Monday, November 28, 2016


[11/27/16]  Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online.
Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday.
Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0 percent over the two days, while the number of transactions fell 7.9 percent.
Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1 percent during Thanksgiving and Black Friday when compared with the same days in 2015.
The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day.
“We knew it (holiday season) was going to be off to a slow start,” Shelley Kohan, vice president of retail consulting at RetailNext, said.
“The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn,” she said, adding that she saw sales picking up in December.
Net sales on Black Friday slid 10.4 percent for brick-and-mortar chains, according to RetailNext.
“Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn’t see the crowds they saw in previous years,” NPD group’s Chief Industry analyst Marshal Cohen said.

Black-Friday Woes: When the Death of Department Stores Began and Where We’re Today

They no longer shop till they drop.
Black Friday is when you’re supposed to shop till you drop. It kicks off the holiday selling season. No season is more sacred for retailers. They’re expected to do about 40% of their annual sales in those few weeks till Christmas.
The National Retail Federation is bubbling over with enthusiasm, expecting holiday sales to grow 3.6% this year to $656 billion. Since Trump has won the election, consumer optimism about the economy has surged, and this is expected to be one hot holiday selling season.
But not today, not at brick-and-mortar retailers, according to Reuters:

“Initial reports show it’s steady and not very busy at stores around the country,” explained Craig Johnson, president at Customer Growth Partners. The retail consultancy deployed 18 people to observe customer traffic across the country.
Store traffic remained subdued across the country, according to spot checks made by Reuters reporters and industry officials.
Rain hurt shopping at stores in the Northeast, Johnson said, but some retailers like Best Buy and Wal-Mart saw improved customer traffic at stores across the country.
Macy’s and Best Buy on Chicago’s Magnificent Mile were packed, but employees said most of the customers were tourists.
Chicago’s State Street, a normally bustling shopping area popular with locals, was desolate.
The Los Angeles Times reported a similarly gloomy scenario from Southern California:
Shoppers out in the early hours on Black Friday roamed stores in Southern California that they say were emptier than in years past.
At 4 a.m. at a Target in Duarte, Michael Chung, 40, and his three children said many of the store’s doorbuster items were still in stock. Last year, he recalled, many already had sold out by that predawn hour.
“There’s less people, and you don’t feel the holiday spirit,” said the seven-year veteran of Black Friday sales. “It’s scary. It doesn’t feel like Black Friday. This year is very weird.”
The multigenerational clans that normally swarm around malls together on Black Friday were also scarce:
“That multigenerational tradition for some families is 50, 60 years in the making,” said Britt Beemer, founder of America’s Research Group. “They drive about 25% of mall sales on Black Friday. If they don’t show up, mall retailers are going to see a significant decline in sales.”
There are still four weeks left to pull out the year. And hopes persists that this year will be decent.
But online sales are hot, according to Adobe Digital Index, cited by Reuters. Online shoppers blew $1.15 billion on Thanksgiving Day, between midnight and 5 pm ET, according to Adobe Digital Index, up nearly 14% from a year ago.
Sales by ecommerce retailers have been sizzling for years, growing consistently between 14% and 16% year-over-year and eating with voracious appetite the stale lunch of brick-and-mortar stores, particularly department stores.
The lunch-eating process began in 2001. The chart below shows monthly department store sales, seasonally adjusted, since 1992. Note the surge in sales in the 1990s, driven by population growth, an improving economy, and inflation (retail sales are mercifully not adjusted for inflation). But sales began to flatten out in 1999. The spike in January 2001 (on a seasonally adjusted basis!) marked the end of the great American department store boom:
Even as the US fell into a recession in March 2001, ecommerce took off. But department store sales began their long decline, from nearly $20 billion in January 2001 to just $12.7 billion in October 2016, despite 14% population growth and 36% inflation!
The decline of department stores is finding no respite during the holiday season. Not-seasonally-adjusted data spikes in October, November, and December. But these spikes have been shrinking, from their peak in December 2000 of $34.3 billion to $23.4 billion in December 2015, a 32% plunge, despite, once again, 14% population growth and 36% inflation!
In other words: the brick-and-mortar operations of department stores are becoming irrelevant.
Ecommerce sales include all kinds of merchandise, not just the merchandise available in department stores. So it’s a broader measure. They have skyrocket from $4.5 billion in Q4 1999 ($1.5 billion a month on average) to $101 billion in Q3 2016 ($33.7 billion a month on average). This chart compares ecommerce and department store sales on a quarterly basis:
The only time ecommerce sales fell beyond normal seasonal variations was during the Financial Crisis. This year too, they’re booming at the expense of department stores and brick-and-mortar retailers in general.
Department stores have begun shuttering stores and selling off properties, not only zombie companies like Sears, but also relatively healthy companies (in comparison to Sears), including Macy’s, which announced another wave of store closings in August and sold its men’s store at Union Square in San Francisco, at peak dollars, for redevelopment.
Brick-and-mortar department stores are dying a slow death, and nothing is going to save them. It will just take a while. The good ones will be able to grow their online presence and survive in trimmed-down form. The bad ones will fall by the wayside. Investors thinking that excellent strategic planning and execution can produce some kind of lasting upswing are deluding themselves. Even a miraculous multi-year boom in the overall economy can’t stop brick-and-mortar operations of department stores from turning into zombies.

