Wednesday, June 13, 2007

Are Retail Sales Really Up?

I've got a bone to pick. ...excuse me if I pick it to death.

From Bloomberg

The retreat in 10-year Treasury yields from yesterday's five-year high eased concern that rising borrowing costs will reduce takeovers and corporate profits. A Federal Reserve report showing a pickup in economic growth helped stocks add to gains sparked by the steepest increase in retail sales in more than a year.

``Positive retail sales numbers improve the prospects that the second quarter is going to be stronger than the first, which is what investors are looking for,'' said Steve Neimeth, who manages about $850 million at AIG SunAmerica Asset Management in Jersey City, New Jersey. ``With bond yields down, that should add more support to the market.''

Hmmm... For the past week we've been told by the "talking heads", and their poison pen brethren, that Treasury Yields have been rising because of "the increasing prospects for global economic growth". Today a Federal Reserve report showing a pickup in economic growth appears and Treasury Yields drop? Any reasonable individual, or 5th grader, would have to reason, following the release of a "government report" that claims the "speculation" about a pickup in economic growth is justified, that bond yields would keep rising. But they did not.

Why not? I'm guessing because the babble these media pawns have been spewing about "economic growth" is all blah-blah. It's in the vested interests of the puppet masters at the Fed and the US Treasury to continually make the populace believe that "things are better than they seem". To be sure, the "Global Economy" is growing, quite well in fact. The US Economy, on the other hand, is not. Despite every rigged statistic, every upbeat sound bite from the good Capt. Bernanke, the US Economy is in the crapper.

The real reason the Treasury bonds are tanking is because "world investors" are losing faith in the "good faith and credit of The United States". That is, they see the US Dollar for what it is: a bad hair piece covering up the bald truth...THE UNITED STATES IS FLAT BROKE.

"But retail sales were up the most in over a year." Comes a voice from the herd. Yeah right, retail sales were up...Bullshit! Let's go to the source of these "retail sales numbers" and shed a little light on 'em for all the herd to see.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $377.9 billion, an increase of 1.4 percent (±0.7%) from the previous month and 5.0 percent (±0.7%) above May 2006. Total sales for the March through May 2007 period were up 4.2 percent (±0.5%) from the same period a year ago. The March to April 2007 percent change was revised from -0.2 percent (± 0.7%)* to -0.1 percent (± 0.2%)*.

My first thought after reading this blather was: "...they've adjusted the number for everything BUT inflation..." Then I noticed that the margin of error for this advance estimates of U.S. retail and food services sales for May is + or - 0.7%. Advance estimate? Margin of error? Can you say "shot in the dark"? And people "trust" the accuracy of these government reports? Then I started thinking about what this "report" actually measures. U.S. retail and food services sales... So somewhere in a high tower in la-la land a group of government surveyors "estimate" how many dollars were spent each month. Seriously, they're really just "guessing":

The advance estimates are based on a subsample of the Census Bureau's full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms. Responding firms account for approximately 65% of the MARTS dollar volume estimate. For an explanation of the measures of sampling variability included in this report, please see the Reliability of Estimates section on the last page of this publication.

The key though to understanding this report and giving it some face value is this: Without adjusting for inflation the number is a bald faced lie. If retail and service prices are rising MoM and YoY, any 5th grader could quickly figure out that "Dollars spent" would rise commensurately. I've worked in the retail grocery business my entire adult life. Every year, month after month, I hear the same thing, "...sales were up 15% over last year...", or some such claim.

And I always say to the boss man when he boasts like this, "That's great, but how much were food prices up in the last year? Were our 'sales volume' numbers up as well?"

"Greg, why do you always rain on my parade? It's all about 'sales growth' baby. How many times do I have to tell you that?"

"Yes, sales growth. We're rockin' boss!"

But have "sales" really grown? Or do things just cost more? The answer is simple...they cost more. Need proof?

Sales would have been strong even without last month's big jump in gasoline prices, which saw prices top $3.20 per gallon. Excluding sales at gasoline stations, overall retail sales would still have been up 1.2 percent.

0.2% of the "unexpected" rise in retails sales in the month of May came from an increase in the "price" of gasoline. How much did the increase in the cost of everything else attribute to the "increase" in retail sales. Did we sell more stuff, or did it just cost more?

I'm anxious to compare this Friday's May CPI numbers to May's retail sales numbers. But then again, those numbers are rigged to...

Resilient bounces in Gold and Silver were once again swiped by dem Rat Bastids on the COMEX as both metals promptly faded after the 11AM close of the LME in London. I could retire if I'd shorted both metals at 11AM over the past week. These cocky vermin need a royal ass whuppin. Of course, this 11AM dump is getting so predictable now, I wouldn't be surprised if traders are just cutting and running in anticipation of these daily Rat Bastid raids. Perish the thought.

Technical repair remains for both metals. Bullish Divergence has appeared on the internal indicators of the 'hourly' chart above. An intra-day test of Friday's low has printed. But to confirm Friday's low we still need to see Gold close above 655 and Silver above 13.26.

Support at the 50 WEEK moving average of both remains key:

Gold: 640

Silver: 12.71

Questions and comments are welcome by emailing me at:

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