Black Friday’s Upside Surprise

Following Friday’s buying stampede — in both stores and equity markets — there will be a tendency to discount the bad news, and  declare all is well in the world. 

Black Friday Retail sales will be interpreted and extrapolated to mean there will be no recession, its doubtful of even a slowdown, the worst of the Housing and Credit Crunch is behind us, and the markets will be just fine. 

I am not a buyer of that pablum.

In a paroxysm of fear, coupled with a small salting of reality, Retail stores pulled out all the stops for this holiday season: They opened on Thanksgiving Day or 4 am Friday, they discounted early and often, they slashed prices at the expense of their own margins.

Consumers rose to the bait: They continued spending more than they could afford, only instead of tapping home equity, they went to their credit cards. However, the total weekend sales were not nearly as rosy.

Despite the obvious absurdity of it all, this will be deemed economically positive by the usual suspects.

This now sets up the final rally of the 2002-07 bull run. We should see a decent (but not great) year end run. As stocks trade higher into December,  it creates an ideal opportunity for many to reposition their portfolios, batten down the hatches, and await the storm.


More on this later . . .

Update:  Or not!

SPX: November 26, 2007

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What's been said:

Discussions found on the web:
  1. Marcus Aurelius commented on Nov 26

    Shorter BP: Son, You know your crazy aunt we keep locked in the attic? Well, she’s still crazy.

  2. eduardo tendero commented on Nov 26

    Should we need here an economist or rather a psychiatrist?

  3. dan commented on Nov 26

    BR, is this the same bear call you made three years ago?


    BR: No. Since then, there have been many other Bull and Bear calls.

  4. Bob_in_MA commented on Nov 26

    Last night there was a headline on Bloomberg, “Japanese stocks rise on US holiday spending.” It noted Honda was up 3%… Theey make great stocking stuffers!

  5. mhm commented on Nov 26

    “Should we need here an economist or rather a psychiatrist?”

    A psychiatrist. The year end celebrations always bring good mood and hope for better days to come. Unless you are Uncle Scrooge.

    No matter how bleak or daring the situation is, people are allowed to escape for a few days. Let it be. You should join the party too, just don’t overstay it.

  6. DC commented on Nov 26

    So dan, care to make a call? Put-up or shut-up.

  7. Deborah commented on Nov 26

    The Financial Times a couple days ago questioned whether it was financially worth retailers opening early on Black Friday when you consider the extra staff, security and overhead costs to be open selling loss leaders.

  8. tjofpa commented on Nov 26

    Couldn’t agree more, Barry

    The GS sell call on the Big C rang in the year end rally.

  9. MarkTX commented on Nov 26

    Yeah I hear ya Bob

    The Hang Seng dialed up a 1000 point move,

    are they riding the US coat tail?

    Europe is currently flat to red.

  10. Ben commented on Nov 26

    What makes this year’s discounting any different from last year? I agree that consumer behavior could change, but you could have written this piece anytime in the past 20 years and been dead wrong. It seems rumors of the death of the consumer have been greatly exagerated. I have been bearish too, but I don’t want to ignore evidence to the contrary.

  11. jameslgb commented on Nov 26

    Black Friday may have been busy, but Saturday the stores were practically empty of shoppers, Target, the Macon Mall, Sam’s Club & a couple of small retailers I stopped at were doing little if any business.
    I expect the retailers will be desperate for customers until the final three days before Christmas.

  12. John Bennett commented on Nov 26

    A far greater concern than retail sales is “the credit crunch is back stronger than ever”.Look out below no Santa Claus rally!

  13. Barry Ritholtz commented on Nov 26

    prior post deleted


    I do not have time to individually correct every troll who comes around to misquote me. The fastest way to get yourself banned from here is misquoting me (which you just did)

    Check back in a month . . .

  14. attobuoy commented on Nov 26

    What struck me about Black Friday was a new aggressiveness (dare I say desperation?) among the small stall operators in a mall I walked into about 8:30 PM. Did anyone else happen to notice similar new aggressiveness?

    And hey there dan, you haven’t been paying attention for the past three years. Barry has calls bottoms and tops better than most. Yes, he’s a worrywart, and for that I value him. But amid worrying he sees when the market is about to turn either way.

  15. Donny commented on Nov 26

    I really don’t see how a run up in the Dow is possible before year end. The (bad) news keeps trickling out day after day.

    It’s kind a like the Bears are checking off all the symptoms of a nasty recession.

  16. Gene commented on Nov 26

    I know you love this stuff, so let me give you the holiday weekend update from the westside of LA.

    Now, unlike NY, it seems to me like most people leave LA on Thanksgiving (particularly on the west side of town). And this is the first time I’ve been in LA for Thanksgiving in about 10 years.

    Anyway, on Thursday evening, I was driving home and drove passed Best Buy in Hollywood. There were people lined up 3/4 of the way up the block (some in tents) at 9pm. Nuts.

