Tags: retail | Gartman | GAP | China

More Thoughts on Retail; Gartman on China; Yellen Speaks Again

By    |   Friday, 22 May 2015 12:55 PM

Retail is particularly interesting now, for at least three reasons: 1) leaders have recently reported earnings; 2) results may be affected by volatility in oil and gas prices; and 3) consumer spending is a key indicator the Federal Reserve considers in trying to figure out when to take belated action to raise interest rates.

In the first clip, CNBC's Fast Money traders offer opinions on GAP (GPS), with Brian Kelly, managing member of Brian Kelly Capital LLC, suggesting that T.J. Maxx (TJX) works better, because it is working now and doesn't need to turn around. Karen Finerman, CEO of Metropolitan Capital Advisors, touts CVS (CVS), which has just announced a major acquisition.

In another retail segment, Scott Rothbort, president of Lake View Asset Management, and John Jay Economics Professor Josh Mason argued about the struggles of new McDonald's (MCD) CEO Steve Easterbrook with the latest makeover. Rothbort told CNBC that too much of the planning is coming from long-time executives, whereas fresh thinking is needed, such as new menu concepts and a possible acquisition of Krispy Kreme (KKD) to counter what Burger King did in acquiring Tim Horton's.

Mason observed that the bigger problem is American finance has changed its focus from how to get money into enterprises to how to get it out. He criticized management for going too far in returning money to shareholders rather than investing in the business. This writer would add that the same could be said for money center banks.

Looking at the Chinese market, Dennis Gartman, publisher of The Gartman Letter, told CNBC that the best course now is to go to the sidelines and let the Chinese market decline by 20 percent or so from recent highs. Gartman noted that it could only take a month or two, since Shanghai ran from 2,000 to 4,000 in only six months. He added that the only vehicle for the public to consider would be the Market Vectors ChinaAMC A-Share
(PEK) and iShares China Large-Cap
(FXI) exchange-traded funds.

In the last clip, CNBC's Steve Liesman explained what to expect from a scheduled speech by Federal Reserve Chair Janet Yellen. Liesman expects that she will not say when the Fed will raise rates, but it won't happen in June. He added, "Follow that logic through. At the next meeting, if they don't say they're going to raise rates, you know when they're going to hike." Liesman asserted that the Fed has been trying to move away from "calendar-based guidance" and toward "data-dependence," but they're always talking about the current and the next meeting. In addition, the Bureau of Economic Analysis (BEA) is having trouble calculating the GDP, having found a 30-year pattern of understating GDP.

For this writer it tends to confirm what former Philly Fed President Charles Plosser has been saying about the Fed lacking the data needed on which to depend to set policy. What Liesman did not say is that even if the BEA is able to come up with some sort of fix by July as it intends, it will take years to get enough data to determine whether the new methodology is any more reliable than the current, flawed system, which evidently is still not "good enough for government work."

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Retail is particularly interesting now.
retail, Gartman, GAP, China
Friday, 22 May 2015 12:55 PM
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