Testing the EPS Theory

SPY Week of INSANITY!

Despite all of this, the actual JUL Retail Sales numbers per employee look real good for Q3 EPS, Inventory reduction foster the restocking scenario, and buried in the Michigan Consumer Sentiment PDF was a statement of increased spending for H2.

Q3 & H2 Looks good to me.

JUL Retail Sales : $355,243

JUL NFP Ball Park : 140,430 & JUL RS + DGO Projection

Link to base chart

Moving Averages, Market & Revenue per Employee

Q3 EPS Theory

5mo Chart
Note the bounces off of the 10EMA MAR through JUN.

JUL Consumer Sentiment : 46.6 a vs 49 e, down from JUN 49.3

Stocks slip as July consumer confidence falls

Report

Revenues to Employment Ratio

Throughout earnings season everyone's all of a sudden flippin' out over top line (revenues) vs payroll cuts, thus margin. Funny how over the last three months no one said "Boo" about such, but now are.

So lettuce check out the ratio between the two largest measures of both: Retail Sales & Employment.

The number everyone's clucking about these days is UNemployment, which is silly in regards to earnings.
Stocks rise & fall based upon expected earnings, of which employment is a factor, not the number of people whom are not working.

Employed people cost money/earnings.
Unemployed people cost earnings nothing.
Obviously increasing unemployment may drag on revenues, but as long as revenues & employment move in tandem so will earnings.
Revenues can drop, but if employment drops with it earnings remain stable.
Should revenues increase on flat employment earnings will increase, and that is the foundation & hope of the current stupid run.

I wanna see if by following the monthly Revenues to Employment ratio if we can get a feel for how Q3 EPS will turn out.
Fluctuations in the $USD will affect revenues.

Q3, Retail Sales & this Current Big, Stupid Run

Just in case I haven't made it clear: I hate adjusted numbers.

They are bullsh!t.

Corporations don't report revenues in seasonally adjusted numbers, so I fail to understand the benefit of headlining econ fundies in seasonally adjusted numbers.

This current run is just plain stupid.
Why is the market on a run with mass job cuts continuing and unemployment being widely & overtly touted as continuing to worsen from 9.5% to 10% (which means it will probably get worse than that)?

Corporations are as lean as they are likely to get from both an employment & inventory vantage point.
Productivity/revenue per employee is as high as it is likely to get.
If the stimulus spending out-paces housing induced credit loss spending then any additional revenue that comes corporate ways will add to the top line while expenses/labor remain level will show up as additional earnings.

Viewed in that light, the run is justifiable.

JUN Retail Sales

Link to Site

JUN Advance PDF


ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES
June 2009

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $342.1 billion, an increase of 0.6 percent (±0.5%) from the previous month, [LOL! The truth is otherwise, a 1.12% drop!], but 9.0 percent (±0.7%) below June 2008.

Total sales for the April through June 2009 period were down 9.6 percent (±0.5%) from the same period a year ago.
The April to May 2009 percent change was unrevised from 0.5 percent (±0.3%).

Retail trade sales were up 0.8 percent (±0.7%) from May 2009, but 10.0 percent (±0.7%) below last year.

Gasoline stations sales were down 31.6 percent (±1.5%) from June 2008 and motor vehicle and parts dealers sales were down 14.1 percent (±2.5%) from last year.

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. Percent Change in Retail and Food Services Sales
(Estimates adjusted for seasonal variation and holiday and trading-day differences, but not for price changes)

The Advance Monthly Sales for Retail and Food Services for July is scheduled to be released August 13, 2009 at 8:30 a.m. EDT.

Strikes One, Two & Three... Leading to Strike Four?

THU's Same Store Sales (raw data not available) was generally poor.

Today's preliminary Michigan Consumer Sentiment was surprisingly poor.

It was not far off and fairly reflective of the JUN 30th also (surprisingly) poor JUN Consumer Confidence report.

0830 next TUE will be the week's biggest scheduled econ event: Retail Sales.

JUN Same Store Sales (in red) cover a large % of the Retail Sales total.

