bailing out of oil. Some forecasts now call for a price decline to under $30 per barrel. One extreme forecast suggests the oil price could go as low as $15. We do not agree.

The recent drop in the oil price from the high $70s to a few pennies under $60 per barrel is the result of the lessening of two risk premia. 1. The hurricane season seems to be passing without incident. 2. The Chavez/Ahmadinejad bluster is known and the market is assuming that we have seen the worst. Some players are suggesting that the European initiative with Iran will succeed and lessen the tensions over Iranian development of nuclear enrichment facilities.

Oil risk premia are estimated by computing the cost of adding a barrel to inventory. This helps explain the pricing of oil in the futures market. When the risk premia declines as it is doing now the nearest term oil price declines the fastest. That is what we have seen in the August/ September period. Longer term futures prices are suggesting that the current decline is nearing an end. Oil for delivery 18 months from now is trading near $68 per barrel."

David's view is that "energy prices are going higher and that our overweight ETF investment position should continue in this energy sector."

He also recently criticized what he termed "the ethanol mess" and offered how it didn’t help the energy price -- but it did help create shortages in grains. He notes that some folks in this world are going to starve because of it.

Why does he want to stay overweighted Energy? These factors suggest higher oil prices:

• The dollar has declined about 10% (trade weighted) from where it was a year ago. Oil is about the same price per barrel as it was a year ago. Oil is priced in dollars. Therefore, we in the US have had a price run up to near $80 and back to $60. The rest of the world has had a smaller price run up and is now looking at an oil price 10% lower than it was a year ago.

• The relative price is important because it allows us to estimate the stimulus that occurs from the oil price change in various parts of the globe. In the rest of the world that stimulus has spurred demand. Oil consumption is about 1 ½ million barrels a day (mbd) higher than it was about a year ago. In the US the change has been nearly flat. Our oil consumption is not the growth area. Look to Asia to find it.

• Oil futures prices suggest a return to nearly the $70 level in 18 to 20 months. McKinsey & Co. forecast continuing rise in world oil demand at about 2.2% a year until 2020. We agree. Oil could easily be $100 before then as world consumption rises between 1 ½ and 2 mbd each and every year.

• The unrest in Nigeria continues and may be worsening. Press reports usually do not include this in the top of the list. They should. Nigeria is becoming an increasingly dangerous place for the folks who work in the oil industry. Investors need to keep an eye on this geography.

• Speaking of geography, the Middle East is deteriorating and the market has ignored it. In Iran, we see Russia supplying missile defense material to protect Iranian nuclear sites. We see the breakdown in Lebanon and the Syria-Hezbollah connection strengthen. The Israel-Hamas battle continues unabated. Clearly we see a murderously intense civil war in Iraq. Soon we will witness the forthcoming pullout of the British. What will that mean? They are in the Basra region; that is where a lot of Iraqi oil exports originate. Basra is Shiite and close to Iran which is also Shiite. Instability in Basra is almost certain to rise when the Brits depart. Right now Iraq still exports about 1.6 mbd. As much as half of it is at risk if the civil war spreads and intensifies in Basra. Also, only about 1600 of the 2300 oil wells in Iraq are working. The civil war prevents regular maintenance and precludes development. So every time a well loses functionality it goes offline. We expect that to continue and intensify.

• All this leads to a strange alignment. In Iran, the Shiite center of power, there is an interest in the higher oil price. Iran has no love for the west and would spend the money on the mischief it spreads in the region and on domestic social spending so as to endear the Ahmadinejad regime to the populace. In Sunni Saudi Arabia, they wish to maintain the present oil price or see it a little higher. They do not want to kill the west but they would welcome the higher oil price if the source of the pressure was from other than OPEC cartel price maintenance. So we have both the Sunni power and Shiite power supporting their respective allies who are the combatants on one side of the Persian Gulf while enjoying the benefits of any higher oil price and attendant risk premium. This bodes ill for Basra and any other place where the civil war might spread.

By way of disclosure, Cumberland maintains an overweight position in energy, with the Vanguard energy ETF (VDE) as their first choice. VDE has 118 stocks, with the heaviest weighted components being ExxonMobil (XOM) Chevron (CVX) and ConocoPhillips (COP) Schlumberger (SLB) and Occidental Petroleum (OXY).

Thanks, David.

Source:
Oil!
David Kotok
Cumberland Advisors.November 29, 2006
http://www.cumber.com/commentary.aspx?file=112906.asp&n=l_mc

Blogger's Take: Holiday Retail Sales

Wednesday, November 29, 2006 | 07:00 PM

in Blog Spotlight | Retail

Given all of the news on Retail sales -- Black Friday, Cyber Monday, same store sales -- I thought this might make for a good topic for Bloggers Take. So what are your thoughts on the holiday shopping season? Is it important? What are your expectations -- Good bad or different ?

