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THOUGHTS ON THIS MORNING’S DATA

13 October 2009 by TPC 6 Comments

Stocks are trading lower this morning after disappointing earnings from JNJ and a downgrade of Goldman Sachs by Meredith Whitney. JNJ repeated the trend that we’ve seen in recent earnings reports where revenue were lacking. Shares are trading down by over 2%. A prudent downgrade of Goldman also has investors worried about the market’s overall valuation. The PE expansion over the course the last 6 months is one of the fastest on record.

In other news the Rebook and ICSC both posted year over year gains. The Redbook came in at 0.6% while the ICSC came in at 1.0%. The consumer appears to be gaining to a little traction over the last few weeks. This bodes well for tomorrow’s Commerce Department report on retail sales.

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6 Comments »

Uformula said:

Would comparisons to last year on these types of metrics be imprudent? Last year the bottom almost fell out of the financial system and the economy froze. We should surely see improvement in YoY. What’s the WoW doing?

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TPC Reply:
October 13th, 2009 at 9:01 AM

ICSC +0.6% WoW. The YoY comps are very easy, but then again that’s what this whole rally is based on – not that things are getting much better, but just that they’re not as bad….

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# 13 October 2009 at 8:57 AM

Greedsgood said:

re: Retail sales

I found this very interesting. Despite the 30% decline in the S&P500 from the 2007 peak, the S&P500 retail/discretionary index (XRT) is off only around 12% from peak. I find this shocking given the deterioration in the consumer over the last two years – unemployment, wealth, credit availability, etc. The only bright spot I can point to is a weak dollar making exports more attractive.

TPG – I’m thinking a short XRT / long XLV (healthcare) looks prudent. Your thoughts on this?

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TPC Reply:
October 13th, 2009 at 9:20 AM

Personally, I am having a hard time justifying short positions here. The XRT is essentially acting like a 1.4 beta version of the S&P. Keep in mind if fell more than 70% from peak to trough. If you are betting on a decline in the XRT you are betting on a decline in the whole market and I can’t say that I feel great about that right now.

I like the hedged idea, but short equities is not my hedge of choice right now.