Retail Sales DISASTER | Stock Market.

worse is not necessarily a good thing

here today so let's see all right here

we go retail sales Advance wow negative

one percent that's twice as bad as

expected retail sales excluding Auto

month over month also twice as bad as

expected negative point eight instead of

0.4 retail sales excluding Auto and gas

negative point three uh so a little less

bad than expected uh so the expectation

there was negative 0.6 retail sales

control group a negative a 0.3 instead

of negative Point excuse me point five

percent let's go ahead and get into uh

what the actual details of this are in

the meantime we also have an import

price index uh that just came out so

we'll go through this as well uh the

import price index let's see here we've

got for the import price index month

over month came in at negative point six

we are expecting negative point one uh

import price index excluding petroleum

month over month negative point six

expectations was flat import price index

year over year negative 4.6 expectation

was negative 4.1 export price index

negative 0.3 the expectation was flat uh

so you you also had a slight revision up

in the prior month from point four on

those retail sales Advanced month over

month up to negative 0.2 but but what

does this mean well what this means is

things are finally starting to roll over

and they're coming in weaker than any

Economist has really been projecting or

at least certainly the average or median

set of economists are not expecting the

numbers to be this bad and the numbers

are actually finally starting to come in

this bad which is the signed up yeah the

Federal Reserve has potentially uh kept

the their boot on our necks for too long

and now all of a sudden the economy is

to some extent starting to drown so

let's take a look at this Advanced

monthly sales for retail and food

services this is for March 2023 I just

read off uh some of the uh the big

numbers here's that revision that was

negative 0.4 for February but this is

now falling substantially we've gone

through some of the headline numbers so

let's see if we can get some charts and

some details here here we go all right

so we're going to look at let's look at

the adjusted on the right side 2023

March so we're gonna go just to make

this a little easier put a little box

around the column we're going to look at

all right what do we have so it looks

like

things that are down or things like uh

oh we could also win the change year

over year yeah let's go with we don't

have a month over month change I think

there's actually a chart that'll give us

a percentage month over month here we go

yeah this is much easier okay March 2023

Advance oh this is perfect uh that's the

year over year

they don't actually make this so

terribly easy for us January through

March 20th Jan 2023 through March 23

from okay this gives you the first

quarter from uh the quarter before that

and then compared to last year okay

let's look over here let's see where the

weakening is so furniture and home

stores you actually had the first

quarter do a little bit uh an increase

here of about 1.3 compared to the last

quarter over here what's negative

building materials was negative in the

first quarter compared to the fourth

quarter you've got health and personal

care stores up uh 3.1 gas stations so it

looks heavily weighted here on gas when

you just solely look at the headline but

that is why we also have retail sales

excluding Auto and gas and that came in

at negative point three percent so it

looks like Auto a gas really pulled

retail sales down substantially so uh

that'll change next month as well much

like the PPI so that means the data is

potentially not as terrible uh as as it

initially appears because it seems like

the big anchor here is really gas so

that's good again the retail sales

excluding Auto and gas we were actually

expecting a bigger drop there we were

expecting negative 0.6 but we only got

negative 0.3 so maybe that actually

shows a little bit more strength in the

economy than than it initially looks

like because when you first look at

retail sales and you see that retail

sales advance and excluding Auto coming

in twice as bad as expected we initially

think oh my gosh the the this is

terrible for the economy but it actually

seems like it was natural gas uh and

potentially gasoline that uh yeah here

gasoline stations again that that really

pulled this down

so uh what else do we have on this food

and service drinking places that's

probably your largest Advance right here

as food service then let's see any other

fours here now when you get a 7.9 over

here at department stores that's pretty

big so you got department stores and

uh food service and drinking place is

moving pretty well here but looks like

everything else clothing this is barely

a movement over a three month period

here uh over the fourth quarter to the

first quarter Sporting Goods barely a

movement over here

uh retail overall 1.3 okay so let's see

if we get a little bit more detail then

we've got

compared to the previous month so here's

our month over month data this is going

to be February or March 2023 compared to

February so let's see what we've got in

this data set here this one shows month

over month where's gas month over months

gas was still had some a movement here

so that's interesting because here

you've got that negative for the fourth

quarter to the first quarter but you

actually had a slight positive here on

the uh the month over month going from

Feb to March of point four percent on

gas

here you can see total retail sales

0.3

