Sense on Cents

On an otherwise uneventful Summer afternoon in the markets, a few developments today caught my eye:

1. Retail Sales remain decidedly sluggish as same store sales declined in July by the second sharpest amount of  the year. Is that any indication of an economy truly turning the corner? As I wrote on July 29th in my post, “Economy and Markets: Improving, Declining, or Adapting?”

While most economists and market analysts are looking at statistics and data to determine whether the economy and consumers are improving or rolling over, my take is different. I view the economy and consumers as adapting to the new dynamic at work in our country.

Economists point to the drawdown in inventories as a reason why future GDP reports will rebound strongly. That rebound will only occur if consumers start spending. I personally do not expect that will happen to a meaningful extent anytime soon.

2. Bloomberg reports Tudor Hedge Fund Says Gain in Stocks is ‘Bear-Market’ Rally:

Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.”

“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” the firm said in an Aug. 3 investor letter. “We are not inclined to aggressively chase the market here. Rather, we eye a better opportunity to be long equities into year-end on a potential autumnal pullback.”

The Standard & Poor’s 500 Index of the largest U.S. companies has climbed 47 percent since falling to a 12-year low on March 9. The index broached 1,000 for the first time in nine months this week after companies reported better-than-expected profits.

“Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said. Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said.

Tudor is viewed as one of the top money managers in the business. I respect his opinion. (more…)