NOTE: This will be the last article posted until mid-January as I'm off on vacation. I hope you enjoy the holidays!
Like last week, we moved slightly ahead this week just before Christmas. We also received two excellent pre-holiday presents. First, we closed our position in Decker's Outdoor (DECK) at $28 for a 40% profit in two months. Second, we placed a stop-limit order to sell our computer storage company at $6.80 to lock in a 60% profit in three months.
Let's look back at this week.
MONDAY
Japan may finally emerge from seven years of deflation in fiscal 2006 as two major price gauges are expected to rise from the previous year's levels, according to a government report. The Nikkei rose 1.4%.
, our electronics retailer, was downgraded by Banc of America to "Sell" from "Neutral". Goldman Sachs analyst Matthew Fassler maintained the stock at "in-line" following the company's fourth-quarter earnings pre-announcement. According to Fassler in a report issued today, the company needs to "alter its assortment, consumer message, and cost structure as growth in its traditional profit centers - supplies for analog technology and wireless - begins to fade." Fassler cited "declining wireless revenue and profit" as the "most important factor" behind the company's shortfall, describing the company as being "in the cross-hairs of the wireless sector's demons." The company is also lacking "the high-margin product to replace wireless," he said. By the end of the week, our position was down nearly 15%. I've placed an order to double down at $20, should it get there. The stock closed Friday at $21.29.
Our big pharma shares surged after several analysts made positive comments about the stock following the drugmaker's recent legal victory.
TUESDAY
Stocks fell for the fourth straight day, extending the market's longest losing streak since October, as investors became concerned that ongoing strength in the housing market could spur further Fed tightening. Even though a smaller than expected 0.1% rise in core-PPI shows that higher energy prices have not led to inflation, better than expected housing starts and building permits caught everybody's attention. November housing starts came in above the 2 million annual rate for a seventh straight month while strong permits suggested that builders still expect starts to stay at a strong rate in the months ahead - one of the Fed's chief concerns. This issue was re-visited again on Friday but in a positive light.
Our Japan investment gained 4.1%. The value of Japan's recovery was further highlighted when insurance giant American International Group (AIG) reported that it will purchase $3.5 billion worth of property in Japan. Those insurance guys generally know what they're doing when it comes to money. This largely unnoticed bit of news bolsters my faith in Japan's continued recovery.
WEDNESDAY
Our big computer storage day! The stock gained 53.3%.
The largest drive maker bid $1.9 billion for our stock - a move that will unite two of the largest disk-drive makers. This is consistent with my investment thesis that ours was not the best company in the field, but that it was the cheapest and therefore stood to appreciate the most. I didn't see this acquisition in the offing per se, but it goes to prove that you often do better owning the cheapest rather than the best. Valuation is vitally important when it comes to stock investing.
Just to be sure, I set a stop-limit order to sell the stock at $6.80 for a gain of 60%. I hope it just keeps rising from here, and so far it has. The stock closed Friday at $7.10 for a gain of 67%. In case something goes wrong, keep that stop-limit order active.
Third quarter real GDP was marginally revised to show a 4.1% annual rate of increase from a previously reported 4.3%. This is fantastic growth, particularly in light of all the fears around Hurricane Katrina. I hasten to remind you that around here we were never afraid of Katrina's effect on the economy. As I wrote in my article on market timing for the CXO Advisory Group, weather almost never matters to the stock market.
Good ol' Japan just keeps cooking along. The Nikkei index jumped 316 points, or 2%, to 15,958 after briefly topping 16,000 - the Nikkei's highest intraday level since October 2000. Our investment gained another 4%.
THURSDAY
We placed a stop-limit sell order on Decker's at $28, and it filled within hours.
Japan is hot again. The Nikkei index has now climbed more than 31 percent this year on renewed optimism for the country's economic recovery, with the stronger dollar also helping support exporters.
Economics Minister Kaoru Yosano said today that Japan is entering a period of self-sustained recovery and is close to escaping deflation due to increasing consumer demand. Consumer prices here have generally been falling for years, eroding corporate profits and paychecks.
By the end of the week, our Japan market investment was up almost 34% since we invested on September 4.
FRIDAY
Japanese financial markets were closed Friday for the emperor's birthday, a national holiday.
The week closed in America with a yawn before the holiday weekend. This was supposed to be the first day in the traditional Santa Claus rally. According to the Trader's Almanac, since 1969 the S&P 500 has been up an average 1.7% over the final five trading days of the year and the first two of the new year. We'll see if that holds true this year. On Friday, the S&P and Nasdaq moved just a tad higher while the Dow slipped just a tad lower. Basically flat.
