Old Themes and Retail Schadenfreude

The past two days have seen a return to good old fashioned data and CB watching with the market entranced with the tussle between the ECB and FED over who, what, how much and when rates will start to move. Shock headlines of global strife are just "So passé, darling". Just look at today, "*PORTUGUESE 5-YR NOTE YIELD ABOVE 9% FIRST TIME IN EURO ERA", but it's looking as though Portugal could fall off Spain and vanish, Atlantis style, into the ocean and the markets wouldn't care. IRISH LIFE CLOSES SOMETHING? Bothered?

As far as Fed watching goes, the market appears to have its opera-glasses focused on the peanut throwing galleries occupied by the "ers" of Plosser, Fisher, Lacker etc and their buddy Bullard, rather than on the stage and the main players of Bernanke, Dudley and Yellen. The heckling, for us, does not yet drown out the chorus from the stage which points to 2012 being the earliest likelihood for hikes.

As for data, we wondered last week if this is all the more important, post Japan and Libya, as we need to see how sentiment has been touched. We also surmised that we don’t think it has. Obviously the spinning brass balls on the governor of sentiment and growth is Oil. TMM note that while interest in energy equities remains strong, open interest at NYMEX has dropped for crude. Perhaps the recognition that in Bahrain and Saudi, as one political scientist noted, "suppression works" and in Libya the major oil producing areas are conclusively in the hands of the rebels lowering the risk of a super spike. The recent price rises have seen little change to demand but have poured and extra (guesstimate) $300 bio to OPEC producers coffers but the latest BBCBlx figs have it at 1 trillion (BBCBlx - similarly reliable source of data to the ONS).

And talking of the ONS, as this post lunges between topics, they have just announced that "ONS ESTIMATES UK BUDGET MEASURES WILL ADD 0.29 PERCENTAGE POINTS TO CPI, BIGGEST IMPACT FROM TOBACCO DUTY". Unsurprisingly, Short Sterling Interest Rate Futures got smoked. TMM think this could be a new twist of government policy. If you want lower inflation and the BoE not to raise rates, then stop smoking.

But one headline that TMM were particularly interested in today was Dixons' profit warning and resulting price fall of 20%. We are sad that the UK retail sector is still showing signs of stress, HOWEVER, we are mightily pleased to see an organisation that has for years been responsible for so much of TMM's shopping ire, finally take a kick from the markets in exactly the same spot TMM have many times considered hoofing their sales staff. Dixon Group's "PC World", is, in TMM's eyes, the spawn of the devil. Its continued existence selling overpriced electronic basics in cavernous retail warehouses populated with staff less knowledgeable than nearly all of its customers, had TMM thinking that the whole set up must either have been a Triad money laundering operation or the retail equivalent of a CDO squared - i.e. had lost track of the underlying asset (the customer) and was running on fresh air and accountancy. Dixons is very HMVesque. Both have been competing with online stores for years and instead of adapting to become fonts of "go to" knowledge and expertise have instead just alienated their client base with a "we know best" arrogance. Management genius can only take you so far before the inevitable kicks in.

So perhaps we should see any demise in the old fashioned retailer, not as a sign of worry, but as a sign of a turn for the better. A cleaning out, a part of the process that is already being discussed with respect to the USA where, after 2 1/2 years of life support, some difficult decisions need to be taken and final farewells said to old loved ones.

Or in the case of PC World, Not. TMM are fighting each other to get to the plug.