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Santa Claus Is Targeting CVS

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If most Americans do their upcoming Christmas shopping at CVS, I don't think I'm gonna like it.

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During a Friday morning interview by CNBC's Bob Pisani with a NYSE floor broker, the latter gentleman suggested that things were truly looking up for the equity markets because the Morgan Stanley Consumer Index (CMR) was one of the key leaders during the rally of the past month. This, again according to the broker, was clear evidence that consumer discretionary spending was not petering out and the American consumer was not about to abandon ship.

I arbitrarily subdivided the components of the CMR in five groups by business similarities, with the corresponding aggregate weightings in the Index:

Altria (MO), Anheuser-Busch (BUD), Coke (KO), Colgate-Palmolive (CL), Conagra (CAG), CVS (CVS), General Mills (GIS), Kimberly Clark (KMB), McDonald's (MCD), Pepsico (PEP), Procter & Gamble (PG), Safeway (SWY), and Walgreens (WAG): Weighting: 44.84%

Abbott Labs (ABT), Johnson & Johnson (JNJ), Medtronics (MDT), Merck (MRK), and Schering-Plough (SGP). Weighting: 16.98%

Emerson Electric (EME), WW Grainger (GWW), Newell Rubbermaid (NWL), Sealed Air (SEE), International Flavor & Fragrances (IFF). Weighting: 16.25%

Carnival Cruise (CCL), Disney (DIS), Sysco (SYY), Walmart (WMT) and Avon Products (AVP). Weighting: 15.62%

American International Group (AIG) and Automatic Data Processing (ADP). Weighting: 6.20%.

Now: I am certainly not on the cutting edge of the jet-set lifestyle, but I feel comfortable stating that most people over 25 (even the dull subset of the 40 something, kid-raising generation) has yet to adopt a keg party in a smoke infested house, followed by a stomach settling visit to McEddies for some grease and soda, and a cholesterol controlling double dose of statins (MRK/SGP), as pulling a "discretionary all-nighter."

Nor do most people enjoy some R&R by attending Tupperware parties (NWL) where you can discuss the latest flavor of bran and/or Preparation H, as a necessary precursor to an implantable defibrillator (MDT), a coated stent implant (JNJ), and a portable oxygen tank (SEE).

Perhaps the floor broker was trying to communicate to the audience that Americans are turning on Geico's Gekko and AIG will be the natural beneficiary, or that Walmart's next advertising campaign will include a "get dolled up (AVP/IFF) and come snag the latest delicacies (SYY) at our in store restaurants" theme. Certainly, he could not have been suggesting that a Disney (DIS) vacation or cruise counts as "discretionary" unless the adult participant has enjoyed a lobotomy, or it is otherwise considered "discretionary" to watch your children grow up seriously disturbed and in need of years of psychotherapy. Who knows, I am not really sure what the floor broker was thinking when he associated the CMR with discretionary consumer spending.

I do know, however, that if most Americans do their upcoming Christmas shopping at CVS, the equity markets are not going to get a great boost of confidence from that. Now, if you'll excuse me, I just saw an ad in the WAG Sunday insert for brand new 19" color TV's for just $29.99. That's what I call a shopping spree!!

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