Durable goods orders jumped a higher than expected 4.4% in November, showing strong business investment that has kept real GDP above its long-term trends. Another positive for the economy.
November new home sales sank 11.3% to a 1.25 million rate. That was bullish for those wanting signs that the Fed might stop raising interest rates. If the pace of home sales is declining, then prices might retreat or at least level-off, making it less necessary for the Fed to keep ratcheting rates higher to contain inflation.
But enough of all this business and market stuff. It's Christmas! We've had a great year and we're sitting pretty for the holiday season. The door for us to enjoy a relaxing holiday vacation is wide open, and I say we walk through it.
On that note, The Kelly Letter is taking a holiday break. I won't be responding quickly to notes, as I usually strive to do. There won't be an update next week and the January issue will be sent the middle of next month instead of the beginning. No notes from me means that you do nothing during this time. With our good-til-cancelled orders to buy more at $20 and sell at $6.80 on the books, we're even prepared to react wisely to price moves while we're enjoying some down time. That's how I've always approached the market and it continues to serve me well. There are very few split-second actions to be taken around here.
So, a very Merry Christmas to you and yours wherever you may be. If you celebrate something else, then enjoy that. I'll be back to you in the new year with lots of opportunities as the great game continues.
It was a mixed week for both the market and our portfolio, with a mildly upward bias. Let's take a day-by-day look back.
Monday The market was subdued as investors waited for the Fed's rate hike and policy statement on Tuesday. OPEC decided to maintain production at its 25-year high, a slight positive.
Tuesday To nobody's surprise, the Fed raised the funds rate by 1/4% for the 13th time in a row. It now stands at 4.25%. The attached policy directive included language that said the Fed would watch economic stats to determine future actions. Again, not surprising (what else would the Fed watch, football scores?) and hardly cause to pop the champagne, but it does provide a glimmer of hope that rate hikes will end if there are no signs of inflation. So all eyes turned toward Thursday's report on the core consumer price index (CPI), and the hand-wringing began as the hours counted down.
Our footwear maker fell again and was down nearly 5% in two days. The call to get out sounded across the internet, mostly with reference to having come too far too fast. The stock gained 25% last week, after all. Better lock in those profits fast! We passed on that idea. Was it the right call? Keep reading.
, our long-motionless big pharma holding and this year's Dow 1 portfolio component, raised a stiff arm from the stretcher and asked not to be toe-tagged just yet. The stock jumped 6.5% on Tuesday after the company raised its dividend 26% from $0.19 a quarter to $0.26. This was a reminder to those who read more than news headlines that corporate America's balance sheets are in tip top condition. Expect more dividend boosts next year.
Wednesday All the talk Wednesday in America was about the Fed's policy statement. What did it really mean? Not much to me. The Fed changed its wording to show that it's not sure if further rate increases are needed. It depends on inflation, and we don't yet have the data to make a call. An absence of data enables gurus of every stripe to begin their favorite activity: prognosticating the future. I prefer to just wait. I didn't know on Wednesday what core CPI for November would be, but I'd know on Thursday.
Overall, regardless of the CPI, we should expect another rate hike on January 31. That way, if it doesn't happen, we'll be pleasantly surprised...and so will everybody else.
While the endless Fed discussion was tons of fun, the bigger news for us was that October's trade deficit grew to a record $68.9 billion, much worse than expected. The U.S. markets paid little attention. However, the dollar weakened against the yen. That lowers the profit of Japanese exporters because when they translate sales in America back to Japan, they get fewer yen per dollar. The Nikkei index sold off sharply in response and our Japan market investment fell 6.6%.
Our footwear maker, though, got back on track. It rose exactly the same amount that it fell the day before.
Thursday At last, the November core CPI! It increased 0.2%, right on target. That's the second month in a row of a 0.2% increase, following five months of 0.1% increases. Are we settling into a stairstep pattern of inflationary pressure? Hard to say yet, so keep wringing those hands. The outcome in either direction couldn't be simpler to digest. If monthly rates stay at this level in first quarter 2006, the Fed will probably continue raising rates until June. If we get one or two 0.1% reports and the average is right at 2% or less, the Fed will probably stop raising rates sooner.
Now you know what to watch. The Fed's mission is to control inflation. It keeps tabs on core CPI to determine the threat of inflation. If you want to know as much as any commentator, watch the CPI. Mention this to your loudmouth brother-in-law at the family Christmas gathering when he tells everybody in earshot that rates are headed back up. Take a sip of your eggnog, look him in the eye, and say, "Maybe. Depends on the core CPI."