Shipbuilding in Japan, Korea, China Collapses in Death Spiral of Orders – “Worse Than The One Following The Global Financial Crisis.”

New orders received by Chinese shipyards – now infamous for undercutting competitors and sinking into bankruptcy – have plunged 58.5% so far this year through October, compared to last year, according to shipping industry data provider BIMCO, cited by the Nikkei. At South Korean shipyards, which include the three largest in the world, orders have plunged 84.2%; at Japanese shipyards, 90%.
They all focused on large dry-bulk vessels, tankers, and containerships. But this year, orders for tankers globally plunged 80% and for container ships 84%.
Global trade, which collapsed during the Financial Crisis but then recovered in a V-shaped manner, was expected to continue soaring. Instead, it has languished over the past few years. Carriers that transport these goods in dry-bulk vessels, tankers, and container ships, face rampant overcapacity and crushed shipping rates. Smaller ones have sunk. In August, Hanjin, the sixth largest carrier and a formerly too-big-to-fail company in South Korea, was allowed to fail. And they all stopped ordering ships.
However, orders at European shipyards have jumped 45% through the first eight months this year. On the global scale, they’re small players, accounting for only 9.3% of the order book. But they focus on the smaller thriving market for cruise ships, ferries, and tugs.
Globally, orders for ships plunged 77% so far this year through October. But 2015 had already been down 13% from 2014. And 2014 had been down 26% from 2013, the first good year since before the Financial Crisis. In 2007, orders had peaked at 92 million compensated gross tons (CGT). So far this year, orders are down to 10 million CGT.
At this rate, 2016 will be the worst year in BIMCO’s data series going back to 1996. Even back then, orders amounted to 18 million CGT.
No industry can survive for long when orders collapse at these rates. But next year might be worse, according to Peter Sand, BIMCO’s chief shipping analyst. For the Asian shipbuilders concentrated in the container, dry-bulk or offshore segments, “there is a possibility for postponements and cancellations.” Outright cancellations are bad enough. But “postponements can add a further headache to the shipyards’ liquidity, as the final payments in these cases may be delayed.”

Among the collapsed shipbuilders is South Korea’s STX Offshore & Shipbuilding, which filed for court protection in May. No country is more dependent on shipbuilding than South Korea: it accounted for 7.1% of manufacturing jobs in 2015.
Korea’s Big Three – Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries – have been dumping noncore assets and shedding employees as part of prior creditor-led restructuring plans. Even that wasn’t enough. At the end of October, the government announced a bailout plan: it would order 250 vessels through 2020, valued at $9.6 billion, but they’ll be smaller ships and boats, not the big, former money-makers that these shipyards really need.

