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Five Things You Need to Know: Retail Sales, Consumer Sentiment, Household Debt, Now We're All High, Chocolate Beer


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. TV Economist and Consumers Not Buying Consumer Weakness. Also, Retail Goods.

At least one television economist Friday morning said he's not buying the story of consumer weakness following the monthly Retail Sales report. Meanwhile, the report showed retail sales fell 0.4% overall, demonstrating that consumers aren't buying the story of consumer weakness either, along with other assorted retail goods such as gasoline.

  • Ho ho, relax, just kidding. It's not so bad as all that.
  • Although the median estimate for Retail Sales according to a Bloomberg survey was for a rise of 0.2%, the headline wasn't a disaster once the decline in gasoline store sales is factored out.
  • Gasoline sales were down 9% even as the Labor Department reported imported petroleum prices fell 10.3% in September, the largest drop since December 2004.
  • Excluding gasoline sales, retail sales rose 0.6%.
  • Sales excluding autos, gasoline and building materials increased 0.8 percent in September, the most since January and twice as much as August.
  • Closely tied to Retail Sales, however, are expectations for future spending as reported through the University of Michigan Confidence Survey (See Number 2, below).

2. Consumer Sentiment Survey Reveals Consumers Anticipating Huge Powerball Windfall

The University of Michigan Consumer Sentiment Survey came in at 92.3 in September, well ahead of expectations for an increase 86.4.

  • Consumers judged the year-ahead prospects for the national economy much more favorably, as expectations for inflation, unemployment and interest rates all improved in the latest survey, the University of Michigan report said.
  • Home buying attitudes, however, remained at the lowest level recorded since 1990.
  • "Consumers held a much more positive outlook for the overall economy as well as prospect for their own financial situation, despite more negative evaluations of their current financial situation," according to Richard Curtin, the Director of the University of Michigan's Survey of Consumers.
  • Interesting to note was the difference between the Current Conditions Index, which posted its 12th largest monthly loss, and the Expectations Index, which posted its sixth largest monthly gain.
  • The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, rose to 78.2 in September from 68.0 in August and 63.3 in September of 2005.
  • In contrast, the Current Economic Conditions Index fell to 96.6 in September 2006, down from 103.8 in August and 98.1 in September 2005
  • Meanwhile, in a separate Minyanville future economic expectations survey:
    - 53% of respondents reported they expect the economy to improve sharply for the remainder of the year following the third race today at Belmont.
    - 26% reported they expect the economy to improve after their third cocktail.
    - 19% reported feeling some numbness in their right arm.
    - 2% reported they just enjoyed their closest shave ever.

3. America Vows to Pay Off a Few Bills Once Dow Hits 12,000

During a television commercial between the sixth inning of game one of the National League Championship Series last night, Americans everywhere quietly vowed to themselves to pay off some bills once the Dow reaches 12,000.

  • The Federal Reserve yesterday updated its quarterly measure of household debt service, which now shows American household debt service ratio reached a new record high in the second quarter of 14.4%, up from 14.3% in the first quarter, and up 13.5% from the second quarter of 2004.
  • The financial obligations ratio, which adds auto lease payments, rental payments, homeowners' insurance and property taxes rose to 19.23% from 18.4% two years ago.
  • Debt burdens in the Consumer category, which only includes payments on consumer debt and auto leases, actually fell slightly from 6.49% in the first quarter to 6.47% and 6.61% in the fourth quarter of 2005.
  • That was the third quarterly decline, however, it was more than erased in the homeowners Mortgage category as the debt burden rose to 11.6% from 11.47% in the first quarter and 10.1% two years ago.
  • Meanwhile, Americans quietly vowed to themselves last night that this time, instead of using the run-up in the Dow to buy clothing, furniture and appliances they really would use it to pay down some debt.

4. Now We're All High

First the Dow, then India's Sensex, now the London FTSE... we're all really high now!

  • The Dow is at new all-time highs and quickly closing in on 12,000, the most important psychological and round number level since 11,000, and a full 20% more important than the critical, psychologically important 10,000 level.
  • Six years ago, when the Dow first crossed the psychologically critical 10,000 level, it was widely noted that compared to the 5,000 level the 10,000 level was, at a minimum, twice as important to the economy.
  • Meanwhile, India's Sensex Index recorded a new all-time high today, closing at 12,736.42, surpassing the old high set back in May.
  • And elsewhere, London's FTSE Index recorded a new five-year high today, reaching 6,143.5, its highest level since February 2001.
  • "There is talk about 7,000 by the end of the year but we would say it looks optimistic at the moment although prospects are still good," Henk Potts of Barclays told the BBC.
  • We would note that, should it occur, a move to the critical 7,000 level for the FTSE would mark a nearly 14% gain between now and the end of the year.
  • As well, it would represent a crucial psychological level at least twice as important as the 3,500 level first surpassed in September 1995.

5. Miller Unveils New Beer Targeting the "Don't Care Anymore" Demographic

Milwaukee-based Miller Brewing Co. is releasing a new "chocolate" beer across the Midwest in time for the holiday season, according to the Milwaukee Business Journal.

  • Miller Brewing Company is releasing a new chocolate beer in the Midwest.
  • The beer, called Classic Chocolate Lager, is a hand-crafted specialty beer that won the gold medal at the 2005 Great American Beer Festival in the Herb and Spice Category under the name Temptation Bock.
  • The beer is brewed with six different malts, including chocolate and dark chocolate malts.
  • Classic Chocolate Lager will be packaged in a four pack of 12-ounce bottles with a suggested retail price of $5.99.
  • Unlike the Miller Lite brand, targeting NASCAR fans and a younger, sport-inclined demographic, or High Life, targeting 21-35 year-old hipsters, the new chocolate beer is aimed at those who have given up and just don't care anymore.

Two great tastes, one desperate choice.

No positions in stocks mentioned.

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