Explaining Why Retail is Up When Sales Taxes are Down (Hint: Retail is Survey, Sales Tax is Real)

A Recovery Conundrum: retail surveys say up, tax collections say down. Excuses were made, that Walmart results weren't included, or that better results would come in Dec or Jan.  No dice, Walmart reported weaker holiday sales, and Dec retail sales fell. 

A second shot at this: unemployment is up but the employed are spending again. A Tale of Two Economies. No dice. They would have to be spending a lot more to make up the huge drop in employed, down 8.4M; or to use the broader measure of unemployment, a 17% unemployment rate. This argument is made even more implausible by the dramatic increase in savings.

Mish explains all: the retail data are based on bogus surveys:

The published numbers are based on "same store sales". Think about all the companies that have gone bankrupt. Take Circuit City for an example. Gone. The doors are closed. Some of those shoppers went to Best Buy where same store sales rose.

Also remember that Best Buy and many other chains closed weak stores. The result: same store sales went up again.

Government methodology for reporting retail sales is based on sampling stores in existence. It does not factor in stores not in existence but recently were. Nor does it handle closed stores when the chain is still doing business.

Believe the sales tax numbers. They are real. As of Nov 2009, no State had any growth; as of Dec, 13% had growth (I guess that means 7 if DC is included), but this does not include big States like NY and TX. This might include Cal in the growth side, but it doesn't help - Cal raised its sales tax rate which increased receipts, but underlying sales were down.

Hard to have a real recovery when home sales are down, car sales are down (ok, blame Toyota and weather), and retail is down.

Comments

[Bird]

DG, the 64.08 high on IWM is a potential lock. May not hold. But I would watch this level.

[vipul garg]

i think such clear and weak data makes a bullish case .
economy has to lag the market by a substantial period.
the bullish camp should be worried if economy was improving rapidly and market wasnt rising.

[Roger D.]

The Dow fractals?

http://www.screencast.com/users/fast996/folders/Default/media/96a69f40-f06b-4c48-b6d0-0f7d80df644f

[DG]

Bird,

I was looking at 64.04 as a "line in the sand". I don't like when we go above those levels even by a .01, but the way we got there with a big gap up makes me think that the fact we went to 64.08 is going to be within the "margin of error".

[Bird]

DG, I am looking for a w-2 opportunity on the 10 minute scale to trade it. If you get a chance to go in, what is your trigger/set-up?

[DG]

"If you get a chance to go in, what is your trigger/set-up?"

I need a "larger and faster" drop than any since the Thursday low.

[Hank Wernicki]

Would not want to be Long near the Close ( as of now )

Hank

[Bird]

DG First level obviously did not hold. No harm no foul. But we are still on the cusp of the 60 minute time mark. 11:30 bar would be ok, as would 12:30. Maybe for you tho you are beyond your line in the sand?

[Hank Wernicki]

Would not want to be Long near the Close ( as of now )

Hank

posts don't show up ...... maybe its my browser ?

excuse the 2nd post if it shows up again Yelnick --- delete it

[Roger D.]

The "Big Picture" In The Dow

Roger

http://www.screencast.com/users/fast996/folders/Default/media/7cd2bcd2-9d0d-4951-9236-512fdee85be6

[Roger D.]

The Big Picture in the Dow

Roger

http://www.screencast.com/users/fast996/folders/Default/media/7cd2bcd2-9d0d-4951-9236-512fdee85be6

[DG]

"Maybe for you tho you are beyond your line in the sand?"

No, the way it works is that the entry point moves with the market.

[anonymous]

How's P3 working out for everyone today?

[Roger D.]

3M Chart

http://www.screencast.com/users/fast996/folders/Default/media/ba9dfc5f-8985-44c1-ae5d-60ee64b501fb

[JT]

CLF has rallied from $39 to over $58 in the past month... Anyone catch that move?

[Simpleton]

Didn't catch it sorry to say. Assume you did? Are you making a recommendation to go long now?