12/03/14   Retail Sales Reports Are Suspect

Editor’s Corner

Ron Rowland

As predicted, we have been bombarded with play-by-play action on the sales activity of Black Friday and Cyber Monday. Unfortunately, it’s hard to figure out where things really stand because every report seems to be lacking important data of one kind or another.

One of the first reports rolling across my news screen blared out that year-over-year sales were down 11% on Friday. This didn’t seem quite right, and sure enough, the details revealed that internet sales were not included in this calculation. The data collected was also supposed to be reflective of the entire four-day weekend, not just Friday as the headline proclaimed. Additionally, this four-day calculation was based on a survey of 4,600 shoppers on Friday and Saturday.

However, the industry trade group responsible for the report stands by its forecast that total holiday sales will be 4.1% higher than a year ago. Apparently, the trade group concurs with our statement from last week that the Black Friday benchmark has become less significant. It’s the whole fourth quarter that matters.

Another shortfall in the report was the retail store numbers didn’t include automobile sales, and auto showrooms were unexpectedly overwhelmed with buyers on Black Friday. Chrysler sales jumped more than 20% for the month, and the company said it had its best November in history. Autos are big-ticket items, and one sale swamps the average retail store shopper’s $380.95 of weekend spending.

Cyber Monday sales reports were anything but consistent. One report, based on an intraday interval, claimed online sales rose only 8.7% versus 20.6% growth a year ago. Another tracking firm shows that e-commerce sales for a 12-hour period ending Monday at noon were 15.6% higher than last year.

Bottom line, we still don’t know the actual sales figures of the past week. Furthermore, it probably doesn’t matter. Black Friday type bargains were being offered days and weeks before Black Friday actually arrived. Online shoppers know they can make purchases on days other than Cyber Monday, and they will likely enjoy better website response times. A national average gasoline price below $2.75 a gallon is putting hundreds of extra discretionary dollars in consumer pockets this year. When the entire fourth quarter’s sales are tallied, it will likely show a significant increase.

Investor Heat Map: 12/3/14


There is huge dispersion across the momentum readings of the sector categories today.  A massive spread of 92 points separates the strongest from the weakest.  Health Care continues its reign at the top, and it is pulling further away from the pack.  Consumer Staples held up well during the jittery week and climbed two spots to second.  Technology slid from second to third, while Consumer Discretionary and Real Estate both advanced a notch.  Utilities recovered from recent weakness and moved from seventh to fifth as Financials held steady.  Industrials tumbled five spots to eighth after General Electric (GE) dropped on concerns its giant finance arm may be regulated as a major bank.  Materials weakened again, allowing Telecom to move ahead of it in the rankings.  Energy stocks have been the focus of negative media attention this past week.  Although losses in the sector have been accelerating recently, the dismal performance is nothing new to our readers.  Energy has been at the bottom of our rankings for thirteen straight weeks.


The tight compression across the style categories of a month ago continues to relax, although the styles remain highly compressed compared to the sector and global rankings.  The top to bottom spread is 17 points today versus 11 a week ago.  Large Cap Growth is on top for a third week.  Mega Cap jumped from sixth to second as investors sought the perceived safety of this group.  Mid Cap Growth, Large Cap Blend, and Mid Cap Blend all slid one spot lower due to Mega Cap’s rise.  Large Cap Value climbed a spot and Small Cap Growth slipped two positions providing further evidence of investor preference for larger companies.  Mid Cap Value and Small Cap Blend kept their relative ranking positions but lost momentum for the week.  Micro Cap edged up a notch, leaving Small Cap Value on the bottom.


Dispersion across global categories also increased this week with the spread jumping from 38 to 60 points.  While quite wide by historical standards, it pales in comparison to today’s sector rankings.  The U.S. remains on top, where it has resided for seven weeks.  China posted strong gains and moved from third to second.  Europe continues its climb up the rankings.  Starting on the bottom six weeks ago, Europe has steadily improved and moved two spots higher to third today.  World Equity fell two places, pushed lower by China and Europe.  Japan and EAFE each climbed a spot and held on to their positive momentum readings.  The U.K. moved up two places but remains in the red.  Canada, which is typically highly correlated to the Energy sector, suffered from that relationship this week.  Canada fell four positions and flipped over to a negative trend.  Emerging Markets, Pacific ex-Japan, and Latin America also posted large drops in momentum.  Latin America landed at the bottom again, after a one-week reprieve provided by Pacific ex-Japan.


The charts above depict both the relative strength and absolute strength of various market sectors, styles, and geographic locations on an intermediate-term basis. Each grouping is sorted (top to bottom) by relative strength. The magnitude of the displayed RSM value is a measure of absolute strength, which is our proprietary method of measuring and reporting the intermediate-term strength as an annualized value.


“We are seeing a longer period of good sales whereas before it used to be just on Black Friday and Cyber Monday.”

David Johnson, co-founder of PickleballCentral.com, 12/2/14


© 2014 AllStarInvestor.com All Rights Reserved. Protected by copyright laws of the United States and international treaties. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. All Star Investor employees, its affiliates, and clients may hold positions in the recommended securities.

Distribution is encouraged. Please do not alter content.