Black Friday's Upside Surprise
Following Friday's buying stampede -- in both stores and equity markets -- there will be a tendency to discount the bad news, and declare all is well in the world.
Black Friday Retail sales will be interpreted and extrapolated to mean there will be no recession, its doubtful of even a slowdown, the worst of the Housing and Credit Crunch is behind us, and the markets will be just fine.
I am not a buyer of that pablum.
In a paroxysm of fear, coupled with a small salting of reality, Retail stores pulled out all the stops for this holiday season: They opened on Thanksgiving Day or 4 am Friday, they discounted early and often, they slashed prices at the expense of their own margins.
Consumers rose to the bait: They continued spending more than they could afford, only instead of tapping home equity, they went to their credit cards. However, the total weekend sales were not nearly as rosy.
Despite the obvious absurdity of it all, this will be deemed economically positive by the usual suspects.
This now sets up the final rally of the 2002-07 bull run. We should see a decent (but not great) year end run. As stocks trade higher into December, it creates an ideal opportunity for many to reposition their portfolios, batten down the hatches, and await the storm.
~~~
More on this later . . .
Update: Or not!
>
SPX: November 26, 2007
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Shorter BP: Son, You know your crazy aunt we keep locked in the attic? Well, she's still crazy.
Posted by: Marcus Aurelius | Nov 26, 2007 8:02:51 AM
Should we need here an economist or rather a psychiatrist?
Posted by: eduardo tendero | Nov 26, 2007 8:21:17 AM
Shut up and drink your Kool-aid.
Posted by: Marcus Aurelius | Nov 26, 2007 8:24:46 AM
BR, is this the same bear call you made three years ago?
~~~
BR: No. Since then, there have been many other Bull and Bear calls.
Posted by: dan | Nov 26, 2007 8:33:12 AM
Last night there was a headline on Bloomberg, "Japanese stocks rise on US holiday spending." It noted Honda was up 3%... Theey make great stocking stuffers!
Posted by: Bob_in_MA | Nov 26, 2007 8:44:29 AM
"Should we need here an economist or rather a psychiatrist?"
A psychiatrist. The year end celebrations always bring good mood and hope for better days to come. Unless you are Uncle Scrooge.
No matter how bleak or daring the situation is, people are allowed to escape for a few days. Let it be. You should join the party too, just don't overstay it.
Posted by: mhm | Nov 26, 2007 8:45:06 AM
So dan, care to make a call? Put-up or shut-up.
Posted by: DC | Nov 26, 2007 8:47:17 AM
The Financial Times a couple days ago questioned whether it was financially worth retailers opening early on Black Friday when you consider the extra staff, security and overhead costs to be open selling loss leaders.
Posted by: Deborah | Nov 26, 2007 8:48:37 AM
Couldn't agree more, Barry
The GS sell call on the Big C rang in the year end rally.
Posted by: tjofpa | Nov 26, 2007 8:49:15 AM
Yeah I hear ya Bob
The Hang Seng dialed up a 1000 point move,
are they riding the US coat tail?
Europe is currently flat to red.
Posted by: MarkTX | Nov 26, 2007 8:49:50 AM
What makes this year's discounting any different from last year? I agree that consumer behavior could change, but you could have written this piece anytime in the past 20 years and been dead wrong. It seems rumors of the death of the consumer have been greatly exagerated. I have been bearish too, but I don't want to ignore evidence to the contrary.
Posted by: Ben | Nov 26, 2007 9:02:44 AM
Black Friday may have been busy, but Saturday the stores were practically empty of shoppers, Target, the Macon Mall, Sam's Club & a couple of small retailers I stopped at were doing little if any business.
I expect the retailers will be desperate for customers until the final three days before Christmas.
Posted by: jameslgb | Nov 26, 2007 9:27:44 AM
Retail traffic up with spending down in holiday start
...The survey, which included data from Thursday to Saturday and projections for Sunday, showed customers spent an average of $347.44, down 3.5 percent from $360.15 last year...
http://news.yahoo.com/s/nm/20071125/bs_nm/retail_weekend_dc_1
Posted by: Bob A | Nov 26, 2007 9:30:20 AM
Retail traffic up with spending down in holiday start
...The survey, which included data from Thursday to Saturday and projections for Sunday, showed customers spent an average of $347.44, down 3.5 percent from $360.15 last year...
http://news.yahoo.com/s/nm/20071125/bs_nm/retail_weekend_dc_1
Posted by: Bob A | Nov 26, 2007 9:30:45 AM
A far greater concern than retail sales is "the credit crunch is back stronger than ever".Look out below no Santa Claus rally!
Posted by: John Bennett | Nov 26, 2007 9:44:42 AM
prior post deleted
Dan,
I do not have time to individually correct every troll who comes around to misquote me. The fastest way to get yourself banned from here is misquoting me (which you just did)
Check back in a month . . .