I think it fair to extrapolate diminishing data in SSS (maybe even sporting goods, as well) plus a known crack spread decline can't be good for Gasoline Stations (8-9% of total) and we can anticipate a poor non-adjusted JUL Retail Sales.

(The powers that be can divide the real numbers by whatever pie-in-the-sky <1.0)

Econ Events Into AUG + Prediction

As we saw from today's surprise drop JUN Consumer Confidence conensus & my own estimates can certainly be wrong.

I cannot emphasize enough how much my own bias & estimates rely on the seasonal up-swell of Existing Home sales into summer that will drop off into fall & over winter.

A lot of hopium is being placed on increasing home sales & price stabilization as a market bottom rather than my PoV that it is simply an ongoing disaster mitigation event.

Summer draws down = home sales draw down
Home sales draw down + increasing unemployment = more home inventory
More home inventory = drop in prices
Drop in prices = decreased homeowner equity/net worth
Decreased homeowner equity/net worth + increasing unemployment = decreased consumer spending
Decreased consumer spending = smaller EPSs
Smaller EPSs + same PE ratios = dropping market

If both EPSs + shrinking PE ratios = rapidly decaying market as money flows out of equities & commodities and into $USD & treasuries.

The good news is that gas prices should also drop!


"Yes", deflation concerns will be back on the table.

What I don't know is how government spending/overt jobs bills will counter any drop in consumer spending.

Q2 Econ Events & Results Chart

Not all of them.
Just the biggies, like NFP, Durable Goods & Retail Sales.

I'll do Housing on another chart, later.

SPY Current & Upcoming Econ Events

Retail sales came in right on the button at 0.5% gain.

I totally fucked-up that call.
I don't believe the numbers, and I'm sure they'll be grossly revised down next month, but for today... I got it wrong.

D@mn ham.

FWIW, market should keep on going up for a few more weeks.
I think that even if all economic activity in the next month or two is flat that the market will be up.
If there was going ot be any reported weakness it would've been a lagging slump from MAY into APR.
Instead, we have a (bogus) APR Durable Goods Orders, foreclosure drenched ExHomes sales with increasing supply, declining drops in both initial claims & NFP and now a (dubious & largely flat) APR Retail Sales.
I don't see why any of this won't fare any worse going into JUL from JUN.
I'm sure the numbers will be just... ducky.



In fact, this past two weeks of infuriating, range bound consolidation should result in another short squeeze.

No rush till MAY Durable Goods two weeks away, though.
Options Expiration week is next week, so I'd expect some continuing, non-directional gyrations.
I'd be surprised if a lasting short squeeze manifested next week.

APR Retail Sales 0.5% Meets Estimates (WOW!)

Wow.
Link to Source


That's... uh... quite some rabbit they pulled out of a hat.

People are still buying a lot of food.
Health & Personal Care is doing quite well.

YoY General Merch is actually flat.

Furniture & Electronics are down despite Construction Materials being up.




I am shocked that these (dubious) numbers are so well.

I can't wait to see how JUN & JUL do.

MAY Retail Sales 0830 THU, 0.4% estimated

MAY Retail Sales THU @ 8:30 EST

The last retail sales release was MAY 13 for the month of APR.

They were shooting for a nice, quiet, flat boring old 0.0% over the revised down MAR $338,930 million.

Instead we got a -0.4 shrink to $337,677 million, ex-auto.
Market tanked.


THU we're shooting for a magnificent 0.4% growth over that $337,677 million = $339,027, ex-auto.


This $1.35 million jump seems a wee ambitious considering the history of APR to MAY Retail Sales changes.


I think between the increasing unemployment and the contraction of credit that US consumers will still be clutching onto their increasingly threatened paychecks.

I'll be ditching all long positions WED & initiating short positions via FAZ, TZA & EDZ.
I'll wait until release to before increasing the position or closing it.
Note the MAY 13 drop went nowhere until the 18th when GS said to buy BAC, that went on for a few days before Moody's (I think it was) suggested EU bonds could be downgraded which in turn incited rumors of US debt being downgraded.
I forget what was so magical on & since MAY 26 that erased all of that.