What’s That Light Ahead?

The light at the end of the tunnel is a train. Retail sales missed expectations this morning for the third time in a row. The last time we had three misses in a row was July 2008. At that, the seasonal adjustment fudge was highly suspect, as zero hedge points out that the unadjusted January fall in retail sales was the largest in history.

Needless to say, this may indicate that the data flow is finally turning (although the stock market is still sustained by the combination of the ECB liquidity pump and the HFT boyz). Me, I’m heavily long 30-year Treasuries. Here are a couple of papers that explain why bonds are a good bet, and an interview with Lacy Hoisington on the same theme.

Well, consumer spending will slow this year very dramatically from a very weak base. We had a decline in real disposable income in 2011. GDP rose, but GDP measures spending, not prosperity. In 2011, as is often the case, when inflation rises, households initially try to maintain their standard of living. So in the face of rising inflation and trailing wages, which was the story in 2011, families resorted to increased credit card usage or to drawing down their saving. But in addition to a decline in real disposable income in 2011, we also saw a net decline in net worth [lower chart below]. And a year-over-year decline in net worth has been associated with the start of all the recessions since 1969.

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