That may not be enough either. On November 15, Hyundai Heavy announced it would sell its non-shipbuilding businesses, including utilities, construction equipment manufacturing, and robotics, to get out from under its suffocating load of debt. Samsung Heavy said it would lay off 30% to 40% of its 14,000 employees by 2018. Daewoo Shipbuilding said it would lay off 20% of its employees by 2020.
In China, bankruptcies are piling up. In April and May:  Zhong Chuan Heavy Industry, Zhong Chuan Heavy Industry Equipment, Zhoushan Xuhua Metal Material, Zhenjiang Shipbuilding (subsidiary of Sinopacific Shipbuilding Group), and Yangzhou Dayang Shipbuilding. Plus, in February, state-owned Sainty Marine; in December 2015, state-owned Wuzhou Shipyard; and earlier in 2015, privately owned Mingde Heavy Industries.
But many of these failed shipbuilders, propped up by state-owned lenders, continue to exist and get orders by undercutting prices and producing below production costs. They’re called zombies.
In October, Guo Dacheng, chairman of the China Association of the National Shipbuilding Industry, said that these zombies should be quickly weeded out, according to the Nikkei; they were damaging the entire industry.
To say alive, other shipbuilders are diversifying away from dry-bulk carriers and container ships; they’re now trying to muscle in on European shipyards by building ferries and cruise ships. If they do this successfully, they’ll create the next glut and collapse.
It won’t be easy. Japan’s big shipbuilders are already trying to diversify into cruise ships, but that hasn’t worked out very well yet. The Nikkei:
After a pause of around a decade, Mitsubishi Heavy Industries restarted building large passenger ships in 2013, a more lucrative segment than container ships. However, the company indicated in October that its Nagasaki Shipyard & Machinery Works unit had lost more than 250 billion yen ($2.25 billion) on an order from a U.S. cruise line for two vessels amid repeated design changes and costs from importing European equipment.
As a consequence, Mitsubishi said in October that it will only accept orders from hereon for smaller passenger vessels while seeking more orders for LNG carriers.
So now, the big Japanese shipbuilders are trying to stay alive by consolidating. Imabari Shipbuilding (5th largest in the world), Oshima Shipbuilding, and Namura Shipbuilding all specialize in dry-bulk carriers. Now they’re in discussions with Mitsubishi Heavy about putting their resources together and get into cruise ships. Combined, they’d make the second largest shipbuilder in the world, if they all survive long enough to get out of this slump.
It could take a while. “The industry won’t recover until 2021,” explained Yoshikazu Nakaya, a shipping analyst with Mizuho Bank. He called the fiasco “worse than the one following the Global Financial Crisis.”

I Don’t Think This Dollar Rally Is Over – Europe Has A Lot Of Issues Yet To Be Resolved, There Are A Number Of Important Elections Coming Up Over There…

