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@theMarket: Spain Rains on U.S. Parade
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I guess when it rains, it pours, at least when it comes to bad news in the stock markets. European Central Bank President Mario Draghi added to investor worries by expressing his concerns of future inflation and was therefore less than anxious to provide any more financial stimulus to the European crisis.
The justification for the recent European stock market rally has been investors' belief that central bankers stand ready to flood the markets with more and more money at the slightest whiff of additional problems. Draghi's remarks, coupled with the Spanish bond auction, did not play well among investors.
On this side of the pond, the Fed's meeting notes released on Tuesday afternoon indicated that unless unemployment and the economy take a sudden turn for the worse, investors should not count on further easing by our central bankers.
Oh me, oh my, lions and tigers and bears!
As I have reminded readers several times in the last month or two, this rally has been fueled by the conviction that the Fed will "soon" announce QE III. Tons of newsprint has been devoted to exactly when this will occur. The latest date pontificated by the most influential brokers is "no later than June." It is therefore mystifying that only two of the 12 FOMC board members support further easing at this time.
Those who have been following my advice have already raised cash, sold their most aggressive stock holdings and are therefore perfectly positioned to take advantage of this pull back.
"So how low can we go?"
It was the first question I received this week from readers.
The short answer is 5-8 percent. That would push the S&P 500 Index down to the 1,310-1,350 level. In the scheme of things that is not much of a drop given the 11 percent rise since the beginning of the year and 20 percent rise since October, although any loss is painful for investors. At that point, I think the market would more accurately reflect the present state of the economy and its prospects.
There is some discussion among economists, however, that the spate of good economic data we have been experiencing lately has been "front-end loaded." As a result of an abnormally warm winter and spring in two-thirds of the country, economic activity has been bunched into the early part of the year and we may see a slowdown as we enter the summer months.
I have maintained that the markets have been priced to perfection and that any bad news would have an inordinate impact. We will have to watch the economic data closely over the coming months for any clues to address those front end concerns. In the meantime, be prepared for some choppy action and potentially more downside this month in the markets.
Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.
The Independent Investor: Retailers' Easter Baskets Full
 "... He's got jellybeans for Tommy,Colored eggs for sister Sue, There's an orchid for your Mommy And an Easter bonnet, too." "Peter Cottontail" by Steve Nelson & Jack Rollins
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This year's early spring could mean a little extra cash in retailers' Easter baskets. Despite gasoline prices approaching $4 a gallon, consumers are shopping for everything from hams to hydrangeas.
Overall revenues are expecting to increase by 11-14 percent. That would make three years in a row in which retail revenues have risen in the March/April period. The unseasonably warm weather we have been enjoying has helped chain store sales post their best weekly gains in more than 11 years. Easter also happens to have arrived 16 days early this year. The combination of the two developments could mean as much as $16.9 billion more this year, according to the National Retail Federation.
Easter is the 4th largest spending holiday in America after
Christmas, back-to-school, and only slightly smaller than Valentine's Day. The average consumer is expected to spend $145.28 (up 10.9 percent from 2011) and 25 percent higher than the dark days of 2009. The average male shopper will outspend women, with shoppers in the 25-44 years age category spending the most.Almost 19 percent of Americans will shop online this year while as many as 46 percent of shoppers will at least use their mobile devices to comparison shop and/or research product and retailer information. Yet, Americans are still looking for a deal. Over 63 percent of spenders are heading to discount stores as their first stop for Easter purchases, followed by department stores (42 percent) and specialty stores (25.4 percent)
My first stop will be at the supermarket, where I will pick up a free turkey or ham as a result of accumulating $300 in shopping points over the last two months. It is no surprise to me that food is the top category of spending for Easter and Passover with 87.7 percent of shoppers buying $5.11 billion in ham, lamb, turkey, and fish with all the trimmings. Ham prices have been higher than usual over the last two years, thanks to high feed costs. A typical ham is selling wholesale for 75 to 80 cents per pound this spring, well above the 55 cents per pound it has averaged for the previous five years.
Candy is also a big item. Easter comes in second after Halloween as the top candy selling event of the year, according to the National Confection Association. We will spend $2.346 billion to fill our children's Easter baskets this year, spending an average of $20.35 each for sweets. Flowers and greeting cards on the other hand, while experiencing healthy sales, are not as important during this holiday. Still, Hallmark Cards reports Americans will send $57 million greeting cards this season, which makes Easter the fifth highest holiday sales period for them.
More than 7,500 warm temperature records were set last month. The warmest March on record was set for Chicago, Oklahoma City, Milwaukee, Detroit, Kansas City, Nashville, Indianapolis and Tampa, while it was the second warmest month in the history of New York City and Philadelphia. The warm, dry weather in two-thirds of the country spurred additional sales in a host of product lines. Spending for lawn and garden supplies was up 39 percent in March over last year. My wife, Barbara, had a hard time buying a rake at our local Tractor Supply store because the sales clerk said they had been sold out weeks before.
Spring clothing sales are also benefiting from the demand for new Easter outfits, while young and old alike are shedding overcoats and scarves to hunt for that perfect pair of shorts or tank top.
All in all, Easter this year should be gangbusters. What retailers worry about now is whether the strong sales now are only pulling demand forward. Will the heavier spending carry over into the summer or will shoppers, having depleted their spending limit, simply put their hands back in their pockets until the fall? I suspect additional consumer spending will depend upon how strong the economy will be and how fast unemployment will fall during the next several months. In the meantime, I wish you my readers a Happy Easter and Passover.
Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.
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