A Tale of Two Retails

Is retail weak? On the heels of lowered sales forecasts by Wal-Mart, that question has moved front and center. The chart below shows the lead up to the holiday shopping season in the broad retail ETF (XRT; blue) and in Wal-Mart stock (WMT; red). Because Wal-Mart comprises less than 2% of the XRT fund, this comparison gives us a nice of retail overall vs. Wal-Mart in particular. For comparison, I've added Target (TGT; yellow) and equalized them in price as of 7/5/06 to show relative performance.

What we see is that retail has done well during the market rise since July, 2006. Target has been a particular winner. Overall, it's hard to make a case for general retail weakness. As we've approached the holiday period, however, the performance of Wal-Mart has trailed considerably. This has made a fine pairs trade for a fundamental analyst able to sort out the stronger components of XRT, such as Target, from the Wal-Marts.

Brett Steenbarger, Traderfeed

~~~~

Barry’s question is timely because we cannot recall such an intense media focus on retail sales than we have seen this year. Our sense is that trying to play the holiday season retail sales game is for the vast majority of investors a mug’s game. In short, the signal to noise ratio is far too low to generate any meaningful trade signals. The number of crosscurrents present at this time of year is difficult for even the most experienced retail analysts to follow. For instance, think about how gift cards have changed the retail game over the last few years. Gift card sales have taken on increasing importance for many retailers over the past few years. Changing trends like this happen every year. If you have you done your work on a stock or the sector, great, if not don’t get caught up in the frenzy surrounding what is supposed to be a joyous time of year.

Abnormal Returns

~~~

I expect a strong holiday shopping season. I think that, post-election, consumers feel that something has changed, probably for the better.

While they don't have a good grasp of what will be different, they have a renewed optimism in the future that will help drive holiday spending.

Stocks are up and real estate prices have not fallen as dramatically as expected in most cities. Add that to a strong Q4 for retail and what you have is a good economy with plenty of steam to carry it through early 2007. That said, I think Wall Street tends to overvalue a strong holiday shopping season. If you are contemplating an investment strategy for 2007, I would focus more on interest rates and GDP, and look to international opportunities.

Rob May, Businesspundit.com

~~~

The media as well as bulls on Silicon Investor both went gone gaga over the black Friday numbers reported by NRF while dismissing the numbers from Wal-Mart as "just one store". Well Wal-Mart is not just one store it is the bellweather store for the masses. But to top things off, the much touted sales data presented by the NRS was not really sales data at all but customer surveys that may bear little relationship to reality. This is just sloppy reporting by nearly everyone picking up the story, including Bloomberg.

What I fail to understand is how Bloomberg and other places can fall for this nonsense time and time again. This is the direct equivalent of the Charley Brown / Lucy football scene being played every Thanksgiving in real life.

In the meantime there was little fanfare given to the massive 8.3% collapse in durable goods. Yes, part of that collapse was aircraft, but orders for non-defense capital goods excluding aircraft decreased by 5.1%, after rising 3.2% in September. In addition the index of manufacturing activity slowed to 51.2 in October, from 52.9 in September and 54.5 in August. In the overall picture, consumer credit is declining, housing starts are plunging, manufacturing activity is slowing, auto inventories and home inventories are rising but the story headlines latch on to the biggest "non-event" around, Black Friday.

Mike Shedlock / Mish's Global Economic Trend Analysis

~~~

There is some divergent opinion as to how indebted the consumer actually is. Regardless of the reality here it seems to me that plenty of people will have no hesitaion to take on another $1500 in debt to ensure a "good" holiday season.

In that context the strength of this year's holiday does not mean much for future behavior. What is more of an indicator of future behavior is the availability of credit, which based on my mail, is still healthy.