this is for retail and Food Services

different from the uh the current

headline number that we just read off

so let's get a little bit more detail

here let's listen in for a moment on

what uh CNBC is saying but it looks like

they're talking about those import

prices right now but let's listen to

your oppression uh Austin of the uh uh I

guess it should be president Goolsby now

right no it's Mr President

Mr President

that's Air Doctor president plenty

potentially he's made it very clear that

I need a lot of respect yeah

it seems like every time I hop over to

them they just jump around on uh

nonsense here but quickly retail uh

after the retail sales we saw treasury

yields actually jump uh yeah see look at

that's interesting see there there's a

lot of confusion around how this initial

print came out see let me I'll just read

this for you word for word and it's the

same confusion I had treasury yields

jumped after retail sales contracted

more than expected which seems odd but

sales excluding autos and gas were

better than expected as was the control

group so in other words the first

impression is oh my gosh this is

terrible but then when you look deeper

at it it's like wait a minute no this is

actually not bad so what's happening is

is if retail excluding Auto and gas can

hold up

at the same time as inflation is going

away that's actually a good thing so

forgive how complicated this is this

morning this retail sales report it's

very complicated but this is actually

not a terrible thing this is this is

suggesting that import prices which is

inflationary are falling substantially

faster than expected the prior revisions

for retail uh for import prices month

over month were also revised towards

more of a negative number although

export prices were revised slightly

slightly up most of the numbers this

month were substantially more negative

than expected for Import and Export

prices actually all of them were and

then retail sales once we pull out the

gas sector retail sales are actually

holding up so in other words better news

on inflation inflation coming down

faster retail sales holding up a little

better let's listen to uh this guy

they're trying to interview you know

funeral prices there's research out uh

by Chicago fed researchers reflecting a

longer tradition of research that shows

wages do not serve as a leading

indicator for Price inflation there are

lagging indicators so when people are

looking at duh this is ghoul speed by

the way one of the new fed uh presidents

prices six months ago I think we want to

keep our eye on the price series not on

the wage series Austin you you said in

your uh you quoted analysts in your

speech saying that the tightening of

credit conditions could be worth 25 to

75 basis points of fed tightening

um do you Embrace that are you is that a

sort of an arms length

I didn't embrace it even in that I said

we don't know what we need to study is

how big is that in in a Fed fund's

equivalent and that the the ranges kind

of are all over the place to uh the

median range I'd call it from the

private analysis 25 to 75. there are

some people as you know they were saying

150 and 200. that that doesn't seem

realistic to me but it's something and

so if you see credit tightening you know

that that does the job of monetary

policy and this moment uh sometimes when

when you're trying to strengthen the

financial system and you're looking at

at either regulatory forcing or the

banks themselves trying to strengthen

their financial positions and stress a

lot of times that's happening when the

economies in the dumps uh and so in a

way your financial stability goals and

your monetary policy goals and end up

fighting each other but this is not that

moment this is a moment where everything

we do to strengthen the financial system

to prevent that from from snowballing is

actually doing the job of monetary

policy so I I don't think that they're

in Conflict at this time all right so

not not much commentary from this guy

here but uh some other notes Here retail

uh the retail sector on average Falls by

the most in the six months after a

recession starts now that's actually

interesting because see we're really

trying to set up this this understanding

of hey when the recession technically

begins where is the pain right uh so if

we draw sort of a here's our decline

here's our recession does does

everything in the economy sort of get

worse or does it get better eventually

you come out of the recession right uh

and uh generally we sort of line

or gray bar we'll use an orange bar in

this case the period of the recession eh

and uh there's this expectation that

maybe earnings would bottom right here

at the uh oops there we go that earnings

would bottom basically at uh the start

of a recession that's sort of an

expectation that has historically held

there's also this belief that the yield

curve re uh or or should I say not

reinverts uninverts

so the yield curve would uninvert and

then there's also a note that the retail

sales sector usually Falls for about six

months into a recession

so retail sales seem to be very

cyclically affected by what people's

impression are of of what the economic

state is right so uh retail again very

cyclical very very much follows the

cycle the economic boom and bus cycle

and the fact that we're still getting

smashing retail numbers here once we

actually sort of extract the uh the gas

and auto segment and we just look at

retail sales which aren't

inflation-adjusted but uh that's okay

they they still give us an idea

of what's going on relative to the prior

