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For the Real Retail Story, Look to Insiders

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Perhaps it's time to follow the leaders out of these stocks.

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The October retail sales numbers released this morning present a very mixed bag. Excluding autos, strategists say they looked mediocre at best. More to the point, the recent decision of corporate insiders to dump shares aggressively signals that investors might want to think twice before committing capital to this sector.

Retail sales jumped
1.4%, beating the 0.9% increase forecast by Wall Street. But excluding auto sales, retail demand increased just 0.2%, undershooting forecasts of a 0.4% rise, according to Briefing.com.

Offsetting the headline beat, Uncle Sam also had this bit of ugly news: September sales revised down to a 2.3% decline versus the 1.5% drop initially reported.

In October, sales for motor vehicles and parts dealers jumped 7.4% after a 14% nosedive in the prior month. Sales also increased at clothing, health, and personal care stores, and restaurants. On the flip side, furniture, electronic, and building supply dealers showed declines.

For reaction to the news, we called up Joseph LaVorgna, chief US economist at Deutsche Bank, who described the data as "decent."

"The consumer won't be a driver of the economy," the economist told us in a brief chat. "I would say that we are still looking for a recovery that falls short of what we normally get. There are just general structural and financial headwinds that keep consumer spending from growing as fast as it normally does."

Constraining consumers spending, of course, is this lousy labor market. It's hard to blame your neighbors for not spending as freely at the local mall these days, with the unemployment rate at 10.2%.

Just how bad is it going to get?

David Rosenberg of Gluskin Sheff says unemployment will rise to between 12% and 13%. Maybe you think the Bear of all Bears is too pessimistic. But even relative optimists don't paint a rosy colored picture. Mark Zandy of economy.com predicts that unemployment hits 11% by the middle of 2010.
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No positions in stocks mentioned.
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