Roger Nusbaum, Random Roger

~~~

Transports Warning

Wednesday, November 29, 2006 | 04:23 PM

in RR&A

NOTE: This Market Commentary alert was originally emailed to subscribers at Ritholtz Research & Analytics on Mon 11/29/2006 4:23 PM;

This is posted here not as investing advice, but rather as an example of an analytical call for potential subscribers. We expect to post future advisories in a similar manner -- after the call, but in the correct chronological location here in the blog.

>>>

Earlier this morning, we looked at the ATA tonnage index for October. Truck Tonnage dropped 1.8% in October. The index decreased 4.0% compared with a year earlier, making this the largest year-over-year decrease since February 2001. Year-to-date, the truck tonnage index was down 2.1 percent, compared with the same period in 2005.

David Rosenberg, Merrill Lynch's chief North American economist, called it "borderline recessionary."

What might this mean for the markets? To answer that question, we took a closer look at the DOW JONES Transportation Index (TRAN). From a Technical perspective, it is now nearing a very critical juncture -- and is likely to make a big directional move soon. (See our Technical Review of the Transports at the RR&A site).

While we have been fairly steadfast in saying its been too early to short equities, any technical break in the Trannies will be the first of our signals to place a bet against the equity markets.

Divergence: According to classical Dow theory, when the Dow makes new highs, we look for the Transports to confirm them. To oversimplify, we want to see more than goods just being manufactured, we want to see them shipped to retailers and sold to the end consumer. That should be reflected in the Transportation Index.

And its not.

As you will see in our technical review, the Trannies have failed to eclipse significant resistance at the 5,000 level -- on three different occasions. Further, the upwardly revised GDP should have been welcome news on the economy, including the Transports; Instead, the group sold off, and closed near the session lows.

Thereis a valid, secular uptrend line for the transports at ~4,400. A violation of that level would be extremely negative, not only for the group, but also for the market as a whole. It would signal more than a mere slowdown on the horizon. Amd if we learn that additional inventories are building, it would suggest the truck, air and rail companies are delivering inventory draw downs, as opposed to customer driven demand for goods.

Either way (bull or bear) there are two significant TRAN levels to watch: 5,000 and 4,400. The former suggests a continuation of the bull trend, while the latter would be a significant reversal -- and a time to begin placing index short bets.

My instinct tells me the soft landing crowd still has another rally left in them. Given all the liquidity thats circulating, this is certainly possible. But regardless, we are watching the Transports very closely for a technical signal.

In the Transport research piece, we examine the index more closely and list the technical rankings of each index member (0 to 100 scaled, 100 - the best, 0 - the worst).

-Barry Ritholtz
November 29, 2006

Econ Blog Traffic

Wednesday, November 29, 2006 | 02:30 PM

in Weblogs

Holy snikes! I just saw this traffic comparo (via an L.A.Times article, mostly about Marginal Revolution) about econ blog traffic.

Apparently BP is on of the top econ traffic getters:

Economists who author blogs are drawing fans who see nothing dismal about the discipline.:

"This interest in the topic translates to blog traffic. Of the top 100 sites in the blogosphere, four or five are about economics, said Brian Gongol, a small-business owner who compiles blog ratings and is an econo-blogger himself. That alone is surprising.

Greenspan aside, economists are rarely well-known among the public. Ever heard of Ludwig von Mises?

The blogs aren't limited to economists at name-brand universities, either. Gongol estimates that four of the top 10 (including his) aren't even written by academics. He writes his in his Des Moines house, far from the centers of academia — when he's not too busy doing his "real" job selling water-treatment equipment.

Indeed, blogging doesn't seem to be the kind of activity that an economics textbook would endorse. A cost-benefit analysis might conclude that the economist pours time into a blog and gets little or no financial reward. Few blogs, for example, have ads to generate revenue. It would follow, then, that the most prominent economists would lose the most from blogging. But not all economists concur that time spent blogging is a waste."

Pretty cool!

Source:
Now online: slide-rule celebrities
Alana Semuels
L.A. Times, November 23, 2006
http://www.latimes.com/business/la-fi-econoblogs23nov23,0,4172561.story?

Restating Earnings

Wednesday, November 29, 2006 | 11:51 AM

in Earnings

Amusing take via Scott Adams:

Source: Dilbert.com

Technical Review – DOW JONES TRANSPORTATION INDEX

Wednesday, November 29, 2006 | 08:27 AM

in Economy | Markets | RR&A | Technical Analysis

Dow Jones Transportation Index (TRAN) – Daily Chart (2003 – present)

After a marvelous three plus year run, the Dow Jones Transportation Index (TRAN) recently formed significant resistance in the form of a double top (black arrows & red line) at the 5,000 level. After holding support along its long term uptrend (green line) on five different occasions (noted by the blue numbers 1 thru 5) the transports bounced back towards 5,000 and appear this time to be failing just under the 5,000 level (brown circle and arrows).

The validity of a trend line depends on the more times it is tested and five times makes this trend line very valid.

With the Index rolling over here and possibly heading back for a retest of that up trend line we would watch the trading activity very carefully over the next few days/weeks. Early evidence suggests the highs for some time may be in place near the 5,000 level however, a trend line break would be needed for definitive confirmation. Ironically on a day where GDP numbers came in higher than expected, which should be perceived as good for the economy, therefore good for transportation stocks, the index moved lower not higher. When the transports fail to rally on seemingly good news we have to wonder, are the good and services now being shipped excess inventories ? Or are investors not rallying the transports because the assume inventories are building ? Either way it appears the transports by its lukewarm price action are pricing in a slowdown.

