Year-old trends continue:

• Same Store Sales (SSS) remain generally weak, more so at high end retailers (left end side on the chart) while discounters (right end side) outperform.
• September SSS were less bad for all retailers with negative sales trends and better for others. Obviously, as year-ago comps began to worsen at mid-year and got increasingly bad throughout the second half, comparisons have to improve. SSS turned quite weak for most retailers in September 2008.The fact that results beat analysts estimates only prove that analysts are not great in predicting monthly sales patterns (who is?).
• For example, GAP (GPS) and JC Penney (JCP) are showing much improved trends in September but their SSS were down 11.0% and 12.4% respectively in September 2008.
• At the opposite, BJ's (BJ)’ 5.5% sales gain this year is excellent given that it is against a 10.4% jump in September 2008.
• Also noteworthy: Aeropostale (ARO) keeps it up. TJX maintains a strong sales momentum.

If charts do not come out well, go here.

Follow-up on my May 14 initial post NORTH AMERICAN AND EUROPEAN BANK RANKINGS. I excluded Goldman Sachs (GS) and Morgan Stanley (MS) because their bank status is so recent. All data is translated in US$ based on May 14 exchange rates. To facilitate reading the charts, US banks are in blue, Canadian banks in red and European banks in yellow.

The resiliency of consumer spending so far in 2009 is rather fortunate since it accounts for some 70% of US GDP. Furthermore, it has significantly contributed to many recent observations of green shoots in the US.

Importantly, it has most likely been a key factor in the spectacular change in investor sentiment since March, leading to much higher equity prices which themselves appear to be feeding the recent more upbeat consumer surveys.

Not a big surprise, but nevertheless disheartening sales trends for many retailers.

May yoy sales changes were generally worse than April (which had Easter this year).

Weekly chain store sales, a proxy for discretionary spending, have reached a plateau since Easter and are showing signs of tiredness as higher gasoline prices and the fading out of the fiscal stimulus are eating into disposable income.

Below is a nice set of charts from RBC Capital Markets depicting the basics of the crude oil and petroleum products markets. If demand/supply dictates price trends, crude oil prices are unlikely to go much higher in coming quarters and, in fact, should decline.

On the supply side of the equation, the world is awash in oil and petroleum products and signs are all pointing to a worsening of the situation.

I picked the 26 largest publicly traded banks in North America and Europe and did some ratios on them. I excluded Goldman Sachs (GS) and Morgan Stanley (MS) because their bank status is so recent. All data is translated in US$ based on May 14 exchange rates. To facilitate reading the charts, US banks are in blue, Canadian banks in red and European banks in yellow. The charts can be seen at http://www.news-to-use...

MARKET CAPITALIZATIONS

Gone are the times when the President of the United States could begin a speech with “My Dear Fellow Americans”. Now it's "My Poor Fellow Americans".

ChartingTheEconomy.com has produced the scary chart below which should make the national debt more meaningful to Americans. Per capita national debt stood at $30k in 2007. It will have jumped 50% by 2010 to some $45k, on its way to nearly $70k (minimum) by 2019. How about that for a stress test, especially since most of this debt will be to the Chinese!

China’s economy appears on the verge of turning around - even Roubini admits this. Recent government data and prognosis certainly point to that. Let’s not forget that the Chinese government controls a lot of this information. Electricity output, seen as a proxy for industrial activity, is a “real” number that we can rely on and although it has improved lately, more recent data suggest continued caution before jumping to an all clear call on China. The chart is from CLSA and its last data point is March. The update is from Na Liu who closely follows China for Scotia Capital.

For continuous coverage of China’s economy, click on the CHINA WATCH tab below the blog’s header.

The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index fell 0.4% in the week ended Saturday from its level a week before on a seasonally adjusted, comparable-store basis.

A great chart from RBC Capital Markets shows the historically large dichotomy between personal consumption of durable goods and production of consumer durable goods in the US. This is primarily the result of the auto crisis but it nevertheless highlights the significant decline in inventories in recent months.

A slight upturn in demand is likely to translate in a strong upswing in production and in manufacturing employment.

Could it be that President Obama has just pulled a “Reagan”?

On August 5th 1981, President Reagan fired 11,345 air traffic controllers who were illegally on strike. By this extraordinary action, he showed everybody that, with the nation in peril, he meant business and the US government would not be used and abused.

Weekly retail sales picked up 1.1% during the last week of March after declining during the previous 2 weeks:

The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index increased 1.1% in the week to March 28 from its level a week before, on a seasonally-adjusted, comparable store basis.

Dennis Gartman watches the Coincident to Lagging Economic Indicator, using it as a leading indicator for when the recession ends. This chart from Scotia Capital proves his point, up to a certain point: the Coincident to Lagging ratio troughs and turns up well before the official ending of recessions. However, it has registered many early false signals. The Coincident to Lagging ratio was unchanged in February…, but it also did that twice before.

click to enlarge

The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index fell 0.1% in the week ended March 14 from its level a week before, on a seasonally-adjusted, comparable store basis.

On a year-on-year basis, retailers saw sales decline by 1.4% in the latest week. "The sales pace weakened over the last week as colder temperatures and wetter conditions around the nation slowed customer traffic - especially at department stores - and with it weakened spending further," said Michael P. Niemira, ICSC chief economist.

There is a great debate among investors and academics about “trough” PE multiples, i.e. what is the appropriate multiple to apply to S&P 500 earnings at market trough. There is clearly a need for thorough objective analysis. The following charts and observations, going back to 1927, should help in this debate.

CONCLUSIONS

It is déjà vu all over again. We have already seen this Groundhog Day movie at least six times over and over again in the last year or so: the market starts to rally – this time around about 8% in a week - and the chorus of optimists starts to say that this is the bottom of the economic and financial crisis and that we are at the beginning of a sustained stock market rally that signals the true end of this bear market.

This is the introduction to Nouriel Roubini’s latest, very long epistle in which he mixes self-promotion with some unnecessary optimists-bashing-ridiculing and his own economic wisdom, sometimes brilliant and instructive, sometimes long in expectations but short in factual evidence. Following is a rather long exposé of his main points accompanied by my own humble tidbits (bold italics). The full text is available here.

THE RULE OF 20

Absolute PE ratios on the S&P 500 Index averaged 15 since 1927 with one standard deviation ranging between 10 and 20. Although useful in determining if absolute PEs are high or low, this is not the definitive buy-low-sell-high approach.