You might also mention to him and any others interested that the economy is looking great. The New York Empire State survey of manufacturers came in at a strong 28.7, hinting that manufacturing growth is continuing. New claims for unemployment for the week ended December 10 were the same as they were a week before at 329,000.
The dollar continued weakening against the yen, the Nikkei dropped 1.4%, and our Japan market investment fell 3.1%.
said Thursday it plans to cut 40 employees, or 5 percent of the company's work force, as part of a realignment of its technology and operations sectors. The job cuts could save the company up to $11 million annually. Shares fell $4.09 to close at $90.81. This is of interest to us as we're watching for the stock to get below $90 as a potential buy candidate. Remember, this is the same stock we sold on Halloween at $109 for a 1% profit. Buying again at a 17% discount is appealing.
Friday Japan crawled back on track. Our Japanese bank finally poked into positive territory for us. It's now up 1.2% since we bought.
let us down Friday when it said it would not meet its fiscal 2005 target of $2.14 to $2.24 per share, which it just revised in its third-quarter earnings report. The reason given was weaker than expected sales of wireless devices, batteries, and related accessories. The stock dropped 6.5% and is now down 11% for us. This is disappointing. I thought the store was ready for a big holiday season and expected it to be in the midst of a strong recovery by now. It's a good company, though, and we'll hold. For instance, they have free cash flow in the $80 to $100 million range and they now sell Apple's hot iPod. Things should improve.
President David Edmondson said, "We have made significant progress in executing our improvement initiatives this year, yet it's clear that we need to move much faster, more aggressively and with more urgency to enhance company performance." That's right, it's time to crack the whip in Fort Worth (where the company is based).
By the time Friday's bell was rung, we came out all right. We generally do around here. We're a little down on a few positions, but nothing disastrous. We're a little up on a few more. We're strongly up on a few more than that. That's almost always how it looks.
Our permanent portfolios had a good week. The Dow 1, which is the aforementioned big pharma company this year, gained 9.6% thanks to the dividend boost. It's still down 16% this year, though.
Double The Dow gained 1.8% and is up precisely 0.0% this year. I do mean precisely. It closed last year at a value of $15,906 and closed this week at a value of $15,906. I've never seen that before. I've seen the values get close, but never to the dollar equal. That means that whatever happens in the next nine trading days determines the portfolio's result for the entire year. Interesting.
Maximum Midcap slipped 0.8% this week, but is up 20.2% this year so we'll cut it some slack.
If you have time and haven't already done so, you might want to take a look at the article I wrote on market timing published last Tuesday by CXO Advisory Group.
I hope your holiday preparations are going well. You don't have to worry about the stock market. Ignore the naysayers, everything is fine.
It was the second week of consolidation in the stock market following November's strong rally. The consolidation proceeded in an orderly manner this week with the S&P edging just a tad lower, and never fluctuating more than 6 points a day. That's encouraging. I still expect that we'll move higher before year-end.
About the only big news this week was cold weather. Hard to imagine nobody saw that coming. It is, after all, winter again. I recently wrote an article for CXO Advisory Group on market forecasting in which I showed that most news supposedly affecting the stock market is actually just a close repeat of news we've seen before, and has no lasting impact. Weather is one of the major categories I noted, along with war, natural disasters, and mergers. I'll post the full article later in the week.
Back to our current repeating news. On Monday, a cold front sent oil over $60 per barrel for the first time in a month and January natural gas contracts hit a new high. That seemed as good a reason as any to stop buying stocks for a little while. Yet, what is it that's always brought up as reason to fear rising energy prices? The consumer's ability to buy things. Rather than focus on what's actually happening in stores, the market looks at the arrival of cold winter weather and the attendant jump in energy prices and then projects how it might affect what happens in stores. Let's not do that. Instead, let's look to the stores.
Wal-Mart reaffirmed its December same-store sales guidance of +2-4%. Target said that it expects December sales to be in line with its planned 4-5% increase. December consumer confidence rose more than expected to 88.7 on the Univ. of Michigan Consumer Sentiment index. It was only 74.2 in October. The consumer looks pretty healthy to me.
Oil got over $61 a barrel before heading back below $60 by week's end.
While the overall stock market saw a week of consolidation, we saw a week of advancement. Let's start with some outstanding news.
