The news that came out today was not unexpected. "Retail Sales Fall By Record Amount In October" was the Associated Press headline. With consumer confidence low, the credit markets tighter than they have ever been, and people nervous about their jobs, it is little wonder that retail sales have taken a hit.
Personally, I do not see the headlines improving any time soon. Thanksgiving is later than usual this year, causing a shorted shopping period, and I fear that we will see news stories about this being the worst holiday shopping season in decades.
The article noted that among the bigger factors in the numbers were auto sales, but the impact is broader than even that. Consumers are seeking not only value, but affordability. Many auto makers are offering 0%, but the payments can be extensive when the 0% is only good for two or three years. Now more than ever, affordable MONTHLY payments are foremost on the minds of consumers.
In my opinion it is value giving that will be the gift staple this year. Big screen televisions will take a back seat to smaller gifts that represent not only a good deal, but a good value as well. This will present a challenge not only for retailers, but manufacturers that produce the big ticket items.
Unfortunately, consumer confidence is also a factor of the news. As more bad news crosses the wires, people get more concerned, and consumers begin to tighten their belts even further. The bad news becomes somewhat of a self fulfilling prophecy.
For satellite radio, the retail sector has been weak for quite some time, and is already delivering net losses in the subscriber metrics of the company. The holiday season has always been a savior for satellite radio, but what will happen this year. Participation by SDARS in retail holiday specials exists, but there is far less attention than in the past. Instead of a whole section in the Best Buy flyer, there is one small ad for an Xpress unit that is surrounded by iPods, etc.
The combination of a shorted holiday shopping period with a low consumer confidence is almost a perfect storm for bad news. This does not mean that there will be no good plays in the market. Good plays always exist. It is now a matter of which plays will be the real winners.
No matter where you are invested, watch the news closely, and understand the potential impact on investments.
Position: Long SIRI.