Spending Spree?

The evidence continues to mount that the similarities between March of 2000 and now are rising. Sentiment indicators and options speculation are at levels last seen during the tech bubble. In fact, they’re becoming more elevated. The stated P/E ratio is 130, a number never seen before. Not to be outdone, day trading by Joe Q public has risen to 1999 levels.

However, maybe the most interesting fantasy is the performance of the retail stocks, posting their strongest relative performance since March of 2007. This strength assumes an approximate 3% increase over the next year. That 3% rise would be the equivalent of $470 billion of retail sales. Keep in mind, current retail sales are now declining at an annual rate of $331 billion. You first have to make that up, and then rise another $470 billion. An $800 billion total swing! On whose credit card is that going to be put?

I’ll still stake my lot on the bond market. For you dreamers, good luck and keep spending.

Till next time,

Bill


Sources: Barons (9/09) and Bloomberg


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