Retail Sales

by Larry Levin

We finally had some economic news today after a dearth of official data recently. The government released the most recent PPI (producer level inflation) and retail sales data. Both seemed to have disappointed investors sending shares lower, as well as GS weighing down the market.

Shares of Goldman fell $15.04, or 12%, to 115.11 today. The investment bank sold $5 billion of shares at $123 apiece in an effort to raise money to repay the bailout money it received. The shares of GS were hit pretty hard as traders concentrated on the dilutive effects of that offering. Goldman has maintained since day 1 that it did not need the TARP money so I have a question - where is the TARP cash if you didn't need it? There are so many questions surrounding these bank handouts it boggles the mind.

Good news for consumers is terrifying news for the Fed - prices are dropping. According to this morning's Labor Department report, the PPI fell 1.2% in March, driven by 5.5% decline in energy prices, including a 13% drop in gasoline. Meanwhile, food prices fell 0.7%.

Although lower prices are certainly good for the public, it comes with a downside. If one believes prices will be even lower next month, said consumer will wait for a better price, which over long periods of time can lead to fewer sales, rising unemployment, etc. These are some of the reasons the Fed fears lower prices and deflation.

Finally, our brain-dead friends in economist egg-head-land were expecting an increase of +0.2% in this morning's retail sales data. Umm, no - not even close.

Somehow these economists must have forgotten the MASSIVE increase in unemployment, which has average about -650,000 jobs per month for five straight months. That doesn't sound very conducive to an increase in retail sales, but what do I know - I'm just a trader looking at life realistically.

"This looks like something of a reality check after a run of upside data surprises," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.

Reality check indeed.



Previous Day's Trading Room Results:

Trade Date: 4/14/09

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 9:00am at 844.75 = b/e (1 lot)

2) OTF buy @ 10:10am at 848.75 = -1.50 (1 lot)

3) FT sell @ 2:10pm at 842.75 = -1.75 (1 lot)

4) Algorithm positions (2)...combined Secret's and Algo total...-5.50


Electronic (YM) Mini-Dow:

1) None today



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