month and a relative to expectations and

the numbers are weaker than expectations

well um but when we take out autos and

gas we go okay well that's not actually

that bad maybe that does sort of align

with the bond market and saying hey

maybe we're still over here right

because the bond market is telling us

we're still maybe three to six months

away from a recession we keep hearing

people talk about Q3 Q4 for a mild

recession even the Federal Reserve is

now talking about a mild recession here

so could it make sense that marches

retail sales data are still given that

they're still well within q1 over here

or too early to really indicate any kind

of recessionary pain yeah

absolutely the yield curve is not

uninverted so the steepening part is

usually the most painful we still have

decent retail sales but that could be

normal uh the stock market tends to at

least historically bottom at the

beginning of a recession which would

actually be here we hope not in this

cycle we hope that in this cycle the

stock market is basically so convinced

that a recession is occurring that the

bottom of the stock market has actually

come before the bottom uh as people

don't want to miss the bottom kind of a

psychological uh impact there but uh

then we believe also that Goldman Sachs

tells us earnings for companies 10 to

bottom six to nine months after the

bottom of stocks which is interesting

because if stocks bottomed some of them

bottomed let's say in December the

bottom of their earnings might be in

August which is interestingly over here

in around Q3 so kind of a fascinating

way to add together some different data

points and of course nobody really knows

exactly what's going to happen we'll see

but we want to keep an eye on these

things let's keep looking at what uh

foolsby I mean a goosby here has to say

not think that some mild recession is

definitely on the table as as a

possibility I mean the the data show

that and we've raised rates almost 500

basis points in a year that's

historically an indicator of slowing GDP

growth when you get numbers like retail

sales and others that are declining you

look at construction I think we've got

to think about

what's the state of growth in the

country fortunately the market continues

to be very strong and so what is your

reaction function change Austin how does

the reaction change how do you respond

to a recession there are people who have

argued to me that your average fed

official actually has a recession built

in and everything but GDP by pointing

out that you don't get a one percentage

Point increase the unemployment rate

outside of a recession does a recession

means you stop hiking does it mean you

cut

well I mean let's not start chasing our

tail here it depends is this mild

recession if they have it is that being

caused by the raising of interest rates

or is that a recession that's happening

because of Supply conditions or things

that are happening outside

awesome I have a question because

whenever the markets get a whiff of the

notion that the FED May pause that the

FED may actually consider a pivot as the

prices go higher so to the extent that

you care about or the FED does the FED

care about that that markets take it as

a good sign and therefore stock prices

will rally because what we saw yesterday

was very interesting we saw a risk-on

rally so we saw for instance the arc

Innovation ETF rise rally on the back of

this notion that maybe the fed's going

to Pivot

that sort of works against what the

fed's trying to do interesting point I I

I think that's an interesting point I've

been publicly saying from the time I

took the job and and before on this

program over the years I'm not a fan of

the FED tying let's call it its mandate

or the doing of its job to how does the

market reacting like I say congress gave

fed a job which is maximize employment

stabilize price it doesn't say anything

in there about make sure that the

markets stay happy or make sure nobody

loses any money uh and so I'm not a fan

of paying close attention to to what the

market response is going to be

like could you imagine if this guy this

got Jerome Powell

like I I don't think I would ever buy

stocks again

I mean you guys said you were gonna

pivot into raising rates in November of

21 and rates went up and that was doing

you're scaring me right now if you look

at the outlook for Rach Austin uh they

don't believe you they think you're

gonna cut and cut pretty deeply by the

end of this year

um and so in a sense the market is not

doing its job for you so maybe you

shouldn't be pandering to markets but

certainly there's some what's the right

word symbiosis that's necessary here

that you're not getting often in the

past that the FED has tried to uh the

wealth has tried to use the wealth

effect to bolster balance sheets and

make things better and have stock market

go and and seriously scary times it's

stated zero to bolster the wealth effect

to help so that was that was uh that's

why we had a fed put for so long if you

really don't think we've ever done that

to try to make things I'm not going to

get in an argument about history I'm

gonna just at this moment when I say we

need to look at what the market is doing

for us in monetary policy I'm talking

about credit conditions on the ground

for regular in the real economy regular

businesses if the stock market reacts

so be it but that's not what I think

that the fed's primary instrument should

be right now should not be using the

wealth effect of stock market wealth to

try to steer the economy I think right

now this credit condition is this but

the FED uses the pandemic as an excuse