Within the sector, the rails and truckers appear to be in the worst technical shape.

See our technical rankings below >>>

Technical Rankings for DOW JONES Transportation Index (TRAN)

ATA tonnage index for October

Wednesday, November 29, 2006 | 07:00 AM

in Economy

Man, we have been on a mad Trade Association jag the past few days.

The latest (via the WSJ's Market Beat) is the American Trucking Associations’ for-hire Truck Tonnage Index. Most of the goods moved across the country are hauled by Trucks: 10.7 billion tons of freight in 2005 (about ~70% by tonnage), with Motor carriers collecting $623 billion dollars -- 84.3% -- of all transport revenues. To say Trucking is important may be a bit of an understatement.

Here's an excerpt from their release:

"The American Trucking Associations’ advanced seasonally adjusted for-hire Truck Tonnage Index dropped 1.8 percent in October after increasing 1.6 percent in September.

On a seasonally adjusted basis, the tonnage index fell to 110.8 (2000=100) from 112.9 in September. The latest reduction put the index at its lowest level since the end of the 2006 first quarter. The index decreased 4.0 percent compared with a year earlier, marking the largest year-over-year decrease since February 2001. Year-to-date, the truck tonnage index was down 2.1 percent, compared with the same period in 2005. The not seasonally adjusted index increased 4.7 percent from September to 117.7."

Source: ATA

I do not follow this stat on a regular basis. For some context, let's go to a 3rd party for some context as to what the freight slowdown in October may mean:

"The news prompted David Rosenberg, chief North American economist at Merrill Lynch, to note that it “is extremely rare to have truck tonnage go down in October ahead of the holiday shopping season — declines of the likes we saw last month took place in 1981, 1982, 2001 and 2002, and these proved to be disappointing sales periods.”

“Truck tonnage for October just came out and looked borderline recessionary, for lack of a more polite term. It was down 4% y/y in the largest decline since February 2001 (-1.8% m/m, and down now in two of the past three months) - and now down for 10 months in a row y/y (!). You have to - again - go back to the March/00 to Feb/01 period to find the last time year-on-year comparables were in the red for such a long stretch of time (and guess what happened in March/01?).”

How much of a leading indicator of future economic activity are trucking volumes? Have a look at the chart above. The slow down in the beginning of the year was very likely related to the decline in Housing and Construction. It fairly accurately foretold the dramatic decrease in Home Building. And, it makes sense that when we see weak October shipping volumes -- during the pre-holiday inventory build up -- it may bode poorly for the Christmas shopping season.

The overall trend in this indicator is not particularly encouraging for near term economic growth . . .

trucking

Sources:

ATA Truck Tonnage Index Fell 1.8 percent in October
Tiffany Wlazlowski
American Trucking Associations, Monday, Nov. 27, 2006
http://www.truckline.com/NR/exeres/
8D9436E1-98EF-4707-A76F-BA66BDB02F5B.htm

Truckin’, Like the Doo-Dah Man
David Gaffen
WSJ MarketBeat, November 28, 2006, 11:28 am
http://blogs.wsj.com/marketbeat/2006/11/28/truckin-like-the-doo-dah-man/

Favorite Holiday CDs

Tuesday, November 28, 2006 | 04:30 PM

in Music | Retail

Its that time of year: In only takes a few weeks, but I very quickly tire of walking into stores and getting assaulted with endless repetitions of all those corny Xmas Carols we've all heard far too many times to enjoy any longer (see this list).

No worries, though: Amazon has some great Christmas Music on Sale this year, with almost all of these discs available for under $10. Here's a way to get into the holiday musical spirit without having to endure the usual annoying cloying tunes. This is one holiday-themed list that won't make you ill.

Enjoy!

1. Ella Wishes You a Swinging Christmas

There truly is no better Christmas album than this one. It is 180 degree from all that junk holiday music you hate: Recorded in 1960, it is without a doubt the swingingest Christmas album ever recorded. A Jazzy big band, brilliant arrangements and Ella's perfect voice make this album a must have Christmas albums, period. Wishes You a Swinging Christmas, Ella Fitzgerald

>

2. A Charlie Brown Christmas

The classic Peanuts Christmas Jazz Masterpiece: For those of a certain age, "the first time you listen to this disc you will undoubtedly be transported directly back to your childhood" (one reviewer noted)and thats absolutely true.

Indeed, for lots of us, this was our first introduction to Jazz -- and Vince Guaraldi is still a great intro. A must have. A Charlie Brown Christmas: The Original Sound Track Recording Of The CBS Television Special

>

3. James Taylor at Christmas

Nicely balanced between pop and jazz selections, with more stately hymn-like fare and balladry. Anything JT does manages to sound fine via his charmingly understated, mellow, soulful voice. (and a must own for JT fans) James Taylor at Christmas

>

4. Oscar Peterson Christmas

Sophisticated yet unobtrusive, this CD is an ideal jazz instrumental backdrop to all your holiday activities. Peterson mades this warm, mellow album accessible to non-Jazz buffs, while at the same time keeping it sophisticated and interesting enough for afficianadoes to enjoy. This CD, along with the Ella disc, are two of my favorites. Its perfect for sipping an evening cocktail and sitting in the dark with nothing on but Christmas lights. Oscar Peterson Christmas

>

5. December, Piano Solos

December holds the distinction of single-handedly putting Windham Hill on the map. This collection of solo piano works crossed over from new age to popular to seasonal.

I always loved having this as one of 5 CDs on the carousel (back in the days of 5 CD disc players). Yes, kids, there was a shuffle play before the iPod. December, Piano Solos: 20th Anniversary Edition, George Winston >

>

6. Merry Christmas from Motown

