Monday, August 12, 2013

"You Can't Lose on Stocks" - Jeremy Siegel

The following chart shows the year over year change in inflation adjusted retail sales per retail trade employee (excluding nonstore retailers). I've used semiannual data to smooth out the trends.

Click to enlarge.

Should the value on the chart drop to zero (we're just barely above it now), retailers will no longer need to hire new workers. Any value below zero means retailers will need to start letting workers go. They will probably be slow to do it at first on the hopes of a rebound. Good luck on that. In any event, a recession probably wouldn't start to hit until they figure it out.

August 6, 2013
Siegel: Keep buying—you 'can’t lose'

"The market is totally spooked by whether QE continues or not," Siegel said, but the Fed "would never accelerate tapering unless the economy was so much stronger, which has got to be good for earnings. So in one way, you can't lose on stocks—either the economy's weak, the tapering will end; or the economy's strong, they'll taper, and earnings will be strong. That's why I think stocks are still a win-win situation."

Professor Siegel, you never cease to amaze me. Stocks are up 160% from the bottom in 2009. Can't lose on stocks? What hubris! No wonder Robert Shiller thinks the stock market bubble is back.

It is my opinion that the market is "totally spooked" because the retail trade data comes out tomorrow and this ballgame is in its 13th inning (still tied ZIRP to ZIRP). As seen in the chart above, the downward trend in growth is even more horrendous (steeper slope) than it was heading into the Great Recession. I see it. Supercomputers using advanced trading algorithms at investment banks no doubt see it too. Meanwhile, Siegel's taking his cues from Ben "There Is No Housing Bubble to Go Bust" Bernanke? Swing for the fences! Can't lose! Forehead. Desk. Whack. Whack. Whack.

That's not to say that the retail trade data will be awful of course. I'm just saying that the trend looks awful and I have no great desire to bet against that trend.

You may be wondering why I excluded nonstore retailers from the chart. They don't create jobs; they automate them. I'm more concerned about the 14.6 million jobs that are left. JC Penney employees are too no doubt. I can tell you first hand what lousy morale can do to a struggling company.

Once again, just opinions! I cannot accurately predict the future. Nobody can. At best, all I can do is offer a somewhat educated guess. This is definitely not investment advice. Alan Greenspan had some good advice back in 1966 though. It did not include "can't lose" in it. That's for sure.

"There is no safe store of value." - Alan Greenspan (1966)

See Also:
Trend Line Disclaimer

Source Data:
St. Louis Fed: Custom Chart


Stagflationary Mark said...

For what it is worth, none of my long-term bearishness is based on what the Fed does or does not do.

If this economy intends to slow down (for a great many structural reasons), then this economy will slow down.

Heaven help us if we slip into a recession during ZIRP. What's the Fed going to do then? Lower interest rates from 0% to 0%?

I can think of one thing they could do. They could strike the word "taper" from their future speeches, lol. Sigh.

Gallows humor.

Stagflationary Mark said...

If I am right that the market is spooked by the retail trade data that will be released tomorrow, then we might expect to see a selloff in the last hour of trading today.

Just a thought.

Stagflationary Mark said...

I've been giving this more thought. The zero point is when the retailers are hiring at the pace real sales are growing.

It doesn't change the conclusions of this post though. It just changes the timing.

Since I'm using semiannual averages and year over year changes, that also changes the timing. The chart's last data point is showing the change from the middle of the first half of 2012 to the middle of the first half of 2013.

If the downward trend has continued, we're basically seeing where we were nearly a year ago. In other words, things could be worse oday than the chart shows.

It won't be easy to tell if it has continued when the data is released tomorrow, since the monthly data is so noisy.

Troy said...

heh, if I had a time machine I'd pop back to 1982 and "invent" Tetris for the Apple II and C64, and then pop into 1990 and invent MtG!

I was in Japan when MtG came out and only bought cards for 6 months, after the initial crush and before the game started getting stale and complicated (it's been refreshed a couple of times since then as the development people learned how to manage a CCG).

The elegance of emergent play mechanics of these two titles is awe-inspiring.

I look at my cornflower-blue empty XNA window and think, 'OK Troy, what's the next Tetris??'!

Stagflationary Mark said...

How about a game of Global Economic Meltdown?

Is this a game... or is it real?

What's the difference?

WarGames Quotes, well, almost.

As for MtG, I knew it could hook me but my semi-OCD saved me. I knew I could never collect every card (well, not without great emotional and financial distress perhaps).

I invested because I knew it could hook others. I'll never forget the first time I walked into a game store to see how it was selling. The guy in front of me bought some cards with cash. He then sifted through them. They weren't good enough apparently. He went back and got some more cards. This time he paid with them with a credit card. He then turned to me and said, "Magic plastic."

That was definitely a holy @#$% moment for me, in a good way.

TJandTheBear said...

Time to jump back on the PM train, Mark. Jus' sayin'. ;-)

Stagflationary Mark said...


Gold's made a modest improvement since i did this chart. Good luck! If it holds that channel in the second chart then the train could very well gain some momentum.

We're mostly on the same side of the trade. That long-term TIPS I bought recently has done fine too, as has every single TIPS bond I've bought since 2000. Hardly surprising to those who don't expect stellar growth though.

Certain professors in ivory towers may have expected a return to normal, but they [Jeremy] shall remain [Siegel] nameless. No point rubbing [mythical 3.5% real yields] it in. ;)