for saying saying it zero why can't I

use that as an excuse for not paying off

you weren't back here it was a pandemic

so how are we supposed to go to dinner

or lunch when there was a pain right

because there's a pandemic if you forget

you went on vacation

and you waited me out yo you waited me

out now you're not allowed to pay for my

own business

I'm going to settle this once I don't

have the kind of time to deal with this

anymore like this guy's a jerk oh he's

evil and he's a I don't get it like he's

not being funny he's being mean uh this

guy's weird he's scary why is he at the

fad Rome what the hell oh my God like he

was supposed to give us commentary on on

uh retail sales and instead we got I

don't want to go to dinner with you Joe

I showed up to do my job and you were in

vacationally

you're a douche like wow

um okay so like I don't even know that I

so much care what that guy has to say uh

you know one thing I thought was

remotely interesting as much as I'm

frustrated by Mr foolsby whatever here

uh is is uh this idea about oh well it

depends what caused the recession is it

basically uh the cycle that caused the

recession or is it rate increases that

caused the recession I do think that's

an interesting point

uh and it's one that's worth diving into

so there are different recessions that

you can have let's draw this out so it

makes it a little easier to understand

because there's so so much going on uh

sometimes when we draw it out it's a

little easier so uh the two different

main kinds of recessions that that I

think we're talking about here are the

idea of okay do we have the kind of

recession that is now destroying

inflation right so there's that we'll

call it the uh recession uh number one

the inflation Destroyer that's what

we'll call recession number one and uh

then there's the recession

number two which is just the uh

fundamentals are screwed the recession

right like everything's screwed uh

obviously we we would hope and think

that the most mild of the two would be

the inflation Destroyer over here this

would uh presumably be the uh the more

desirable the reason for that is because

that's the fed's goal and so if if this

is the goal this is the goal well if

this is the goal

then obviously when the recession has

destroyed inflation when uh

anyway what inflation is destroyed there

we go then uh then ultimately you can

end the recession by cutting right uh

and now like I mentioned yesterday in a

video this the basically the cancer of

inflation is gone so even though the

symptoms are still bad you have weight

loss and hair loss and you're sick and

stuff now the cancer is gone or going

away markets can actually rally markets

can rally on this kind of uh dare I say

pivot I would call this more of a U-turn

uh because the FED is done

right that that's that's good so that

would be good

in recession number two you have screwed

fundamentals but at the same time

inflation has not been destroyed well

then you have real problems right then

you're in the worst case scenario uh

this is in this scenario on the right

you probably don't want to own stocks

right now and in the scenario on the

left you probably do want to own stocks

so that gives you a little bit of a

breakdown on retail sales uh and and the

fed's reaction to recession let's

quickly see some more Wall Street

reaction here looks like

well headline retail sales were weaker

than expected even accounting for

revisions the narrow Aggregates like

control were slightly better than

expected still the overall picture is

pretty weak spending as the first

quarter came to an end import prices

also fell more than expected

uh not entirely clear why front-end

yields are skyrocketing higher so front

end yields is a reference to what's

going on in the bond market you've got

the 10-year moving up about uh six basis

points and the two years moving up about

11 basis points that is odd uh I think

maybe Ah that's that is weird because

technically if you have import prices

falling and retail sales not as bad as

expected uh the oh I I could understand

this I know why okay all right I I think

I think I have an understanding okay so

import price is falling faster is good

for us getting out of that recession

right or prevent potentially preventing

it which seems like a long shot at this

point it seems like it's going to happen

anyway retail sales being better is good

uh so you have inflationary numbers

coming down with retail sales coming in

better than expected so why would the

treasury market potentially send yields

up in other words why would people

potentially be dumping bonds

and doing something else with their

money

because maybe they realize inflation is

going to be dead sooner than we expect

without having to go into a deep

recession it seems like the more people

believe we're going into a deep

recession the more they buy bonds and

the more we believe we're not going into

a deep recession the less they buy a

bonds that's why during the banking

crisis everybody was jumping in to buy

bonds because they're like flight to

safety everything's going to hell and

the less the banking crisis seemed like

an issue the more uh the the more

relaxation we saw on some of those

plummeting yields on treasuries and

that's why I think we're sitting at

about 3.52 right now as opposed to the

3.32-ish low that we ended up getting to

so very very mixed picture here but

hopefully that gives a little bit of

insight into what actually happened here

with the retail sales uh I would call it

a little a little messy there but I

think we got to the bottom