A terrific collection of favorite Motown artists doing all the usual songs; The work was interesting enough that the series from Motown saw a few more versions of this after the success of the first one.

This first collection is all Motown A-list: The Temptations, Diana Ross & The Supremes, Jackson 5, Smokey Robinson & The Miracles and Stevie Wonder.
Merry Christmas from Motown (Various Artists)

>

7. Christmas with the Rat Pack

Break out the cocktail shaker, its time for some Christmas drinks with Frank, Sammy and Dino! This is a boozy holiday compilation, a perfect retro lounge soundtrack for a bachelor pad. My favorite comment about this: "the novelty of having three of the 20th century's most notorious sinners belt, whoop, and sing the praises of sleigh bells, roasting chestnuts, and the virgin birth would be enough to recommend this dizzy, 21-track delight, but there's actually some rewarding pop archaeology here as well."
Christmas with the Rat Pack: Frank Sinatra, Dean Martin Sammy Davis Jr.

>

8. Wintersong

Sarah's elegantly beautiful voice mixes some traditional (but not ubiquitous) Christmas songs along with some more modern holiday tunes (John Lennon's "Happy Xmas (War is Over)" and Joni Mitchell's "River"). If you enjoy her lovely and haunting voice, you will most likely enjoy this collection. (I suspect this collection may grow on me) Wintersong, Sarah McLachlan

>

9. A Winter's Solstice: Windham Hill Artists

Following the success of December, this album became one that built a Windham Hill tradition of New Age seasonal music / mixed artist collections. They are now up to number VI in the Winter Solstice Series. A Winter's Solstice: Windham Hill Artists

>

10. Rhino: Swingin Christmas and Ultra-Lounge: Christmas Cocktails, Part One (2 way tie).

These two are similar hipster recordings:

Ultra-Lounge is a martini-and-mistletoe combo from the late 50s/early 60s. Think of the Doris Day movies of that era (or even Tony Randall's), and you get the picture of the big band sound on many of the tracks. Its very retro, and features the likes of Nat King Cole, Dean Martin, Lou Rawls, Julie London, Jackie Gleason, Peggy Lee, Billy May, and Les Brown. Ultra-Lounge: Christmas Cocktails, Part One

>

The Rhino collection digs deeper back to the 40s to more recent cuts -- a diverse collection of songs covered by Louis Armstrong, Louis Prima, Woody Herman, Lionel Hampton, Esquivel, The Manhattan Transfer, Vic Damone. (Les Brown is the only artist present on both discs).

Rhino: Swingin Christmas

>
That should be enough to keep you warm all winter!

NAR's Existing Home Sales & Prices

Tuesday, November 28, 2006 | 01:19 PM

in Data Analysis | Real Estate

Its "Trash a Trade-Group's Spin" day here at the Big Picture. After this morning's look at the National Retail Federation's nonsense, we might as well have a go at this morning's enzyme-free donkey fazoo from the National Association of Realtors.

The data: Existing Home Sales & Prices

The spin? Let's have a look at what the friendly agents at NAR had to say:

David Lereah, NAR’s chief economist, said market fundamentals are improving.

"The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors"

“The annual decline in the October median home price is skewed because there was an uncharacteristic spike in October 2005, but the trend for the fourth quarter will be prices remaining slightly below a year ago.

Fundamental's are improving? Well, the freefall in unit sales stopped -- thanks to a record drop in prices:

"The median home price was $221,000 in October, compared with a revised $221,000 in September and $229,000 in October 2005. It was the largest year-to-year decline ever and a record third consecutive decrease, NAR said." (emphasis added)

Somehow, Lereah overlooked the small issue that October's 3.5% decline in the national median existing home price follows September's 1.8% year-on-year decline. (Whoops! I'm sure he'll follow up on that next month).

How common is this annual fall? CNN/Money noted:

"While month-to-month declines in home prices are not uncommon, year-to-year drops had been rare before the recent housing slump. Last August was the first month in 11 years to see such a decline."

Let's move on to Confidence -- is it really returning? Certainly not based on the increase in inventory:

"Inventories nationally increased 1.9% at the end of October to 3.85 million units. That represents a 7.4 month supply at the current pace of sales."

Hmmm, how about that unusual spike in 2005 which skewed the data? Let's have a closer look at that, and see how unusual it realy is. We go to Kevin DePew at Minyanville, who is on the case:

"Lereah claims the October decline in national median prices is "skewed" due to "an uncharacteristic spike in October of last year. Sure enough, in October 2005, the national median price jumped 16.6% year-on-year, which followed September's 13.4% year-on-year jump, which followed followed August's 15.8% jump, which followed July's 14.1% jump, which... wait a minute... followed... STOP IT! That's not an uncharacteristic spike. That's a freaking TREND!"

Finally, I am not sure just what it means to say that "sales are lower than sustainable due to psychological factors." My best guess is that's a polite way to say: "You want howe much for that house? What are you f%$#@ crazy?"

Bottom line: Investors need to look at data sources very very carefully before relying on them -- this is especially true when the source is a trade group, who tend to be non-objective, and indeed have a very specific agenda that benefits from happy talk. In the present case, a strong motivation for transactional business.

Sources:
Existing Home Sales Rise in October, Market Stabilizing
NAR, November 28, 2006
http://www.realtor.org/press_room/news_releases/
2006/ehs_oct06_existing_home_sales_stabilizing.html

Existing-Home Sales Climb, But Prices Show Record Drop
JEFF BATER
November 28, 2006 10:14 a.m.
http://online.wsj.com/article/SB116471970158834473.html

Home prices post record drop in October
Chris Isidore
CNNMoney.com, November 28 2006: 10:56 AM EST
http://money.cnn.com/2006/11/28/news/economy/
homesales/index.htm?postversion=2006112810

More Bad Data from the NRF?

Tuesday, November 28, 2006 | 06:52 AM

in Consumer Spending | Data Analysis | Financial Press | Retail