Our footwear maker is now up almost 52%, making it our best-performing autumn investment so far. The stock rose some 25% last week in a dramatic run that saw 7.1% on Tuesday, 6.4% on Wednesday, and 7.3% on Thursday.
On Wednesday, Piper Jaffray research analyst Jeffrey Klinefelter maintained an "outperform" rating and $30 price target on the stock, expecting to see the company's boots "under every tree" this holiday season based on talks with company management Tuesday.
"We believe the strong demand for [the boots] across a broad assortment of styles is an indication that [they are] becoming a strong brand versus a 'hot' trend in just one boot style," Klinefelter said.
The company is reporting strong sell-throughs across its assortment of slippers, clogs, and boot styles. In addition, the company plans to open a "design studio" in Italy in fiscal 2006 with the aim of adding higher-price-point luxury styles, which Klinefelter believes will reinforce a "halo effect" over the boot brand.
We first bought at $23 on Oct. 5 and then again at $17 on Oct. 28. The stock already hit Klinefelter's $30 target, closing the week at $30.35.
is continuing its gradual recovery. From its 10-K filed Wednesday evening:
We anticipate that the shift in our software business from license sales to subscription sales will continue during fiscal year 2006. More specifically, we believe license revenue will decline again in fiscal year 2006, but the sequential declines in quarterly license revenue should be at a slower pace as compared to fiscal year 2005 and eventually flatten out by the end of fiscal year 2006. We expect growth in subscription revenue over the second half of fiscal year 2006 to offset the declines in license revenue. We believe that our subscription services business has largely stabilized and services and other revenue will grow in fiscal year 2006, led by continued expansion of our consulting services and growth in our procurement outsourcing business. In summary, we expect these trends to largely offset each other, with total revenue remaining relatively flat on a sequential basis for the next few quarters. From an expense standpoint, our recent restructuring activities are largely complete, and we anticipate that costs and expenses over the next few quarters will remain relatively consistent with our costs and expenses in the fourth quarter of fiscal year 2005.
The key to making money in this stock was buying at a very low price, which we did. As you can see, the recovery is not going to be a dramatic, boot-under-every-Christmas-tree kind of jolt. Instead, it's a classic drip higher over time as costs get ordered and sales get realigned. We paid $6 a share on Sept. 13. The stock closed this week at $8.28, a gain so far of 38%.
On Tuesday, Amtech initiated coverage with a Hold and a positive bias. The firm set a $31 price target. That range is looking familiar. Just last week, Citigroup reiterated its Buy rating on the stock with a $32 price target. The Amtech report said they are waiting for some improved efficiencies before buying more of the stock. They see some potential for gross margin expansion from new capacity and expect the company to grow the PC market and finally gain share in the handheld device market.
Analyst reports never fail to raise an eyebrow. Why, for instance, if Amtech believes the stock is heading for $31, would they not buy more now when the price is around $26? They are waiting for improved efficiencies, but apparently they believe those efficiencies will come. Presumably they will bode well for the company and also be accompanied by a higher stock price. This begs the question, what price between 26 and 31 is Amtech waiting for?
As for us, we'll remain content with our entry price of $25.
The off-cue information on this company continued when the news said that the company disappointed on Thursday in its mid-quarter update. It narrowed Q4 revenue guidance to $10.4-10.6 billion. It had previously expected $10.2-10.8 billion, so the mid-point fell from 10.6 to 10.5. Consensus estimates were also 10.6. Does going from 10.6 to 10.5 strike you as cause for panic? Me neither and the market quickly recovered from its initial overreaction. After dropping 2.5% in after-hours trading Thursday, the stock gained 1.5% on Friday. So far, we're up 4.3%.
Our Japan bank finally saw some lift in its stock, rising 4.1% Tuesday and 3.2% Friday. So far we're still down 2.3%. Our computer storage company rose 8.1% Thursday. Last week saw our Japan market position rise 2.2% overall, with a 4.7% rise Friday. So far, we're up 27%.
All in all, very nice in a falling week. Too, our permanent portfolios fared well. They slipped, but just barely, and remain the place to be for the long term. In characteristic fashion, Ultra MidCap bested Ultra Dow. For the week, MidCap fell just 0.3% while Dow fell 1.9%. So far this year, MidCap is +21.2% while Dow is -1.7%. That Max MidCap continues to dazzle.
The Fed meets next Tuesday and much attention will be paid to its take on the inflation picture. It's expected to raise rates by 0.25%. Bill Gross at Pimco thinks the Fed will stop raising rates in January when Ben Bernanke takes over from Alan Greenspan. Mr. Gross projects that the economy will slow to a soft landing in summer of next year due to home prices leveling out. When people can no longer withdraw from their home equity like a giant ATM, cash levels will drop and people will buy less.