Posted by: Barry Ritholtz | Nov 26, 2007 9:49:57 AM
What struck me about Black Friday was a new aggressiveness (dare I say desperation?) among the small stall operators in a mall I walked into about 8:30 PM. Did anyone else happen to notice similar new aggressiveness?
And hey there dan, you haven't been paying attention for the past three years. Barry has calls bottoms and tops better than most. Yes, he's a worrywart, and for that I value him. But amid worrying he sees when the market is about to turn either way.
Posted by: attobuoy | Nov 26, 2007 9:50:15 AM
I really don't see how a run up in the Dow is possible before year end. The (bad) news keeps trickling out day after day.
It's kind a like the Bears are checking off all the symptoms of a nasty recession.
Posted by: Donny | Nov 26, 2007 9:52:13 AM
I know you love this stuff, so let me give you the holiday weekend update from the westside of LA.
Now, unlike NY, it seems to me like most people leave LA on Thanksgiving (particularly on the west side of town). And this is the first time I've been in LA for Thanksgiving in about 10 years.
Anyway, on Thursday evening, I was driving home and drove passed Best Buy in Hollywood. There were people lined up 3/4 of the way up the block (some in tents) at 9pm. Nuts.
Shopping was on our agenda for the weekend as we're finishing the remodel and will be moving back home in three weeks. My wife thought it would be crazy, I thought it would be not a problem.
First, I went to Best Buy on Friday around 9:30 to pick up the TV for the kitchen and a Blu-Ray player. No problem parking. The store was active, but not crazy and there was no line at checkout. the heavily discounted items I wanted were in plentiful supply. I'd say it was marginally busier than a normal weekend. At 10:30 we were at the Grove, probably the most successful retail development in LA history. Normally, it's a zoo on any weekend. At 10:30 to 11:30 Friday, it was barren. A bit later we were at the Beverly Center. Also, seemed lighter than a normal weekend (no problem getting in or out). On Saturday late afternoon, we hit the Westside Pavillion. Now, going there at 6pm is probably not a good indicator, but the place was empty (but for the young kids in the giant plastic fruit playground). The furniture stores we hit around town were also decidedly empty all weekend (I guess no one is buying couches as Christmas presents).
So there you have it. I'm interested to see what the professional reports say, but at least this observer in one town didn't see much activity.
Off the to car show this afternoon, though I think the new Lambo will have to wait. This house project is expensive!
Posted by: Gene | Nov 26, 2007 9:53:44 AM
Sales per customer were down.
"Yet the National Retail Federation, which represents retailers, said Sunday that shoppers spent an average of $347.44, down 3.5 percent from a year ago's $360.15, even though more than 47 million shoppers hit stores during the weekend, up 4.8 percent from last year."
http://www.suntimes.com/business/666881,CST-FIN-retail26.article
Posted by: Vader | Nov 26, 2007 10:14:37 AM
The weekend bombed. No more needs to be said. "Black Friday" is a media and retail industry driven frenzy of stupidity. It is the weekend that counts because it signals what the following weeks will look like.
No "Grinchmas" this year, but Santa has bad IBS and acid reflux.
Posted by: Cherry | Nov 26, 2007 10:25:06 AM
I live close to all the McStores. I needed a new mp3 player because I inadvertantly found that it does not make good bait. (Picture the player hanging from the headphone wires about a foot in the Huron River.) It also does not work after the dunking. So I went online to find what I wanted, read customer reviews, and saved well over 20 dollars and received free shipping and a free case. I figure I am not the only one to do this. (I no longer believe Al Gore invented the Internet just for me!) I saw this morning that on Black Friday 32% of the people made purchases online. I do not know the magnitude of the purchases. What is important is how this might effect local economies.
As far as Honda making more money by making more sales. Cmon now have you gone to the gas pumps? Who in their right mind might want a high quality car that gets very good gas milage? Is Detroit offering these two things? In this case someone is eating someone elses lunch.
Posted by: alexd | Nov 26, 2007 10:44:46 AM
I broke down and finally got an hdtv.
Posted by: tom pitts | Nov 26, 2007 11:03:35 AM
My take:
1. Agree with many of the observations here. Black Friday itself was probably alright due to deep discounting and retailers opening earlier than ever. Plus, more people are on a tighter budget so they NEED the savings in order to maximize what they can get. Really, just stealing more sales from later on in the shopping period as well increasing the % of loss leaders and low margin items sold.
2. Retail gifty-type items will be the last area to slow down as psychologically it is critically important for people to at least portray a semblance of success and normalcy to close friends and family. They will, however, cut down on items for themselves and durable goods.
Posted by: Short Man | Nov 26, 2007 11:11:37 AM
everyone is waiting to sell this rally, therefore I don't think we're really going to get much of one. retail is a joke. is gold a safe haven yet? or will it continue to trade with the stock market?
Posted by: schnauser | Nov 26, 2007 11:17:51 AM
