Caught up in all the hype about the recession being over and stocks going to the moon is the fact the consumer has disappeared. It's understandable, like Pavlovian Dogs we have gotten conditioned to the credit bubble business cycle. Downturns are shallow and to be used as an opportunity to reload the shelves with cheap...errrr... inexpensive Chinese goods. It is natural for us to assume that economy is going to continue racing forward in 2010. I truly want this to happen, that would be fantastic but this little thing called reality is anchoring to me sober view.
Christmas is going to be rough for the retailers this year. The have put their bets on no one showing up in the stores. I know this because of the Baltic Dry Index which tracks the rates that sea going vessels charge on the open market. It is down....big. This tells me there is slack demand for container ships, which translates into less G-unit Gangsta Style Urban Parka's on the store shelves. So even if the consumer had their Credit Card limits restored and interest lowered to non mafia levels AND showed up to buy, buy buy! There would be nothing to buy.
This just isn't limited to the retailers, pick a sector of the economy and the story is the same. No sales begets no profits begets no earnings. It will be rough for stocks.
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