Wednesday Morning Coffee: Premature Withdrawal

Dr. Bernanke's medicine wore off quickly. Still, Asia got a nice high off the good stuff, with the Hang Seng juicing up 10.7%, China's mainland CSI 300 Index rising 4.7%, India's BSE Sensex 30 climbing 5.2% and the NIKKEI 225 moving up 2.0%. But, somewhere along the silk road, Mr. Market was stricken by withdrawal. Across the pond, the DJ Euro STOXX 50 was already down 4.5% as DJ Industrials futures here in the states indicated a rough start would ensue.

Seems global market decoupling is as much a fantasy as global economic decoupling. Actually, we wouldn't call it a fantasy, just an inevitable likelihood that is still far from reality. Seems The Greek knew what he was talking about when he warned about the importance of U.S. consumption back in the days when more famous TV pundits were sending investors into multinational large caps. We did that too you remember, but we told you the good times wouldn't last forever as well. That said, the market will soon wake up to realize fiscal stimulus is coming and the Fed has its back. Buy financials, and the ETF's in the space should prove useful in avoiding company specific risk there.

That Silly Stubborn ECB

Oh Jean-Claude, why must you Pu Pu on Ben's parade? The ECB is so concerned with inflation, perhaps they also fear the Pu Pu Platter might replace fabulous French cuisine. At some point this week, China will announce full-year 2007 GDP, as well as Q4. If the fourth quarter doesn't do it, we're fairly certain '08 data will show Chinese goods are not filling middle class Chinese homes, at least not yet. Jean-Claude, if the U.S., Europe and Japan are not buying as much, pressure on inflation should ease in the near-term. Jeanie baby, you're looking into the sky for the airplane to strike you while missing the fact that you are standing on the track of a speeding train. Recalling yesterday's Barbarian World reference, the villagers will probably head over to Jean-Claude's house today after hanging William Poole in the moonlight on Tuesday.

Economic Data & Analysis

The International Council of Shopping Centers - UBS was capable of exacerbating the panic this morning with its release of weekly same-store sales data. This, after last week's report of a slim 1.1% year-over-year growth rate. That marked a drastically lower level of growth than last year's 2% - 3% norm, and the year before rate of about 4%. Thank the Lord & Taylor this week's growth rate instead inched up higher to 1.6%.

We have seen some popular pundits putting people into the retail sector, and we just can't agree. While the stocks have corrected significantly, the pain has not been felt as sharply in operations. Retailers are going to report miserable holiday period results this quarter, and guidance should not be bright either. Yesterday, Target (NYSE: TGT) announced January was running at the low end of its guidance range. If the holiday season could not get the consumer to open his wallet, stock market decline in the double digits is not going to spin Macy's (NYSE: M) turnstile either. No, things are going to get VERY ugly in the retail and restaurant sector.

Petroleum Status

I told you so!!! Oil is backtracking, all be it a full month or two after we told you it would. The economic driver is and always shall be the most important factor behind the movement of oil prices. When global recession looms, nobody gives a crap about IEA inventory reports or OPEC monthly bull. It should be a short trip to the $70s from here... That Solar Sunset research we published here still holds folks. Sell the whole energy sector, until Iran.