by Dave
On Friday gold fell -4.20 to 1186.10 on heavy volume, and silver rose +0.15 to 16.59 on very heavy volume. Gold and silver both sold off early in Asia making new lows, and then managed to recover somewhat – with silver doing substantially better than gold.
On the week, gold fell -21.20 [-1.76%], silver dropped -0.06 [-0.39%], GDX fell -2.09%, and GDXJ moved down -2.09%. In addition, platinum dropped -1.65%, palladium rose +2.07%, while copper screamed up +8.70%. Copper is now trading at 2.69, up 28% over just the last month. Copper is seriously overbought, but it still seems to be motoring higher.
Gold’s break through 1200 support was the major event in PM this week. On Friday, gold made a new low to 1170.30 before bouncing back. The drive through 1200 occurred on Wednesday, triggered by the dollar breaking out to new highs. Gold is now very oversold (RSI-7=11), and the “high wave” candle print on Friday is bullish: a 43% chance of a low.
If the buck cooperates by topping out, I believe we will see a bounce in gold in the very near future.
December rate-increase chances are at 94%.
This week, gold open interest fell by -62,441 contracts, almost double last week’s drop. Quoth the commercials: ka-ching! ka-ching!
Silver also made new lows this week, but ended up dropping substantially less than gold. This caused the gold/silver ratio to fall back a bit, losing -1.21 to 71.49, which seems relatively bullish. The candle print on Friday was a bullish harami, which the candle code says is quite bullish; a 73% chance of marking a low. Since copper did absurdly well this week, this probably helped provide some measure of support for silver.
Miners drifted sideways and lower this week; they managed to avoid making a new low, which is certainly better than both gold and silver, but the candle print on Friday was a bit feeble: a very low-rated “spinning top”, which the candle code gives a sub-10% chance of marking the low. There appeared to be some relatively strong buying on Wednesday (the day gold plunged through 1200 support) that kept the miners from making a new low, and over the last 3 trading days we saw the miners rally in the last 30 minutes of trading. The GDX:$GOLD ratio was up slightly on the week, while the GDXJ:GDX ratio was unchanged. Ultimately, plunging gold prices didn’t send the mining shares over the cliff, and that’s good news.
The buck rose +0.24 to 101.45, breaking to a new high of 102.02 on Thursday before retreating. The buck was very close to printing a swing high on Friday, avoiding that outcome by just 0.03. The buck is overbought (RSI-7=77) and momentum is definitely starting to slow. The candle print on Friday was just a “long black” candle, which the candle code says could go either way – although the probability of a top is higher than the rating for a continuation – around 60/40. A look at the Euro chart also shows slowing momentum, although like with the buck, there is no clear reversal yet in the Euro. The Yen is extremely oversold (RSI-7=7), but momentum for the Yen does not appear to be slowing.
US Equities/SPX
The US equity market rallied +31.45 [+1.44%] to 2213.35, making a new all time high on Friday. US small cap stocks (RUT) have been up 15 straight days – that has to be some kind of record – and both RUT and DJIA made new all time highs on Friday. SPX is overbought (RSI-7=82), but the “white marubozu” candle print on Friday is just a 15% chance of marking the top. VIX dropped -0.51 to 12.34.
This week was about materials, industrials and energy; the very strong rally in industrial metals seemed to be the proximate cause. Sickcare performed worst – and looking at the moving averages, sickcare has definitely diverged from the rest of the market.
NameChartChg (W)52w chEMA9MA50MA20050/200Last Crossinglast
MaterialsXLB2.57%8.64%risingrisingrisingfallingma50 on 2016-11-082016-11-25
IndustrialsXLI2.30%13.82%risingrisingrisingrisingema9 on 2016-11-072016-11-25
EnergyXLE2.24%7.30%risingrisingrisingfallingema9 on 2016-11-142016-11-25
Cons DiscretionaryXLY2.19%1.85%risingrisingrisingrisingma50 on 2016-11-102016-11-25
HomebuildersXHB2.13%-5.93%risingrisingrisingfallingma200 on 2016-11-172016-11-25
UtilitiesXLU1.88%10.32%risingfallingrisingfallingema9 on 2016-11-252016-11-25
TelecomXTL1.65%19.10%risingrisingrisingfallingma50 on 2016-11-082016-11-25
Cons StaplesXLP1.43%2.52%risingfallingrisingfallingema9 on 2016-11-252016-11-25
TechnologyXLK1.35%9.31%risingrisingrisingfallingma50 on 2016-11-172016-11-25
REITRWR1.35%-1.38%risingfallingrisingfallingema9 on 2016-11-222016-11-25
FinancialsXLF1.13%12.28%risingrisingrisingrisingema9 on 2016-11-072016-11-25
HealthcareXLV-0.32%-3.62%fallingfallingrisingfallingema9 on 2016-11-222016-11-25
Gold MinersGDX-2.09%53.23%fallingfallingrisingfallingema9 on 2016-11-102016-11-25
Gold in Other Currencies
Gold had a bad week in almost every currency; only in Yen did gold do well, and that’s just because JPY fell -1.90% on the week vs USD. Gold dropped in XDR by -25.90.
Rates & Commodities
TLT was almost unchanged, falling just -0.02% on the week. TLT is trying hard to put in a low, but missed a swing low this Friday by just a few pennies.
JNK rallied +1.32%, moving back to within a few pennies of its 50 MA. JNK appears to be headed back into an uptrend, although it is not quite there yet.
CRB rose +1.41%, led by a massive rally in industrial metals. CRB had some problems on Friday because of the big move down in crude oil.
Crude rose +0.13 to 45.96, rallying strongly on Tonday and Tuesday, and then plunging almost $2 on Friday. The gyrations in oil are all about expectations for the OPEC talks next week; first there was happy news from Russia saying they were on board for a production freeze, but then Friday saw the Saudis withdraw from the “non-OPEC” meeting next Monday (“why meet with non-OPEC until we get the OPEC group in line” – boom, oil drops $2), while on the same day Iraq agreed to participate in production cuts for the first time. Oil equities were down just slightly even though oil cratered on Friday. I think the setup for an oil rally is a good one. The drop on Friday sets up a slingshot for next week. I don’t think OPEC can afford to fail this time – nobody wants to see oil down at $35.
