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[Chris G]

Alan M. Newman's Stock Market CROSSCURRENTS
Alan M. Newman, Editor
December 4, 2013

There’s no way we will get involved in this madness. Although manias should occur no more than a once in a lifetime, we’ve seen two fantastic bubbles in the last 13 years and we are certain the current phase is yet another. Given the recent collapse of several key strategists (most notably David Rosenberg of Gluskin, Sheff & Associates), finally throwing in the towel and turning to the bull camp, any impetus for holdouts to remain skeptical has vanished. Consequently, we can visualize a rush into stocks for this final month of the year to make up for lost opportunity. The stage is set for a final blow off and it could take another six weeks before the momentum dissipates.

The retail sector has not looked back since the close of trading on December 31, 2012. The Market Vectors Retail ETF (RTH) is up 39.3% for the year, half again as much as the S&P 500, an astonishing gain for a sector that is so dependent upon consumer spending in a less than robust economy. However, Amazon (AMZN) now accounts for 9% of the total index and has soared 57%, which provides a nice fraction of the sector’s overall gains. We believe an overwhelming amount of confidence has been placed in the consumer’s ability to provide a huge impetus to ratchet up GDP, an outcome we see as quite unlikely. Unfortunately, there are sufficient signs of distress to doubt good times are ahead as we intend to show below. Sales will be up, but not enough to justify prices for the sector.

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