I’m kinda dumfounded to see this issue come up time and again, but -- there they go again: The National Retail Federation is once again putting out data which has gotten misinterpreted by most of the MSM:

"Retailers kicked off the holiday selling season in style as shoppers across the country set their alarms for the wee hours of the morning to catch doorbuster specials. According to the National Retail Federation’s 2006 Black Friday Weekend Survey, conducted by BIGresearch, more than 140 million shoppers hit the stores on Black Friday weekend, spending an average of $360.15, up 18.9 percent from last year’s $302.81.*"

Or so said the NRF's press release. Note that little asterisk?* Follow it, and we see

"*Spending data includes Thursday, Friday, Saturday and projected spending for Sunday."

Even that disclaimer is inaccurate: First, this is not based upon actual sales data, but rather, is a survey of consumers. Not only that, but much of the survey results are self-reported projections of spending expectations -- not reciepts. The survey dates are 11/23-11/25. This means survey interviews done on Thursday 11/23 are almost all forecasts of future behavior; depending what time of the day they are done on Friday 11/24, between 2 and 3 days of data are predictions, and perhaps one day is self-reported data.

To get an accurate read of retail sales, we need actual DATA -- like company sales reciepts or Credit Card purchase totals. Asking people how much they are planning to spend or have already spent is a surefire methodology of getting bad dope.

Note that this has become an annual rite of error by NRF. In my opinion, based on my read of how they present this data, I suspect they are purposefully attempting to mislead the media. We saw the exact same issue last year in the way they report their survey: In 2005, the NATIONAL RETAIL FEDERATION said holiday Retail sales rose 22%; We later found the actual sales data was nowhere near that statement. Taking a survey forecast and reporting it as actual sales is not honest.

Given last year's debacle, as well as the more recent cheerleading back-to-school forecast, one would have hoped the NRF would make it clearer that this isn't actual sales data -- but rather, is a survey asking people how much they intend to spend, and on what items.

It is quite unfortunate that most of the media reports this survey as if they were actual sales. They are not.

Why? Surveys are very subjective; People are notoriously inaccurate at reporting their own behavior: Their own Egos can get in the way (Yeah, I'm a big spender!); How questions are phrased impacts answers; Even the immediate prior question on a survey can and will change a respondents answer tot he next question. Phrasing, grammer, buzzwords -- all impact results.

Given that the NRF is an industry spokesgroup, we cannot expect any degree of objectivity -- but should instead recognize them for what they they are: A industry trade association promoting the goals of their membership. There's nothing wrong with this cheerleading, as many industry groups have their own trade associations who spin the data (like the National Association of Realtors do with Housing Data). The problem arises when the mass media reports their marketing releases as a form of objective economic data. They are decidely not.

Consider how widely survey results can and do vary. For example, CNBC also conducted a survey of Holiday shoppers -- about on-line sales, specialty stores, big box discounters, and the factors that might affect their overall spending. Their results? They found that spending this year is likely to be flat. Here's an excerpt of the CNBC survey result:

"Despite a huge turnout of shoppers on Black Friday and the rest of the Thanksgiving weekend, most Americans will spend less or the same amount they spent last year on gifts, according to CNBC's exclusive Holiday Central Survey. Surprisingly, overall falling gas and energy prices had little or no effect on overall expenditures, according to the survey...

Specifically, 46% of those surveyed said they will spend "about the same amount" they spent on gifts last year and 32% said they plan to spend less than they spent last year. The average amount consumers plan to spend this year on gifts is $764. Only 20% said they plan to spend more than they did last holiday season."

I'm not suggesting the CNBC survey accurate,while the NRF survey is not. But it shows how widely varying survey results can be based on who asks what questions. However, in the spectrum of likely sales gains at this stage of the economic cycle, between a gain of 18.9% versus flat spending, my expectations -- a +2 to 4% range -- are much closer to flat than a huge increase over last year.

And, its hard to imagine a 19% increase in spending would lead to triple digit loss for the Dow . . .

Last year, numerous media mistakenly trumpeted misleading data as an actual measure of sales, rather than a mere survey. Once again this year, we saw similar errors showing up in various Holiday Retail articles -- some more or less erroneous than last year:

WSJ: "In a survey of 3,090 consumers, the trade association found that shoppers spent an average of $360.15 this weekend, up nearly 19% from last year's $302.81. Discounters were still the most popular shopping destination, but their share dropped significantly from last year; about 50% of those surveyed said they visited a discounter over the weekend, compared with 61% last year."

They didn't spend that much, they said they spent that much -- and that's huge difference. Bloomberg is even more explicit:

Bloomberg: "U.S. consumers shopping over the Thanksgiving holiday weekend spent 19 percent more than a year earlier, outpacing the advance of 2005, after retailers slashed prices to attract customers.

Consumers spent an average $360.15 from Nov. 23 through yesterday, up from $302.81 a year earlier, the National Retail Federation said yesterday in a statement. Fewer people shopped, with about 140 million visiting stores during the four days including Thanksgiving, down from 145 million last year."

No, spending was not up 19%. People said they expected to spend 19% more. These were not actual spent dollars, but rather, were expctations of spending. There's an enormous difference, especially when we consider that people tend to be very poor judges of their own behavior.

