It looks like we got some good news and bad news this week.
The good news — if you can call it that — is we have a “deal” in Washington that will end the government shutdown and fund the government for a few more months.
The bad news is there was no real progress, despite the shutdown and all of the political blustering. In my opinion, Washington simply hit the snooze button. Much like trying to crib a few more minutes before facing the day, we now have a little while until we have to really deal with the debt ceiling and government budget.
You may think to yourself “at least we don’t have to deal with this during the holiday season.”
While that is certainly true, we will have to contend with a softening outlook for the holiday shopping season. I first raised this concern to you and subscribers of my investment newsletter PowerTrend Profits a month ago when ShopperTrak published its forecast for the 2013 holiday shopping season. More specifically, ShopperTrak expects retail sales in November and December to rise by 2.4% from a year earlier, less than the 3% increase in 2012 and below the gains of around 4% in 2011 and 2010. That puts this year’s holiday spending at one of the lowest levels in recent years.
We’ve got further confirmation this week that the holiday shopping season will be rougher than it has been in the last few years. First, the National Retail Federation (NRF) shared its view that the average person is planning on spending less this year than last year. Now don’t be alarmed, the NRF’s data suggests that your family and loved ones will still treat you well this holiday season, but that means cutting back on gifts for friends, candy and food, decorations and cards.
More confirmation that this year’s holiday spending will be more ho-hum that ho-ho-ho came from Internet retailer eBay (EBAY), which missed revenue expectations when it reported its September quarter results this week. In addition to the miss on its top-line, eBay’s guidance was also below expectations reflecting what management called a considerable softening in the U.S. economy. eBay’s news has me wondering if its woes are solely due to the economy or if it is seeing dollar share erosion due to strong efforts by Amazon.com (AMZN) and a renewed online retail effort by Google (GOOG).
The one bright spot in all of the holiday shopping forecasts that I have seen is for online retail sales. During the last few years, this method of shopping has continued to take share from brick-and-mortar stores. Given the growing install base of smartphones and tablets, I don’t see this shift in shopping behavior that is a part of my Always On, Always Connected PowerTrend leveling off anytime soon. While that trend is welcome news for Amazon, it also bodes well for United Parcel Service (UPS) and FedEx — after all, if you order your merchandise online, it still needs to get where it’s going.
Near-term, I’ll be navigating the current earnings season, which is set to kick into high gear next week. Yet the combination of softer consumer spending this holiday season, slower earnings growth and the start of more negative commentary and warnings is going to put a somewhat sour mood on the market.
Have we seen the market top already this year? It is possible and even probable, but then again when I hear that talk I remember to myself there are a number of well-positioned companies that are not in either the Dow Jones Industrial Average or the S&P 500. My near-term plan is to mine for those kinds of companies, as well as those that have long-term drivers to their businesses. It is that way of looking at things that has allowed me to deliver strong returns over my more than 20 years following industries, companies and stocks.
It is time to go hunting and use any dips or pullbacks to our advantage.
PowerTalk with BBVA — The Next Big Bank I Bet You Haven’t Heard of
Joining me on PowerTalk this week is Ed Bilek, the head of U.S. shareholder services for Banco Bilbao Vizcaya Argentaria SA (BBVA). BBVA is the 35th-largest bank globally with assets north of $800 billion, according to Accuity. Headquartered in Spain, BBVA has a presence in more than 30 countries. It is not surprising that you may not have heard of BBVA here in the United States, since it was only a few years ago that the company made a concerted effort to enhance its U.S. footing when it bought Compass Bancshares.
Flash forward to today and BBVA Compass is the 22nd-largest bank in the United States, based on deposit market share data just released by the FDIC. Based on conversations I have had with management, its long-term goal is to grow BBVA into a top 10 U.S. bank. That’s a similar strategy embarked upon by Toronto Dominion Bank (TD), and it has served its shareholders well.
After listening to my PowerTalk with Ed Bilek, I suspect BBVA is a bank that you’ll at the very least want to keep your eyes on.
To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.
