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Consumer Debt Weighs In On Retail ETF’s (SCC, SZK, XRT)

|Includes:Chico's FAS, Inc. (CHS), EXPE, GAP, GES, GYMB, JCG, JCP, LB, PSS, RSH, SCC, SZK, XRT

empty-shopping-cartThe dot com boom and the real estate bubble gave consumers confidence and a way to spend like it would never end.  The bubbles have burst and deleveraging is taking a toll on consumers.  We can no longer sell our Qualcomm stock for $500/share or swipe our ATM card through our home as many did for the last 10 years.  Where will consumer spending come from for the next ten years?

Approximately 30% of US household wealth was destroyed by the real estate collapse and the 2008 stock market crash.  Currently it stands at about $15 trillion, down 30% from $22 trillion at the 2007 peak.  With consumer household debt at approximately $13 trillion, this leaves us with $2 trillion in assets.  The debt burden is taking a toll on the consumer as home values continue to fall and banks cut their credit limits.  The consumer would rather save than spend as it deals with a lack of assets.

Markets have been pricing a recovery in consumer spending which accounts for 70% of GDP but, retail sales last month disappointed.  The commerce department reported today that retail sales fell 0.1 percent last month as economists had expected a gain of 0.7 percent.  All eyes will be on the fall retail spending as back to school shopping accounts for much of retail sales.  The SPDR S&P Retail (NYSEARCA:XRT) which comprises of approximately 60 stocks that follow the US retail market has enjoyed 50% gains since it’s November 2008 low. 

Here is a list of the top 10 companies listed within the ETF below:

  • CHICO’S F A S INC (NYSE:CHS)
  • COLLECTIVE BRANDS (NYSE:PSS)
  • Expedia, Inc. (NASDAQ:EXPE)
  • GAP INC (NYSE:GPS)
  • GUESS INC. (NYSE:GES)
  • Gymboree Corporation  (NASDAQ:GYMB)
  • J CREW GROUP INC. (JCG)
  • PENNEY J C CO HOLDIN (NYSE:JCP)
  • LIMITED BRANDS INC (LTD)
  • RADIOSHACK CORP (NYSE:RSH)

Investors may looking to book some profits after today’s retail numbers, and the UltraShort Consumer Services ProShares (NYSEARCA:SCC) & UltraShort Consumer Goods ProShares (NYSEARCA:SZK) bet against the consumer.

'Disclosure:  No Positions'

Stocks: CHS, PSS, EXPE, GAP, GES, GYMB, JCG, JCP, LB, RSH, SCC, SZK, XRT