Consensus Advisors: X(mas) Factors
Commentary by Michael A. O’Hara
Through a special arrangement, presented here for discussion is a summary
of a current article from Consensus Advisors, a boutique investment and advisory
firm specializing in the retail industry.
As we consider the stream of macro news stories arriving daily and last week’s
election results, it makes sense to explore some of the x-factors that could
cause actual results to differ materially, positively or negatively, from these
Possible Negative Stimulants:
Geopolitical Activity. Recent news of foiled terrorism plots still
remind us that there are people out there who gain from unsettling our culture,
and the ultimate goal of these people is not to blow up one synagogue or subway
station, but to permanently alter our way of living.
Commercial Real Estate. There has been much discussion in the press
about the re-valuing of home mortgage assets held by banks, but the average
American has no visibility into the value of commercial real estate (office,
industrial, multi-family housing and retail) loans held by lending institutions.
We hope that these assets are also now properly booked but beware if some high
profile property collapses a few weeks before Christmas. The wrong story could
trigger broad-based discussion of a double-dip recession in the press and among
the consuming public.
Residential Real Estate. It is hard to imagine any good news coming
from this sector over the coming two months. The best we can hope for is the
absence of more bad news of significance.
Unemployment: While the release of unemployment statistics in November
and December are likely not to deepen shopper anxiety this holiday, new layoff
announcements at the local level can have geometric effects regionally.
Possible Positive Stimulants:
The November Elections. The economy should benefit if the political
parties in Washington can come to an agreement on ways to address unemployment
and grow the GDP.
Income Taxes. If anything is done to avoid a tax increase or even
cut taxes over the next month, it is likely to have a positive effect on the
private sector consumer’s sense of his or her wealth.
Corporate Earnings and the Stock Market. Most of the third-quarter
earnings reports from major public companies are good or at least as expected. The
Dow Jones Industrial Average has climbed over 11 percent since August 26. With
careful inventory management, cost cutting measures and the value of the U.S.
dollar helping our exporters, corporations and the stock market may well offer
the perception of stock portfolio stability (or possibly gain) to shoppers
as they enter the mall on Black Friday.
Technology. Three years ago, when I sat in my easy chair, I was pretty
much limited to reading the newspaper or a book. Today, I can do that plus
search the web, download music, listen to a radio channel that plays songs
geared specifically to my taste, watch videos, chat with my friends, check
my work calendar, monitor the Celtics game, plan a vacation and work on a spreadsheet,
all through a magical device called the iPad. These devices will stimulate
the consumer’s imagination during the holidays this year like never before.
Discussion Questions: What would be your positive and negative X factors
that could make or break the upcoming holiday selling season? Are there others
you would add that may have been missing in the article?