Consumers are still shopping despite fuel costs, despite lousy weather, despite sluggish income growth and despite relatively tight (but now loosening) credit. Today’s number (+1.0% vs +0.9%, latest consensus) was broad based, with solid gains in many discretionary spending categories. Retail sales are now almost 9% above their year-ago level. This fits our anchor quite nicely.
With every imaginable headwind about, folks shop anyway. Today’s result does not represent a final spurt, some sort of orgasmic shopping spree before collapse; it represents instead - trend ahead.
Of course we will always have wild cards, some driven by acts of God (tsunami), some by a sub-surface churning and yearning for freedom, suddenly upon us.
The Mid East will remain such an event, providing a potential retardant for US growth. We don’t have a clue re day-to-day price change in crude. We do however understand the dynamics of the situation in this region.
No doubt a complete stoppage of Libya crude delivery has been priced in. But it is more than that. Given the situation as we understand it, there is the risk much more turmoil to come before the we see the day. Stay at the sidelines if this reality will discomfort your investment or planning decision. And above all, ignore authority figures.
Bernanke told the mkt crowd last week - not to worry, higher crude would only cause a problem if extended (implying that it would not be). The IEA told the same crowd the same day that much higher crude prices are here to stay.
They’re both wrong.
Over the intermediate term the course-of-least resistance for crude prices will remain higher. In the end, progress to consensual gov’t in the Mid East means a more manageable energy situation for the West. Hold on in the meantime.
Robert Craven
With every imaginable headwind about, folks shop anyway. Today’s result does not represent a final spurt, some sort of orgasmic shopping spree before collapse; it represents instead - trend ahead.
Of course we will always have wild cards, some driven by acts of God (tsunami), some by a sub-surface churning and yearning for freedom, suddenly upon us.
The Mid East will remain such an event, providing a potential retardant for US growth. We don’t have a clue re day-to-day price change in crude. We do however understand the dynamics of the situation in this region.
No doubt a complete stoppage of Libya crude delivery has been priced in. But it is more than that. Given the situation as we understand it, there is the risk much more turmoil to come before the we see the day. Stay at the sidelines if this reality will discomfort your investment or planning decision. And above all, ignore authority figures.
Bernanke told the mkt crowd last week - not to worry, higher crude would only cause a problem if extended (implying that it would not be). The IEA told the same crowd the same day that much higher crude prices are here to stay.
They’re both wrong.
Over the intermediate term the course-of-least resistance for crude prices will remain higher. In the end, progress to consensual gov’t in the Mid East means a more manageable energy situation for the West. Hold on in the meantime.
Robert Craven
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