If you are feeling brave, you can buy a CL futures contract Sunday night, which is 1000 barrels of “paper oil”, or $1000 for every $1 change in the price of crude. For the poor folks (like me) there is the half-sized QM contract; a $500 gain/loss per $1 change in the underlying. If OPEC passes something, its probably a $10,000 gain per CL contract. If they don’t agree, then maybe an $8,000 loss.
Physical Supply Indicators
* SGE premium to COMEX has risen to $22.19 over COMEX. Chinese are buying the dip with both hands.
* The GLD ETF tonnage on hand fell -30.25 tons, with 885 tons in inventory.
* ETF Premium/Discount to NAV; gold closing of 1186.10 and silver closing of 16.59:
PHYS 9.66 -1.01% to NAV [down]
PSLV 6.28 -0.59% to NAV [up]
CEF 11.73 -8.95% to NAV [down]
* Bullion Vault gold (!/orderboard) showed no premiums for either gold or silver.
* Big bar premiums are lower for gold [1.92% for 100 oz bars in NYC], higher for silver [+3.43% for 1000 oz bars in NYC], and higher for silver eagles at +16.03% [NYC].
Futures Positioning
There was no COT report this week because of the Thanksgiving holiday in the US.
Moving Average Trends [9 EMA, 50 MA, 200 MA]
No material change this week. Everything is still a sea of red, although with silver and the silver miners performing best, things aren’t as bad as they could be, and the downside momentum especially for silver has definitely slowed.
NameChartChg (W)52w chEMA9MA50MA20050/200Last Crossinglast
Silver$SILVER-0.39%17.87%fallingfallingrisingfallingema9 on 2016-11-112016-11-25
Silver MinersSIL-1.21%77.09%fallingfallingrisingfallingma200 on 2016-11-112016-11-25
Platinum$PLAT-1.65%8.57%fallingfallingfallingfallingema9 on 2016-11-102016-11-25
Gold$GOLD-1.76%12.21%fallingfallingfallingfallingma200 on 2016-11-082016-11-25
Junior MinersGDXJ-2.09%80.36%fallingfallingrisingfallingma200 on 2016-11-102016-11-25
Senior MinersGDX-2.09%53.23%fallingfallingrisingfallingema9 on 2016-11-102016-11-25
Gold Manipulation Report
On Friday, two hours into the trading day in Asia, there were two 2k+ contract down spikes in a 3 minute period that took gold down about $11 to the new low of 1170.30. Buyers appeared fairly rapidly, eventually pushing price back up above the 1180 line of departure. I’d call this more bullish than bearish behavior, and if this was an attempt to break the price of gold sharply lower on the light trading day after Thanksgiving, it failed.
A dollar breakout to a new high of 102.02 caused gold to plunge through 1200 support; silver followed gold lower but was not as badly hit, and the miners bounced off support. SPX, DJIA, and RUT all made new all time highs this week. In the west, we appear to be back to a “nobody cares” situation for gold, with money pouring into equities and especially small cap stocks.  Crude is experiencing a lot of volatility because of the upcoming OPEC meeting next week; an agreement means a $10 spike higher, and a failure means crude probably drops down into to the mid-30s.
No COT report this week. The big drop in open interest for gold suggests a whole lot of short-covering by the commercials, but we won’t know the details until next Monday when the COT numbers are released.
Gold and silver big bar shortage indicators show no signs of shortage in the west; the ETF premiums were mostly lower, and GLD’s tonnage dropped. However in Shanghai, premiums have exploded, with the SGE trading at a $22 premium to COMEX, and in India there is talk of a gold import ban.
Gold is now quite oversold, silver is showing some signs of strength and may have put in a low on Friday, and the miners haven’t plunged through support just yet, so things are looking as though we may be nearing a low. For this to happen, the buck needs to cooperate. The dollar needs to top out, and for that to occur, the Euro also needs to print a low. Most likely, bonds would also need to bounce too. Momentum indicators suggest all this is possible and in the near term too. Gun to my head, do I think gold is at-or-near a low? Probably yes. It is oversold enough, momentum is slowing, the buck is starting to look a little tired – so I’d say more likely than not, yes. If not Monday, then probably by Wednesday. But I need to see a swing high in the buck to increase the odds.
One wildcard is the Indian gold import ban. If that happens, gold probably experiences another leg down, regardless of what the current TA picture is showing.
The key question in my mind is, would this be “a” low or would it be “the” low? Martin Armstrong’s indicators loom large in my mind. His computer places great emphasis on the 1200 break, and the weekly close below 1200, to him, means that gold has further to fall, and that any bounce we see now is just a reaction rally that will eventually be sold.
Armstrong likes to say that the strongest gold rally will come in the form of a “slingshot” move; first a plunge to get everyone out, and then a strong rally that nobody will want to buy because of the preceding scary plunge.  He has said for years that he expects to see a massive dollar rally that will break the back of the US economy, dragging gold below $1000 before the yellow metal “slingshots” higher on a massive “crisis of confidence in government” move.
So based on that, my answer is, this will probably be “a” low, rather than “the” low. In the longer term, I don’t think this dollar rally is over. Europe has a lot of issues yet to be resolved, there are a number of important elections coming up over there, and any one of them has the ability to turn into an existential threat to the Eurozone – not to mention the possibility of Turkey opening the “refugee tap” and letting three million Syrians flood across the border into Europe.  Those things are all Euro-negative, which would be dollar-positive.
One would think this political uncertainty would help gold, and at some point, it probably will. However, first we have to rinse out all the “I’m buying gold because of negative rates” gold longs. Are they all gone yet? That, I don’t know.
Let’s see if next week we get a bounce. And the COT, we need to see that too. And the buck, it needs to top out. Still, gold at $1180 beats gold $1370, doesn’t it? Didn’t someone say a while back “we’ll never see gold at these prices ever again?”  I was so hoping he was right.