The Daily Dose: A Cute Baby Fed Hawk

 | Dec 18, 2013 | 11:00 AM EST  | Comments
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Caution was a word that I used on Monday to describe the right course of action into the Fed meeting. That is a word I think should continue to reign supreme to yes, you, the cowboy trader living and dying by the news flow.  Here are a couple simple explanations underscoring that call:

  1. No taper in the Fed statement at 2 p.m. EST, but the tone on the economy is viewed as upgraded. That sets the stage for a hawk wing to emerge on Chairman Bernanke at 2:30 p.m.
  2. No taper, the Fed chairman is likely to sprout another hawk wing as he articulates a taper early in 2014.
  3. In reviewing the chairman's most recent comments, it's quite clear he has not articulated strongly enough the timing of taper. When he tried to communicate to a stronger degree on May 22, markets were upheaved.

As you can plainly see above, the risk reward for stock prices is negative into, and immediately following, this extravaganza. My eyes will be on interest rate- sensitive sectors between 2:00 p.m. and 2:30 p.m. -- the homebuilders, automakers, emerging market ETFs and financials. If the first three don't do much to rise slightly in terms of price action and if financials weaken a bit, it could be an indication the market is okay with good economics being good news. That news could be sustained with a 10-year north of 3% and more drama-filled Fed meetings.

In easily understood news:

Why Retailers Have Abandoned Partner Syndrome

We have all been dumped at one point or another. It stings. With that stinging sensation comes at least a month of acting out to get a now former partner's attention. I think this is a great example of what continues to be a holiday 2013 theme in retail land, brick and mortar companies trying desperately to grab the attention of a former partner...the consumer.

Brick and mortar retailers have been dumped for: (1) desktop PC shopping on websites that basically know our every move thanks to investments in big data; (2) revamped app experiences on smartphones and tablets; and (3) the good ole savings bank (savings rate has been over 4% this entire year, and on an uptrend since January 2013).

Here are three reasons why marathon hours are arriving on the scene as the holidays conclude:

  1. Execs simply ordered too much merchandise that the consumer is deciding is not necessary. The days of buying an Xbox One type price point item, plus five games, plus five toys for Little Jimmy is so 2001-2007, not so 2013. The consumer is just not buying as statistical correlations would suggest, and in which orders are placed six months in advance.
  2. Brick and mortar retailers are trying to become mobile-like, except with a ton of fixed costs, by being open at any time comparable to a WaWa. This would be good if the consumer was out there spending freely, buying items that will be collecting dust in February. However, these stores are staying open while consumers venture home from work having spent the holiday budget on Amazon.com during office hours.
  3. Execs have not driven deep enough promotions this holiday season. Promotions have increased since Black Friday at many chains, but the consumer is still yawning or is flat out done buying. All must be left on the field to sell inventory and enter 2014 with a better financial story to be told to investors.

Specific Companies

Why the following companies are unleashing marathon hours:

  • Kohl's (KSS): over three quarters of negative sales growth, opposite of Macy's.
  • Toys R 'Us: its sales growth year to date has totaled -4.5%.
  • Kmart: eight quarters of negative sales growth.
  • Sears (SHLD): a laundry list of problems, chief of them being they are not a top holiday gift destination.
  • Target (TGT): recently told my team its core customer is afraid of spending too much, and is reducing store trips as a result.

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