Retail Sales are Booming…

We are in the final stretch before Christmas. Yes,
the blatant commercialization of a great holiday gets old. But it never
manages to dampen my Christmas spirit.

Online sales are up 12% over last year. And brick
and mortar sales are coming in strong too. SpendingPulse reports that
clothing sales are up 9.8%, jewelry’s up 2.6% and furniture sales are up
3.4% over last year.

Unfortunately, retail stocks haven’t done well after
that early November rally.

*****The S&P 500 looks poised to challenge
resistance at 1,250 today, despite the threat of downgrades for European
countries
France, Spain and Belgium.

No surprise the euro is down against the U.S.
dollar. And European stocks are also clearly enjoying a “weak currency”
bounce, just like the one that carried
U.S. stocks to their current
level.

Now, U.S.
investors have to get more comfortable with a
strengthening economy as the next catalyst for stocks.

GDP estimates for 4Q and
2011, are rising. Goldman Sachs just upped its 2%
GDP growth target for 2011 to
3.4%.

That’s a healthy upgrade, especially when we
consider that 2.5% growth is needed to bring the unemployment rate down.
So Goldman is basically changing its outlook from one where the

U.S. continues to lose
jobs, to one where we could actually add a significant amount of jobs.

Of course, more jobs means more income and more
spending. And while that would certainly raise inflation expectations, it
also raises the potential for a virtuous cycle of faster growth and
falling unemployment.

It still seems to me that energy stocks, and
especially oil stocks, are one of the big beneficiaries. If growth
remains tepid, oil benefits from the weak dollar. If growth picks up, oil
benefits from increasing demand. It’s win/win for oil.

*****New price targets for Apple
(Nasdaq:
AAPL)
suggest a +$400 billion market cap. That would make Apple the world’s
biggest company and its market cap would rival countries like

Belgium,
Poland and
Sweden.

Of course it’s not a fair comparison to pit a
corporation against a country. Still, I wonder if you’d rather be Apple
CEO Steve Jobs or own
Sweden?

As Steve Jobs, you’d be ridiculously wealthy. But
think about the pressure to keep churning out top selling
gadgets…

*****England
appears set to start raising interest rates next
year. And
England‘s government is starting to implement budget cuts, also known
as “austerity measures” valued at around $200 million.

That would approximate to roughly $600 million in
budget cuts here in the
U.S.

Despite the recent Congressional election that
seemed to validate the grass root “austerity” movement in the U.S., our
Congress just extended tax cuts that are estimated to $858
billion.

What gives? Is “austerity” real, or is it a
political buzzword?

On a household level, Americans have imposed some
austerity. Savings are up and debt is down. But it’s the exact opposite
at the Federal level.

Are our political leaders operating against the will
of the people? Or are they reflecting the localized will of constituents
who don’t want to see their earmarks cut?

I think it’s an interesting question because it
seems to me that elected officials lose votes if they cut spending. Cut
Medicare, and retirees vote you out. Cut farm subsidies and farmers vote
you out.

I’d like to hear your thoughts, and solutions about
austerity:

[email protected]

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