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Five Things You Need to Know: Inside Retail Sales, Calpers Gets Wind of Commodities Bull Market, Ole', Stop Hurting Yourself China, Fighting the Global War on Tourism


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. Retail Sales

Retail sales for August grew unexpectedly led by a rise in, of all things, sales of automobiles. That's a good thing, right?

  • Expectations for August were for a large drawdown in auto sales, which in turn would pressure retail sales but Autos surprised on the upside, actually up 0.4%.
  • For the month retail sales came in 0.2%, far ahead of expectations of a decline of 0.1%.
  • But inside the numbers released from the Commerce Department were some rather ugly things as well.
  • Gasoline station sales declined significantly (-1%) due to falling demand.
  • More importantly, clothing and electronics sales came in far weaker than most expected.
  • Clothing and electronics, both of which were expected to rise by most economists given the back-to-school season and a number of states offering sales tax incentives, declined a surprising (-0.3%) and rose a meager 0.1%, respectively.
  • As well, and less surprising, furniture and home furnishings stores sales fell (-0.3%).
  • The weak clothing and electronics sales, combined with the falloff in gasoline demand, suggest the consumer cutback may be far more significant than economists have until now believed.
  • Expect to see cuts forthcoming from economists in real consumer spending growth as a consequence of this.

2. Calpers Gets Wind of Commodities Bull Market!

The California Public Employees' Retirement System, the largest US public pension fund, could take its first direct stakes in infrastructure projects such as oil depots and orange groves as part of a radical change in its commodity investment strategy unveiled this week, the Financial Times reported.

  • The shift, aimed at diversifying Calpers' $208bn portfolio, will take the fund into direct commodity investments previously regarded as too speculative.
  • Calpers executives this week stressed the fund would not follow hedge funds and other short-term investors that have been active traders of physical commodities and derivatives.
  • Instead Calpers will spread its investments among commodity futures, direct involvement in infrastructure projects – which could include oil storage facilities and orange groves – and companies affected by commodity prices such as rail and road operators, the FT reported.
  • Russell Read, Calpers' recently appointed chief investment officer, told the FT that the new strategy would lead to a sharp increase in the commodity exposure across the entire spectrum of the funds' investments in both the public and private markets.
  • Can you show us that CRB Index chart again?

3. Ole'

The U.S. Federal Reserve may need to raise interest rates again to temper inflation at the same time as a housing slowdown threatens growth, the International Monetary Fund said, according to Bloomberg.

  • "Even as the economy slows, inflationary pressures are rising,'' IMF Chief Economist Raghuram Rajan told reporters in Singapore after the IMF released its semi-annual economic outlook, according to Bloomberg.
  • Rajan then delved into the key risk to the economy that Fed speakers such as Janet Yellen have alluded to recently: "The concern remains that a sharp adjustment in the housing sector would generate strong headwinds for the U.S. economy."
  • Rajan added that the housing slowdown is "well and truly here.''
  • And certainly consumer spending could be undermined by the housing market (see Retail Sales, above).
  • Everything seemed to be going normally in the Rajan interview until suddenly he pulled out a Spanish-style matador's hat, performed a little pirouette, waved a red cape and said, "The Fed may soon be on the horns of a dilemma and monetary policy will need to be skillfully managed if the economy is not to be gored.''
  • Horns? Gored?
  • To that we can only say, "Ole'"!

Federal Reserve Chariman Ben Bernanke
warily eyes the U.S. economy.

4. This is Going to Hurt You More Than it Hurts Us

Treasury Secretary Henry M. Paulson Jr. said on Wednesday that China is only hurting itself with its economic policies, the New York Times reported.

  • Treasury Secretary Henry M. Paulson Jr. said on Wednesday that Chinese leaders were imperiling their own nation's future by engaging in policies that Americans and others see as unfair.
  • China, you're just hurting yourself, Paulson said.
  • After all, there is nothing we, as Americans, would like more than to see China stop this self destructive behavior and rise up to be the gigantic, global powerhouse with a population that dwarfs ours and the natural resources and political might that goes along with leveraging the newfound economic might of more than a billion people into a full-on empire that is capable of challenging any nation that dares pursue political or economic goals that run counter to the further strengthening and maintenance of the empire that we know China can one day be.
  • Please China, it hurts us to see you hurt you.
  • One day, perhaps when you're the world's greatest superpower, you'll understand this.

5. Global War on Tourism

As international travel booms, the United States is fast losing market share, the International Herald Tribune reported.

  • Since 2000, international travel globally has grown nearly 20 percent; in the United States it has barely budged, the IHT reported.
  • Of 808 million international travelers in 2005, only 6.1 percent traveled to the United States, putting us behind France and Spain.
  • A June survey found that 77 percent of international travel agents polled said the United States was more difficult to visit than other countries.
  • "Flying into Kennedy is like flying into a third world country," Smedes Rose, a travel industry analyst at Calyon Securities in New York, said. "It's pretty awful."
  • Look, here's where I draw the line, folks. These namby-pamby complainers can say whatever they want about the strength of our borders, but the fact remains we, as a country, are committed to keeping tourists out of the U.S. and protecting our citizens from any potential future acts of tourism. What is so wrong with that?!

Editor's Note: Sorry, we have to interrupt and stop this nonsense right now.

Editor: Kevin.

  • I thought the whole point of Homeland Security was to block tourists from entering in the first place!

Editor: Kevin!

  • People, in case you haven't heard, we are engaged in a global war against tourism!

Editor: KEVIN!!!!

What?! What?! I am in the middle of Five Things, what do you want?

Editor: Kevin, it's the global war on terrorism, not tourism. We want to keep terrorists out of the country, not tourists. Homeland security is in charge of fighting terrorism, not tourism. The story is about the decline in tourists to the United States, not terrorists.

Oh. Ok. Well, just change the words around a bit and we're good to go.

No positions in stocks mentioned.

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