Daily Gains Letter

Main Street


Not Much for Retailers to Be Thankful for This Past Thanksgiving

By for Daily Gains Letter | Dec 3, 2013

Thankful for This Past ThanksgivingDespite the retail sector’s every attempt to generate sales this Thanksgiving, from sharp discounts to being open earlier than ever, their efforts fell flat. It’s further evidence that the U.S. economic recovery is not as entrenched as many think it is, and once again shows the economic disconnect between Wall Street and Main Street.

In spite of high unemployment, stagnant wages, consumer confidence at a seven-month low, and a smaller number of people forecast to hit the shops over the Thanksgiving weekend, the National Retail Federation still predicted sales to grow 3.9% from last year. (Source: Banjo, S., “Holiday Sales Sag Despite Blitz of Deals,” Yahoo.com, December 2, 2013.)

Over the Black Friday weekend in 2012, U.S. shoppers spent roughly $60.0 billion in the retail sector, but this year, it was a different story altogether. While the final numbers have yet to be tallied, early indicators show that total U.S. retail sector spending over the Thanksgiving weekend fell to $57.4 billion. It’s also the first time that retail sector spending over the Thanksgiving weekend has dipped in at least four years.

Even during the worst of the recession and the beginning of the so-called economic recovery, U.S. shoppers were willing to spend, buoyed by optimism. Five years into the so-called economic recovery, and shoppers are tightening their belts, weighed down by pessimism.

But it didn’t start out that way; in fact, most U.S. retail sector stocks were initially quite enthusiastic about their prospects. Wal-Mart Stores, Inc. (NYSE/WMT) had originally planned to open its doors at 8:00 p.m. Thursday night, but instead opened its doors at 6:00 p.m. Target Corporation (NYSE/TGT) … Read More


Wall Street Cheers 13.6% Unemployment Rate; S&P 500 Soars!

By for Daily Gains Letter | Oct 24, 2013

Unemployment RateBad news on Main Street is good news for Wall Street. Illogical heads prevailed on Tuesday after the U.S. government announced that the unemployment rate dipped to an ever-so-modest 7.2% in September, from 7.3% in August. The U.S. added just 148,000 new jobs in September—far short of the forecasted gain of 180,000 jobs for the month. (Source: “The Employment Situation – September 2013,” Bureau of Labor Statistics web site, October 22, 2013.)

The number of long-term unemployed (those without a job for at least 27 weeks) remains stubbornly high at 4.1 million, and the underemployment rate is at an eye-watering 13.6%, up a sliver from 13.4% in August.

Weak jobs numbers means the Federal Reserve will continue its $85.0-billion-per-month quantitative easing policy into 2014. Those who do not read these pages were apparently surprised last month when the Federal Reserve did what it said it was going to do—namely, keep its stimulus package intact until the economy improves to a 6.5% unemployment rate and a 2.5% inflation rate.

It clearly hasn’t, isn’t, and won’t for the foreseeable future.

Those bad jobs numbers sent the S&P 500 into record intra-day territory. In the week since Congress ended the U.S. government shutdown, raised the debt ceiling, and reported stubbornly high unemployment, the S&P 500 climbed more than three percent. Year-to-date, the S&P 500 is up more than 22%.

That increase is in sharp contrast to anything approaching reality on Wall Street. During the first quarter of 2013, 78% of S&P 500 companies issued negative earnings-per-share (EPS) guidance, 81% during the second quarter, and a record 83% for the third quarter. (Source: “Earnings … Read More


Poverty Rate Reveals Just How Little the Fed’s Helping Main Street

By for Daily Gains Letter | Sep 19, 2013

Poverty Rate RevealsAfter five years of pumping trillions into the U.S. economy, the average American really is no better off than before the Federal Reserve initiated its unprecedented economic stimulus efforts. This is in spite of Federal Reserve chairman Ben Bernanke’s claims that the Fed’s efforts at encouraging U.S. economic growth are helping Main Street more than Wall Street.

Bernanke may claim to be focused on helping the average American, but the U.S. economic numbers suggest his steely gaze is trained elsewhere. For example, even though unemployment numbers improved from 7.4% in July to 7.3% in August, the vast majority of those jobs were created in low-wage-paying industries. On top of that, more and more have given up looking for work and are no longer considered unemployed, so they’re removed from the equation. Voila, better numbers.

What about housing prices? While a slightly improving U.S. economy has lifted housing prices 13% over the last year and a half, they’re still down 25% from their 2007 pre-Great Recession highs. It’s also important to remember that any increase on the back of an improving U.S. economy, while a welcome sign, is only on paper.

At the same time, 7.1 million homes, or 14.5% of all residential properties with a mortgage, still have negative equity. Of the 41.5 million residential properties with positive equity, one quarter (10.3 million) have less than 20% equity. Borrowers with less than 20% equity could have a difficult time getting new financing. Interestingly, 1.7 million residential properties have less than five percent equity, meaning they are at risk of negative equity if the markets turn and home prices slide. (Source: … Read More