The other day, my son’s best friend comes in with a gloomy look on his face. I asked what the deal was (because he’s always such an upbeat person) and he said that they just laid off all of the seasonal help a week before Christmas.
I said, “What, you mean Best Buy just laid all of you off?”
He said, “Yep. . . they called us all in and laid us all off at one time.”
Folks, I’ve seen a lot of things in my life but I’ve never seen seasonal help laid off before Christmas unless things were really slow and really that bad.
Now you know when one of America’s biggest electronics chains lays off all of these people a week before the Christmas holiday that things are bad.
However, this is not something totally new. It’s actually a continuation of a trend that (believe it or not) peaked in 2005.
Yep, retail sales on a year-over-year basis have been on the decline since 2005. It almost reached the 2005 peak in 2006 and then the bottom fell out and it’s been on the decline ever since.
In 2005, at the peak, we were growing retail sales at an 8 percent to 9 percent year-over-year clip. Where do they stand now? They are around negative 8 percent a year, which is a shrinkage or contraction of that amount year-over-year right now.
What a difference a few years makes.
I think this Christmas season things are going to be bad. I think in January we’re going to get the “ugly truth” about what happened in December and stocks will start to take on a negative tone that will begin to reopen the wounds of the last couple of years and sink stocks again at least by the second or third quarter of next year.
This stock sell-off is going to have a very negative effect upon the euro and other foreign currencies that tend to benefit when times are good.
It will likely benefit the dollar and quite possibly the Swiss franc and yen as investors go back into a defensive posture and run for everything beaten down and out of everything that seems lofty at the time. But back to the dollar for a moment.
This will not be a new bull market in the dollar but rather a bear market rally in the dollar that will last as long as stocks are crashing.
I hope you will prepare your stock holdings now by making sure you are off of any margin trading and that you’re moving your stops up on profitable positions.
However, more importantly, I hope you are positioning yourself into the currencies that can benefit you when stocks correct severely again.
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