Economics and Investing: Shocked and Spineless
By Adam Lass
A Taipan Financial News Market Report (Sign up Free!)
In this Article:
Retail sales are joining auto sales in the toilet.
Inflation is finally making its impact felt.
The Fed is not stepping up with solutions.
---------------------------------------------------
Economics and Investing: Shocked and Spineless
Don’t let them tell you this was a surprise. Anyone who can count to 20 without taking their shoes off should have known it was coming.
I am referring to the disappointing sales figures coming out of Wal-Mart Stores (WMT: NYSE), J.C. Penney (JCP: NYSE) and Federated Department Stores (FD:NYSE). It appears that (try to feign shock now) sky-high energy prices are starting to cut into these guys’ bottom lines!
“Oh wait: There were other reasons too!” they cavil. April was cold in some places and rainy in others.
Rain in April? What a shock! So sell slickers and umbrellas.
They’ve been trying to foist these excuses on us for most of winter. It snowed, it was cold, it was dark out, shoppers couldn’t find their mufflers. By late spring, it is facile at best to assign blame to the weather. Face it: the oil companies are eating retail’s lunch. And their breakfast and dinner, too.
Economics and Investing: Oil Companies are Robbing Retail Blind
I have stated this repeatedly: the well-bandied, indeed, overused phrase “the oil companies are just printing money” simply isn’t true. Every time Harry and Harriet Homeowner open a 50% higher electric or heating oil bill, every time Carl Commuter gasses up at $3 (or $3.25, or even $3.50), every time Susan Shopper cringes at the cost of fresh vegetables for the family table, the money they are so painfully paying has to come from somewhere.
And now we see quite clearly where that somewhere is coming from. It is coming from Ford Motor Company (F:NYSE) and General Motors (GM: NYSE), who have reported sales ranging from slow and sluggish to deader than the proverbial doornail.
------------------------------------
Read on… Get Market Report everyday! Sign up Free!
------------------------------------
Americans have looked rising costs in the eye and decided that the old wagon can probably get them through the summer after all. What the heck, clean it up and put on a fresh set of cheap tires, and maybe it will last another year!
Economics and Investing: Hard Choices for Shoppers…
That was the easy decision. Now come the harder choices. Now we see Mom and Dad choosing whether or not to buy a second pair of blue jeans or name-brand O.J. Now it’s generic cornflakes instead of a new prom dress.
“Suddenly” the automakers, grocery store chains and chain retailers cry in pain, and corporate America looks to the government for help. Well guess what? The cavalry isn’t coming this time.
There is one department of the government whose sole job is protecting you from this. And it is sadly AWOL. The Federal Reserve has two missions: Protect the dollar by preventing inflationary erosion at the top… and dump cash on an ailing economy at the bottom.
Economics and Investing: And Harder Choices for Washington
By stalling as long as it has, it is now facing two terrifying prospects. It can stop this burgeoning inflation by raising rates now before it becomes so entrenched that it takes decades to solve. Doing so will tip an economy already at a virtual standstill into a (hopefully short-lived) recession. But once done, we can cycle through the pain and back into daylight and better days.
Or it can wait. And wait, and wait some more, until we are mired in a hideous stagflation cycle akin to the one that afflicted four different American presidents in the latter days of the 20th century, and required the sort of medical attention that comes darn near killing the patient.
The first solution takes the sort of backbone that used to come in men named Morgan or Volcker or even Greenspan. Unfortunately, we see no sign of such fortitude these days.
***
Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength’s proprietary analysis system, Adam’s expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
Did you like this article? Get Market Report everyday! Sign up Free!
Related Articles:
Economics and Investing: Domestic Auto Sales Slump
Economics and Investing: Unanimous Expectations
Economics and Investing: It's Elementary, Watson… Buy CVX
Related Resources:
Economics and Investing: Retail eats a bullet
Economics and Investing: Automakers try to buy a break
Economics and Investing: The Fed sees little and says less
| |