Aside from the large drop in the market yesterday, the other happening to note is the 6% rather sudden spike in the Shanghai Composite Index. Speculation is flying as to what happened. Do you remember the “fat finger” explanation when the US had its own “flash spike” problem in two years ago? Well, here it comes again.
Okay, so the market dropped handily yesterday. So what? Let’s just call it a market rebalancing, although I am reluctant to even go that far. The fact is that there is no catalyst, other than not-bad economic news, to stimulate the market, so when it goes down so hard in this environment, one should not panic. True, volume spiked up yesterday, but that is because when the selling starts, the professionals don’t follow my advice – they panic.
The other thing that happens whenever we have these minor market selloffs is the breathless media parades out the hilltop screamers. Yesterday, the falloff in Walmart’s numbers gave one screamer a reason for the sky to fall.
- Walmart is a terrific operator… They didn’t suddenly become stupid,” says says Howard Davidowitz, one of the top retail minds in the country. “The economy is in collapse. That’s what’s going on.”
One of the “top retail minds in the country” now tells us the economy is in collapse because Walmart had another quarter of non-stellar numbers. The breathless media loves to put these crazies out there and let them shout their “theories.”
- “I don’t think we’re in a recession right now, but I think there’s a 50 percent chance we’ll be in one next year,” Davidowitz shouts, and there’s nothing the government is going to be able to do about it. “We’ve spent all the money, we’ve borrowed all the money, and we’re in the tank.”
Can anyone say “Meredith Whitney?” Arguably, she is one of the “top financial minds” in the country and two years ago January, she told all of us the sky would fall because of a coming spectacular municipal bond collapse in the US. Well, we waited and waited, and, yes, some municipalities have gone under (think Detroit), but there was and is no collapse. There is a lesson here. Pay attention to the macro picture, pay attention to the details, pay attention to the market and enjoy the crazies, but don’t listen. Those who did not run and hide because of Ms. Whitney’s outlandish prediction made money in the market in the last two and a half. And, those who went directly against her advice years made lots of money in muni bonds in the last two and half years.
The larger problem is that the breathless media often supports the screamers with shallow writing that seems to say something but really says nothing.
- Those are the numbers, but not the whole story. Walmart is the thermometer of the American economy. Disregard the government data. Jobs and GDP and all the rest are at best inaccurate measures of the economy and at worst flat out corrupt. Walmart is capitalism writ large. The entire organization is focused on nothing but selling goods and services to Americans. It may be an empire in decline, but Walmart sells more than $1 billion worth of merchandise per day in a bad quarter. When Walmart misses estimates, it can only mean one of two things: either Walmart or the American economy is weaker than anyone thought.
Wow! How is that for an either/or fallacy? Really? Those are the only two choices Mr. Writer? How about that Walmart has been showing signs of weakness for some time? How about even if Walmart is weaker, other retail signs are stronger? How about the clothing and sporting goods markets, the housing market, the auto market, and the high-end market all showing strength?
- Don’t forget that Macy’s (M) also missed expectations yesterday. Three makes a trend. The GDP data is positive and the employment data says things are improving gradually. Either the best merchants in America forgot how to sell, Americans stopped consuming beyond their means, or the economy is turning south, not getting better.
FYI, the third above is Target, which actually has not reported yet, but when it does, the expectation is that it too will miss the mark. So, again, the either/or fallacy from the “news” reporter following up on the screamer’s hilltop harangue.
Sit tight, folks. The month of August is almost over. My hope is that when it is finished, we can look back fondly at the good time had by all. Remember as well, the fall has been a solid time for the market in the recent years, and this fall looks to fall right in line.
Trade in the day; Invest in your life …
