Retail is on a roll
Given the new consumer optimism, good luck to anyone who wants to short this sector.
How badly would I want to short retail, if I were at my old hedge fund?
Consider Nordstrom (JWN). I mean, what the heck? How can that stock be up this much on absolutely nothing? We have a story about how Sears (SHLD) basically doesn't have a real CEO, and the stock is up 20% in a month.
Every single show company I follow has had dramatic moves. Can Guess? (GES) and J. Crew (JCG) keep going up on nothing, or Gap (GPS), which seems to be galloping to $30? Isn't this supposed to be the weak quarter for Polo Ralph Lauren (RL)? How many times can Lew Frankfort, CEO of Coach (COH), say things are great? Terry Lundgren has been flogging the turn in Macy's (M) for 8 points now. Jones Apparel (JNY) has gone up fivefold on the fact that things aren't as bad as they were.
Isn't this all ridiculous?
Absolutely not. What people don't realize is that we are on a roll here, with the consumer getting multiple breaks: People are less worried about losing their jobs. The ones who have them are getting huge overtime. Those who don't, unexpectedly feel more optimistic.
The 5 million people who are in the foreclosure process, the showdown inventory, have en masse stopped paying their mortgages, or they are paying far less. That's going to the stores.
Inventories seem almost permanently scaled back. There are no sales going on in America to speak of. When you don't have to discount, you can consistently blow away the numbers.
The rich throughout the country collectively bought so little in 2008 and 2009 that they are replenishing their own stocks of goods, hence the run in Tiffany (TIF), Coach and Nordstrom.
Many of these companies had liquidity issues that took them to the brink of bankruptcy, and their stocks are much lower than they should have been, so the coiled-spring effect is pretty amazing.
The sheer volume of houses sold -- the actual transactions -- is the biggest in years, and the volume of transactions is often the best indicator of retail spending.
Finally, the consumer is feeling good. There is a change in the works in this country. There is a sense of confidence that the regime in Washington isn't going to raise taxes for all but the rich. They like this government. There are instances of cash-strapped states, but those examples are being overwhelmed by the new hiring and appreciating home prices, particularly in California and Texas.
The monthly sales numbers were supposed to be overinflated by an early Easter. Yet they continue to be robust, according to all my sources.
Did the stocks run too much ahead of these numbers to be reported next week? A little bit, perhaps, but not enough to make them good shorts. Yet that's what all my hedge-fund friends are doing.
At the time of publication, Cramer had no positions in the stocks mentioned.
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3 stocks will be in the spotlight Thursday as investors try to make sense of the numbers from the sector.
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