Looking for something to do? How about supporting our media stock by seeing The Chronicles of Narnia: the Lion, the Witch, and the Wardrobe? It opened last Friday.
The film cost more than $250 million to make and promote with a marketing campaign designed to woo almost every possible group to the film version of C.S. Lewis' children's books, which have sold some 100 million copies.
is betting this core constituency of fans will see the film and tell their friends about it. The company said its most extensive effort was aimed at schools. Last spring, it sent out 300,000 curriculum guides to try to convince teachers to include The Lion, the Witch, and the Wardrobe in lesson plans.
I grew up loving The Chronicles of Narnia and perhaps you did, too. Now you can see it on the silver screen and let's hope its sales follow the success enjoyed by The Lord of the Rings.
There is one more piece of news this week, I add with a blush. On Monday, CXO Advisory Group LLC published its list of tracked investment experts and the overall accuracy of their forecasts. The list was ranked from #1 to #24. Sitting at #1 with a 74% accuracy was...I.
Number two on the list was Ken Fisher at Forbes with 71%, number three was Marc Faber with 62%, and number four was Jack Schannep at Zacks.com with 60%. Famous names on the list included Don Luskin at Smartmoney (#7, 56%), S&P Outlook (#10, 52%), Jim Cramer at TheStreet.com (#17, 45%), and Jim Jubak at MSN Money (#24, 37%). The average accuracy of the group is 51%. You can see the full report.
As always, it's a pleasure to work hard for you. I'm pleased at this latest sign of our success. It won't be the last.
Right on schedule, November brought the November-December rally we've been preparing for since the end of summer. Some of our purchases were early and we suffered short-term setbacks because of that. Already, however, my initial outlook has proven correct and the profits are mounting.
I'm pleased with results at . We bought at $23 in early October then watched the stock drop some 27% by the end of the month amid dire headlines, poor results, and analyst downgrades. My favorite report on the stock suggested waiting to buy at $5 a share. We did not succumb to the negativity but stuck to our thesis that this is a great footwear company on the rebound. Note the "rebound" part of that. There's nothing to rebound from unless bad news abounds. Thus, none of what transpired in October was shocking to me. It would have been nice to have waited a couple of weeks on the initial buy to get the lower price, but that's a complaint I could have made nearly every week of my investing life to now and one that I expect to nag me until the day I place my last sell order. In other words, one never gets the price exactly right. That's why I so often rely on gradual buys and sells. They take the pressure off, and they came to our rescue in this case. We doubled down at $17 at the end of October, which reduced our average buy price to $20 even. The stock rose 34% in November and put us up 22% so far. Good work.
We also can't complain about . We barely saw any red ink around this purchase. It went up within a few days of buying it and just kept going up -- to the tune of 10.5% last month and 46% so far. I have one 65%-75% gainer each winter and that happy designation appears intended for this stock this year. Last year it was Maxtor (+65%), the year before it was Sun Microsystems (+66%), and the year before that it was also Sun (+72%).
Then there's Japan, the country that can't stop getting things right lately. On Monday, its key stock index rose for the eighth straight trading day to set a new five-year closing high as export-oriented high-tech and automaker issues attracted buying on the dollar's rise to near the 120 yen line.
Every Japanese bank reported excellent results last month. The economy looks stronger week by week. The postal reform is moving ahead. Even the children are gearing up to participate in the global economy: it was reported that 20% of five-year-olds study English. Our market investment was early. Blame that on a bad technical read by yours truly. It turned around quickly, though, and rose 16.8% in November, putting us up 24.5% so far. I expect far more before we're done.
Last month's purchases of ended the week at +6%, +10%, and -0.2% respectively. All fine.
Regarding our computer maker, Amtech issued a report saying that it was the one to own for the next 6-12 months. The firm got it right calling to own Hewlett Packard a year ago. I'm pleased that we're slightly ahead of the game on this call from a firm with an impressive history of calling it right.
Regarding our semiconductor maker, Citigroup reiterated a Buy recommendation and a $32 target. Getting there would put us up 28%.
Our permanent portfolios also gave thanks in November. Double The Dow rose 8% and Maximum Midcap rose 9%. That remarkable midcap portfolio is on track to post its third year in a row over 20%. You can see the results here. While I consider the superiority of this simple long-term approach to beating the market to be one of the best little secrets off Wall Street, feel free to tell your friends and family about it. Before long, expect a fresh book highlighting it from the same fingers that typed this to you.
