by Addison Wiggin & Ian Mathias
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More shoppers but fewer sales… The story behind the “Black Friday” numbers
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The 5 reveals the real cost of the 12 days of Christmas… can you say “gooseflation?”
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Eric Fry on perhaps the greatest misallocation of $38 billion in recent history
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Dollar declines again, overtakes yen as carry trade currency of choice
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Did your fund return 1,000% this year? The one that did below…
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Plus, the last word on “dictator” Chavez… for now
147 million shoppers pillaged stores in the U.S. for their holiday booty over the weekend… up nearly 5% from last year.
But even with the added help, sales were down 3.5% from the same period the year before.
“While last year showed a greater emphasis on high-definition televisions,” says National Retail Federation (NRF) CEO Tracy Mullin, “this year, consumers were focused on lower-priced doorbusters like digital photo frames, laptops and cashmere sweaters.” The average shopper spent $347.44, down over $10 from last year.
– Nearly 15% of “Black Friday” shoppers were nutty enough to hit stores for those 4 a.m. sales — up nearly 2% from 2006.
– 1 in 12 consumers have finished their holiday shopping already. On the other hand, 2 out of 2 of your editors started thinking about Christmas about 5 minutes ago and will finish their holiday shopping sometime around 10 p.m. on Christmas Eve.
– Men so far this year have spent an average of $393 shopping; women less… $303.
– The NRF expects holiday sales from now till the end of December to rise 4%, to $474.5 billion — the slowest growth rate in 5 years. If you’re the betting type, you might still find a few good shorts on retailers this week…
And while we’re in the mood, here’s more holiday cheer: If you were to buy all the gifts of “The 12 Days of Christmas” song, it would cost $19,507 this year… up or 3.1% from last year, and surprisingly close to CPI growth of 3.5%.
The price of the five golden rings would be your biggest wallet buster — they’re up 21% since Christmas 2006, an extra $70.
“Six geese a-laying” rose a close second… up 20%. We blame ethanol.
And wage rates have gone up too… after the first increase in minimum wage since 1997, “eight maids a-milking” inflated dramatically.
Only “nine ladies dancing” saw no price increase this year… they held onto last year’s 23-year high of $4,759.
If you had to throw in “a dozen Wall Street bankers” — not that anyone would want them for Christmas — you’d really be busting the curve this year. We reported on Monday the bonus pool for Wall Streeters this year reached $38 billion… even as the top banks book billions in losses.
“The connection between merit and pay disappeared a long time ago,” writes Eric Fry in the Rude Awakening, helping us break the numbers down. “As recently as 10 years ago, the bonus pool for New York City’s finance company employees totaled less than 90% of the net income of NYSE brokerage firms. Today, the relative size of the bonus pool has doubled, to about 180% of net income.
“$38 billion is more money than Wall Street’s five largest brokerage firms — combined — earned during the last 12 months; $38 billion is also more than the combined earnings of these five firms during all of 2004 AND 2005.
“It is more than the annual GDP of Guatemala or Costa Rica. It is seven times more than the annual budget of the National Cancer Institute (NCI), America’s principal agency for cancer research.
“Looking beyond our own shores, $38 billion is three times more money than the entire world spent on humanitarian aid last year. $38 billion is twice the sum necessary to provide basic health care to every child in the world, and three times the sum necessary to provide clean drinking water to every child in the world.”
Yet as we expected, there are more losses from these banks on the way. Swiss bank UBS is expected to write down more than $5 billion in the fourth quarter, reports MarketWatch this morning.
Gold has rallied over $30 since Nov. 21, storming back to $830. Gold’s weekly rise was the most since mid-July, and the percentage gain Friday was the biggest since Feb. 21, 2007.
“While trading was thin in all markets because of the holiday,” writes our friend Doug Casey in his Daily Resource PLUS, “there was no denying gold is benefiting from weakness in the dollar and a crude price over $98. But also factoring in is the widespread belief that the Federal Reserve will lower borrowing costs.”
Interest rate futures show a 98% chance the Fed will lower the overnight rate again on December 11th.
Oil closed at another record high, $98.18, on Friday. Futures traded as high as $99.29 that same day, a record of their own.
While traders were enjoying tryptophan-induced pipe dreams here in the U.S., the international variety sold the dollar all the way down to $1.48 against the euro… that’s a whopping 12% decline year to date. They bought yen… which shot up 2.5% last week alone and 10% year to date.
The pound has risen a “mere” 6% this year, up from $1.95 in January to $2.07 today.
Who would have ever imagined the “dollar carry trade?” Well, we have… but only in jest. Now according to numbers compiled at Bloomberg, “A basket of currencies including the British pound, Brazilian real and Hungarian forint financed with dollars returned 17% this year, compared with 9% when funded in yen and 7% in Swiss francs.”
Despite ludicrously low interest rates in Japan and Switzerland, falling dollar prices coupled with the Fed’s rate cuts since August have made it the carry trade of choice in 2007. This could become more interesting still… hmmmn.
Over the weekend, Lahde Capital, a Santa Monica hedge fund, reported 1,000% gains for its investors this year, after fees.
The California hedge fund attained such remarkable results by shorting all things subprime — from lenders to homebuilders. According to the Financial Times, if Lahde can maintain its 1,000%-plus returns until the end of the year, it will be “one of the world’s best-performing funds of all time.”
By the way, as a reader of The 5, you should also be getting your complimentary copy of Dan Amoss’ Strategic Short Report. His plays are not up 1,000% since August, but they have averaged a respectable 40% gain. We e-mailed his latest short, a struggling American auto parts manufacturer, to you over the holiday. If you missed it, click here.
“Chavez wasn’t elected as a dictator,” writes a reader. “He was elected as a president. That should settle those concerned about his legitimacy. However, he has turned himself into a dictator. Those are the indisputable facts. Call him whatever you like. The end result is the same. The country and people of Venezuela are already paying a heavy price — and life will get much worse there, before it ever gets better.”
“The reader who wrote in has missed the most important element,” writes a reader in response to the question ‘Democracy is not the opposite of totalitarianism. Why do you call a democratically elected president a dictator?’
“They answer two entirely different questions: 1) Who propels to power? and 2) How MUCH power? Chavez is a democratically elected president who has become a dictator. Of his dictatorship, there is no doubt. “By their fruit shall you know them,” said someone far wiser than I.
The 5 responds:
Amen. We were flooded with e-mail concerning Hugo Chavez and our recent “critiques” of his leadership. But in this case, we’ll let Senor Chavez reveal himself to be what he is:
“He who says he supports Chavez but votes ‘no’ is a traitor, a true traitor,” uttered Hugo over the weekend, referring to his proposed constitutional changes, one of which could allow him to be president for life. “He’s against me, against the revolution and against the people.”
The changes would also allow government to expropriate private property without court authorization, take control over the central bank and impose a national six-hour workday.
Until tomorrow,
Addison Wiggin
The 5 Min. Forecast
P.S. We note with sadness today the passing of Ali Samsam Bakhtiari
(1946-2007) of Tehran, Iran. Mr. Bakhtiari was a former director of the National Iranian Oil Co., and a vocal spokesperson on the impending social and political implications of “Peak Oil.” Our own Byron King was a regular correspondent with Mr. Bakhtiari, and we’ve had the honor of publishing a number of essays based on those discussions.
Mr. Bakhtiari died suddenly. Byron will publish a more detailed obituary in the next few days. Meanwhile, we express our condolences to the Bakhtiari family.