~~~

Newspaper readership has dropped significantly over the past few years. Budget cuts have reduced the number of reporters, fact checkers, assistant staffers. And, it may only get worse, as the internet pulls even more readers from traditional print outlets, pressuring news gathering budgets even further.

Its easy for trade organizations to crank out official sounding statements; their adeptness at manipulating the media is apparent. We should brace ourselves for more of this sort of marketing spin being reported as fact in the future.

And thats a shame . . .

UPDATE: November 28, 2006 11:09 am

So, now that the data is out -- how did the NFR "forecast" square with reality? The WSJ's Holiday Sales News Tracker noted:

Chain-store sales slipped 0.4% in the week ending Saturday from the prior week, the International Council of Shopping Centers reported Tuesday. Not too impressive given all the reports of jam-packed malls over the holiday weekend. However, when you compare last week’s performance with the same week a year earlier, chain-store sales increased 2.6%.

Redbook puts out a similar survey but got slightly different results. Chain-store sales rose 0.1% in the first four weeks of November from October, and 3.2% from November 2005, according to Redbook’s gauge.

2.5% . . . 3.2% -- thats very consistent with my pre-Black-Friday forecast of 2.5-3.5% range for the holidays.

UPDATE: November 28, 2006 4:37 pm

I spoke with Scott Krugman of the NRF; He pointed out that the full press release specified that this was the result of a survey and not actual sales reciepts; The NRF retains the services of "Big Research," an independent marketing research firm -- and then reports back the results of their survey.

Further, the NRF economic forecast back in September was fairly circumspect: NRF Sees Subdued Holiday Gains in 2006.

So to be fair, while I have issues with their first paragraph, its the Media's responsibility to do their homework and report the news accurately -- not a Trade Association's.

