Uncertainty or are we going to go shopping?

“NOBODY LIKES THE BRINGER OF BAD NEWS."
- Ancient Greek playwright Sophocles.

Last week was far from quiet as financial markets reacted to several pieces of bad economic news brought throughout the week.

The week began with the news that Circuit City filed for Chapter 11 Bankruptcy, and will be closing 150 stores - and this in advance of the holiday season, when most retailers make a larger portion of their profits for the year. Department store Nordstrom reported its growth rate is down 16%, where they were expecting an increase of 10%. Poor economic reports from Best Buy and Macy's followed a few days later, as well as lower future earnings guidance from Wal-Mart and Intel. As if the headlines of the week weren't enough, Friday's Retail Sales report showed that overall retail sales fell for the fourth straight month and plunged to their worst level since record keeping began in 1992. Looks like a pretty dismal holiday shopping season ahead...probably the worst that retailers will have seen in a long, long time.

In addition, there was bad news for the automobile industry as Deutsche Bank downgraded shares of General Motors from hold to sell, giving a price target of $0...yes, $0. As a result, General Motors stock fell below $3 for the first time since April 13, 1943. Interestingly enough, the automaker was not even making cars at that time but producing only military equipment for WWII.

And the bad news continued on the job front as well, as the Initial Jobless Claims report revealed the highest number of first time unemployment claim since 2001. In addition, Continuing Jobless Claims reached their highest level in 25 years. Remember, poor economic news and a weak labor market usually cause Bonds and home loan rates to improve. This is because fewer jobs and lower confidence about keeping or finding work causes people to spend less. In turn, businesses and retailers lose pricing power, and this is a cycle that keeps inflation - the arch enemy of Bonds and home loan rates - at low levels, especially if oil remains near present reasonable prices.

However, despite all the bad economic news of the week, Bonds and home loan rates were unable to make significant improvements this week

So what do we make of all this? Just look at the big adverts from a very famous local version of "The Donald" with big color adverts in the Sunday LA Times on multiple pages saying "I'm Buying" and looking to make a few big deals while he has cash and most do not.

Yes there is uncertainty. But there is certainly more to be made in the Income Property realm of investing than in today's stock market.

IMHO Keith Lambert
310-391-0821