Sad to say, not everything is going so swimmingly. We're still waiting for last month's investment in to bear fruit. It's down 7% despite reporting excellent results. We'll double down if it reaches $12.
looks to be doing everything right, but eked out a mere 3% gain last month and is still down 9% from our purchase. It announced interesting holiday promotions and began selling the hot Apple iPod. This is definitely the season to be holding a well-positioned retailer and I'm keeping the faith.
I'm watching several positions for possible buys, but will mention just two here. looks ripe for a strong rebound and has already begun rising. The reason is the semiconductor cycle, which has many companies in need of new equipment made by the company. The stock broke through $18 last month and looks headed to $19. I'd like to pick up shares below $18.50, but might end up buying higher if a pullback appears unlikely.
While chip sales are up, prices are down, yet the semiconductor index has risen 17% since November 1. That's a lot of rising on a net profit change of zero. That prompted Goldman Sachs analyst James Covello to write, "Our main takeaway is that the recent semi rally is not justified by any significant fundamental improvement [in the chip market]. Average sale prices remain weak, and we expect continued weakness into 2006 due to excess (factory) capacity and tough (year-over-year) comparisons." It's hard to make a call on this one yet, particularly in light of Citigroup's countervailing opinion shown above, so we'll keep an eye on prices for a while. I feel good holding our semiconductor maker. I'm not sure about this one yet.
We bought CBOT Holdings on October 21 for $108, watched it explode to $134 and then deflate back down in a matter of days, and sold on October 31 for a 1% profit. It then shot back up to $121, making me look like a crusty old worrywart, before promptly crashing a second time to restore my youth. It's now around $95 and not nearly the girl of the ball that it appeared to be after its IPO. The problem is that its crosstown rival, the Chicago Mercantile Exchange, is up tenfold since its IPO three years ago. Everybody hopes that CBOT is the next CME, but it's not quite the broad business that the Merc is. At a P/E of 137, CBOT looks pricey even below $100. However, it's a key player in the fast-growing securities trading business sector and could pull a Google by throwing all reason to the wind and rising several hundred percent on nothing more than technical momentum. "It's hot and getting hotter!" hardly makes for compelling analysis, but has proven time and again to make money in the market. Could this be such an issue? Maybe. It bears watching, so that's what I'm doing. If you'd like to know if and when we buy, please join us. The first month is free.
Let's take a moment to look at the big picture.
In calling for this winter rally, I pointed out several reasons that the economy probably wasn't headed for a recession. Back in September, feelings sagged in light of two Category 5 hurricanes, a high-priced war in Iraq with a cloudy outlook, a Fed that continued raising rates, and expensive oil.
The good news was that energy prices were coming down, real estate was still climbing, corporate earnings were up, and the impact from the hurricanes appeared to be far less than feared by some (though not by me).
So far, the good news is winning.
The last two weeks of November found strength reported in every economic sector. Retail store sales, durable goods orders, consumer confidence, third quarter GDP, and even new home sales were all healthy. With November nonfarm payroll growth at 215,000 and above the average 185,000 monthly gain in the two years before Katrina, almost every part of the economy is looking solid.
Higher interest rates are not dousing the fire.
Consumers are still spending as evidenced by the ringing of holiday registers. The National Retail Federation reported a 22% surge in Thanksgiving weekend sales. Wal-Mart said that November same-store sales will rise 4.3% this year. Shoppers navigated through the crowds taking advantage of early store openings and special deals. The NRF called last weekend's tally, which included Black Friday, a "blockbuster." This season is shaping up to be the second-biggest selling season since 1999, according to the NRF.
Heating bills may be a bit higher this winter, but maybe not. This past Monday the price of crude dropped 2.4%, thereby extending its 19% decline from its August high, while heating oil hit a four month low. Even if prices rise a tad they will nip just a little from the retail environment.
All in all, good job, America. Hurricanes, wars, asset price bubbles, rate-raising Feds all be damned. The resilience of the American economy never ceases to satisfy.
The key component to watch is the Fed. The minutes of its November 1 meeting made clear that it is monitoring energy prices closely as a signal for what to do next with interest rates. If it appears that high energy prices are pushing all prices higher (inflation), then it will continue raising rates. If not, it might hold steady. The former would put the brakes on the stock market. The latter would push the accelerator.
As always, I'll keep watching and let you know how to best position your money.