Sources:
Early Birds Catch Plenty of Worms as Retailers Have Lucrative Black Friday
NATIONAL RETAIL FEDERATION, November 26, 2006 --
http://www.nrf.com/content/default.asp?folder=
press/release2006&file=blackfriday2006.htm

Black Friday survey
http://www.nrf.com/content/press/BIG2006Thanksgiving-NRF-press.pdf

HOLIDAY SHOPPING SPENDING FLAT COMPARED WITH LAST YEAR
CNBC, November 27, 2006
http://nbcumv.com/cnbc/release_detail.nbc/cnbc-20061127000000-holidayshoppingspe.html

CNBC Video Report on Black Friday
http://release.theplatform.com/content.select?pid=I2GMRyUIbGPGmKjFEoLAcmOCq1djaNlL

Holiday Sales Get Off to Solid Start, But Wal-Mart Doesn't Share Cheer
AMY MERRICK and KRIS HUDSON
November 27, 2006; Page A1
http://online.wsj.com/article/SB116459701046633253.html

U.S. Thanksgiving Spending Increases 19% on Discounts
Mary Jane Credeur
Bloomberg, Nov. 2006
http://www.bloomberg.com/apps/news?pid=
20601087&sid=at5Fe1Zy7ytM&refer=home

Have we already enjoyed the Year End Rally?

Monday, November 27, 2006 | 10:01 AM

in Currency | Investing | Markets | Psychology/Sentiment

A NYT column last weekend asked: Have we already enjoyed the Year End Rally? Today's action makes that query all the more relevant -- especially in light of last week's Dollar whackage:

Here's the ubiquitous excerpt:

"THE stock market has had a great run over the last few months, but as the holiday season begins, some analysts are worrying that the traditional year-end rally on Wall Street may have already come and nearly gone.

Mary Ann Bartels, technical research analyst at Merrill Lynch, wondered in a note to investors whether the tendency for stocks to climb in the last couple of months of the year had been rescheduled this year for September and October.

“We think yes,” she wrote. She then acknowleged feeling torn between what her charts have told her and what the calendar and history have led her to expect.

“It is not our favored stance to be more toward the bear camp looking for a cyclical correction of 8 to 10 percent, but all of the market indicators suggest this is the more likely scenario over the coming weeks,” Ms. Bartels said. “What is surprising is that these readings are occurring at this time of year. Most years see a bullish year-end rally.”

She highlighted several exceptions that prove the rule, including three years in the 1990s when the Standard & Poor’s 500-stock index lost at least 6 percent at some point during the last two months of the year. What signs suggest that 2006 will play out as those three years — 1991, 1994 and 1996 — did?

Trading volume has shrunk, something that often precedes a price decline, she noted, and several sentiment indicators, including opinion surveys of investment advisers and measures of market volatility, show the sort of complacency that typically occurs near market tops.

Interesting stuff . . .

UPDATE: November 27, 2006 10:43am

CNBC's Bob Pisani quotes several unnamed traders who have said that in light of the dollar drop, overseas investors are repatriating some cash, locking in their profits for the year, and eliminating additional currency risk . . .

Source:
This Party May End Before It Starts
CONRAD DE AENLLE
NYTimes, November 19, 2006
http://www.nytimes.com/2006/11/19/business/yourmoney/19mark.html

Amazon.com Gift Certificate

Monday, November 27, 2006 | 06:30 AM

in Retail

Today is called Cyber-Monday -- a nonsensical media phrase to follow up the Black Friday shopping blitz. On line shopping has been growing rapidly the past 10 years, with 30-40% year on year gains.

We also know gift cards have been huge the past few years around the holidays, This year, Amazon is making a big marketing push to create a mash up of the two: online Amazon gift certificates.

Mike, my freshman year college roommate, sent me the first Amazon gift subscription I ever received in 1997. Thanks to him, I've been a regular Amazon customer ever since.

Is an email with a dollar credit the same as a little plastic card 2 x 3 card? (I don't know)

Amazon.com Gift Certificate

Also, I have updated the weekend retail round up with the following links:

Beware: Heavy store traffic doesn't mean huge sales

U.S. Thanksgiving Spending Increases 19% on Discounts

Black Friday Breakdown (Scott Rothport, Street Insight)

Black Friday Turned Green at the Malls Before Dawn
http://www.nytimes.com/2006/11/27/business/27shop.html

Web sales down on Black Friday

Shoppers slow pace after early frenzy

Not as many Black Friday shoppers, but spending is up

Traffic down, spending up in holiday retail debut

Retail sales mixed at start of US holiday season;
(Car sales forecast to fall in 2007 to lowest since 1998)

How Housing Slump Is Risk To Big Three Rebound http://online.wsj.com/article/SB116458922079133152.html

Holiday Sales Get Off to Solid Start, But Wal-Mart Doesn't Share Cheer
http://online.wsj.com/article/SB116459701046633253.html