Market Recon: 2/13/2013

Stephen J. Guilfoyle “Sarge” was previously the U.S. Economist at Meridian Equity Partners from 2007 following a long career at Credit Suisse. Stephen has worked on the trading floor of the NYSE continuously since July 1987 and actively serves as a Sergeant in the National Guard.

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Good Morning,

Well, folks….we’ve gotten through the “State of the Union” address, and it was a nice address where the President did come across rather well. He did promise Americans everything except free ice cream on Sundays, but as you know it’s one thing to say you want to fix every road and bridge, and hire the people to do it, and it’s another thing to pay for it. Raising the Minimum Wage to 9 bucks an hour? Sure, you’ll steal some young voters for the Democratic Party….. that is until their employers let them go. Reminded me of Presidents from the past, who proposed such great idea publicly, knowing that they will never get them through. Stock futures are slightly higher this morning, perhaps on the hope that the G-20 will tackle the possibility of a continued “Currency War”. I though Mr. Rubio from Florida sounded pretty good as well in his response to the President. That is until he went for that swig of water in such a bazaar fashion that it will surely be parodied on Saturday Night Live for years to come if you happened to miss it. I laughed so hard that I do not remember the rest of his speech. He did steal the show, if that was his goal.

Today is the day that we see Retail Sales for January from top to bottom. We got some mixed signals this week from Goldman Store Sales,and the Redbook, both weeklies, so not part of today’s data. Yesterday, we also found out that small business owners still are not very optimistic, and that was January data. This is key for reading demand, now that middle class Americans have been hit with this payroll tax increase. The expectation today is for a 0.1% increase month over month over December, which would be the second worst print since July. The number improves slightly if you leave out autos and gas. I think what investors must recognize is the developing shopping habits of the American consumer. Obviously, times are tough, and Americans are hurting, but they are still shopping. The S&P 500 is up a little more than 3% over the last four weeks or so, right? Now, take a look at the retailers who cater to those folks who are restricted by their budget. Over those same four weeks, Target (TGT) has seen it’s share price rise by 4%. Walmart (WMT)?? Oh, their stock price is up 5%. Am I done? NO. Kohl’s (KSS) has enjoyed a 10% increase in the price of their shares in the last four weeks. Americans still need to buy their kids clothes. They still need food, tools, and all the things they always had to buy to support a household. Now, they’re just smarter about it.

The Bank of Japan meets today, and there is no set time for the release of their policy statement. It will probably come late tonight or early tomorrow morning if you’re running on New York time. They, just three weeks ago, these guys announced that they would start open-ended asset purchases in January of 2014, perhaps just to not give Prime Minister Shinzo Abe everything he wanted right away. Well, the BOJ is shopping for a new Governor, now that Masaaki Shirakawa has resigned, so do not expect any policy changes at this meeting, but do expect that timetable to be moved up, once Abe gets his man. If Abe does not get his way, he seems willing to change laws that would blur the lines of the independence of the BOJ. Haruhiko Kuroda seems eager to be that man.

Japan will likely release fourth quarter GDP of around +0.3% quarter over quarter. This would snap, at least for now, Japan’s third recession of the last five years. Maybe they’ll feel that they don’t need to go as far as Mr, Abe thinks they do. Yeah right.

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This post originally appeared at  Guilfoyle’s Market Recon.  

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