David A. Rosenberg
November 12, 2009
Chief Economist & Strategist
+ 1 416 681 8919
MARKET MUSINGS & DATA DECIPHERING
Afternoon Tea with Dave
U.S. CHAIN-STORE SALES BELOW PLAN?
According to the Redbook survey, same-store sales were running at +1.7% YoY
as of November 7th — below the target of +2.2%. Remember, the comps are
very “easy” given last year's meltdown, so +1.7% is actually quite poor.
According to the Redbook
survey, same-store sales in
the U.S. are coming in below
As for any inflation pressure — it is just not there. The Redbook said “Holiday
merchandise is beginning to be displayed in stores as retailers are promoting
earlier than usual. Some stores are already in a rush to cut prices and extend
store hours in an effort to create a “Black Friday” everyday.”
WHAT ARE U.S. EARNINGS DOING?
So far, Q3 S&P 500 operating EPS is coming in at $15.27 — still down around
2% YoY from a year ago and well below the $21.11 consensus expectation at
the start of the year. Still no evidence of a turnaround in sales — deflating
10.7% YoY for what will be the fourth decline in a row. Cost cutting and
productivity gains remain the dominant theme, hence operating margins are
holding at a high level of 7.23% (versus the 15-year average of 6.60%).
M&A a positive underpinning
— deal flow is coming back
Who’s buying in the equity
markets? Answer, hedge
funds, equity portfolio
managers and those
covering short positions
MERGERS & ACQUISTIONS A POSITIVE UNDERPINNING
Deal flow is coming back, with premiums to boot — so far this year, there have
been 5,851 deals (worth $636 billion). That is still down from 2008, but activity
is stabilizing. In addition, in Q3, takeover offers were made at prices that were
an average 41% above where the shares of the targeted companies were
trading a week before the announcement. The gap is normally 32%.
SHORTS STILL BEING COVERED
When looking for where the buying power for U.S. equitie