American Consumer Put

So what is the most important piece of data and/or event this week? It is not central banks' rate cuts, not Chinese PMI, not Italian bonds' yield, not EUR/USD quote, not G20 meeting, not even NFP, it is US Chain Store Sales.

Traders around the world got spooked by European debacle on Halloween. Today they are continuing to sell hard. But there is one large group of people who still do not care about what is going on in Europe - American Consumers. Like drunken sailors, they are spending their way out of emotionally and financially depressed state. Sentiment and Confidence numbers are at their lowest levels since the end of last recession in 2009. But retail sales are rising and showing no signs of abating. This morning weekly chain store sales are showing a healthy gain. On Thursday we will get October monthly figures for chain store sales. I bet they will show a respectable gain as well.

So I ask why is this happening? The multitude of answers could apply:

1. 91% of folks (or more correctly 84% looking at U6) are still employed.
2. Housing has absolutely no affect lately, as people are defaulting on their mortgages and moving into rental properties, if anything, they have more spare cash to spend due to that.
3. Prices on goods and services are not rising, no inflation anywhere, as the matter of fact the discounts are increasing towards the holiday season, as retailers want to blow out the inventory they have.
4. And the most important reason (in my opinion) is there is still no major systemic crisis event to keep the consumer away from the stores, like Lehman bankruptcy in September of 2008.

Lets remember that it was Lehman bankruptcy and financial debacle that ensued which sent retail sales into the negative column on consecutive YoY monthly basis for about a year. Retail sales have been rising since Fall of 2009 on relentless 2-year shopping spree to satisfy the insatiable demand of tireless American Consumers.

So it is with the above notion I would like to conclude my thesis: unless there will be another Lehman-like event, which will cause US retail sales to go down and continue on the downward trend, US stock market will have American Consumer Put underneath it, because consumer spending represents 70% of US GDP.