    Shopping was on our agenda for the weekend as we’re finishing the remodel and will be moving back home in three weeks. My wife thought it would be crazy, I thought it would be not a problem.

    First, I went to Best Buy on Friday around 9:30 to pick up the TV for the kitchen and a Blu-Ray player. No problem parking. The store was active, but not crazy and there was no line at checkout. the heavily discounted items I wanted were in plentiful supply. I’d say it was marginally busier than a normal weekend. At 10:30 we were at the Grove, probably the most successful retail development in LA history. Normally, it’s a zoo on any weekend. At 10:30 to 11:30 Friday, it was barren. A bit later we were at the Beverly Center. Also, seemed lighter than a normal weekend (no problem getting in or out). On Saturday late afternoon, we hit the Westside Pavillion. Now, going there at 6pm is probably not a good indicator, but the place was empty (but for the young kids in the giant plastic fruit playground). The furniture stores we hit around town were also decidedly empty all weekend (I guess no one is buying couches as Christmas presents).

    So there you have it. I’m interested to see what the professional reports say, but at least this observer in one town didn’t see much activity.

    Off the to car show this afternoon, though I think the new Lambo will have to wait. This house project is expensive!

  17. Vader commented on Nov 26

    Sales per customer were down.

    “Yet the National Retail Federation, which represents retailers, said Sunday that shoppers spent an average of $347.44, down 3.5 percent from a year ago’s $360.15, even though more than 47 million shoppers hit stores during the weekend, up 4.8 percent from last year.”,CST-FIN-retail26.article

  18. Cherry commented on Nov 26

    The weekend bombed. No more needs to be said. “Black Friday” is a media and retail industry driven frenzy of stupidity. It is the weekend that counts because it signals what the following weeks will look like.

    No “Grinchmas” this year, but Santa has bad IBS and acid reflux.

  19. alexd commented on Nov 26

    I live close to all the McStores. I needed a new mp3 player because I inadvertantly found that it does not make good bait. (Picture the player hanging from the headphone wires about a foot in the Huron River.) It also does not work after the dunking. So I went online to find what I wanted, read customer reviews, and saved well over 20 dollars and received free shipping and a free case. I figure I am not the only one to do this. (I no longer believe Al Gore invented the Internet just for me!) I saw this morning that on Black Friday 32% of the people made purchases online. I do not know the magnitude of the purchases. What is important is how this might effect local economies.

    As far as Honda making more money by making more sales. Cmon now have you gone to the gas pumps? Who in their right mind might want a high quality car that gets very good gas milage? Is Detroit offering these two things? In this case someone is eating someone elses lunch.

  20. tom pitts commented on Nov 26

    I broke down and finally got an hdtv.

  21. Short Man commented on Nov 26

    My take:

    1. Agree with many of the observations here. Black Friday itself was probably alright due to deep discounting and retailers opening earlier than ever. Plus, more people are on a tighter budget so they NEED the savings in order to maximize what they can get. Really, just stealing more sales from later on in the shopping period as well increasing the % of loss leaders and low margin items sold.

    2. Retail gifty-type items will be the last area to slow down as psychologically it is critically important for people to at least portray a semblance of success and normalcy to close friends and family. They will, however, cut down on items for themselves and durable goods.

  22. schnauser commented on Nov 26

    everyone is waiting to sell this rally, therefore I don’t think we’re really going to get much of one. retail is a joke. is gold a safe haven yet? or will it continue to trade with the stock market?

  23. Michael M commented on Nov 26

    Three of the most concerned/bearish voices I follow have recently turned sort of short term bullish: Kass thinks we have made a low for the year, Barry thinks we will ramp in to year end, and Todd Harrison is sort of bearish still but “dancing between the elephants with some long names”. Also, Saut is very bearish at this point but short term bullish as he’s out today saying pretty much the same as Barry just wrote.

    With the indexes at these levels this cannot be “throwing in the towel”. Does it tell us that even the bears have been so burned this year that they can’t believe the slide will continue? Or does it mean that short term negativity is running ahead of the market?

    At least for those who think that we need to take out some of all the bears before we can go meaningfully lower it seems that that condition is now close to satisfied.

    As for retail, I just don’t see how retail can lead us higher if news like this keeps hitting:

    “Citigroup shares fell Monday after CNBC TV reported the firm could lay off up to 45,000 staffers.”

  24. Eric Sebille commented on Nov 26


    It seems it is time for you to go and call out Mr. Luskin on Kudlow. It appears your subprime spillover call was much better than his call that the Fed will hike rates in September, when you guys sparred back in April. Logic always prevails over blind optimism.


  25. michael schymacher commented on Nov 26

    regarding the announcements about layoffs…

    Is it not just a wee bit coincidental that the dreaded “L” word gets more play in the two weeks prior to the fed meeting??

    It sure did last time…..

    C plans to lay off between 17k and 45k.

    If that is not designed to cause a bit of panic…..I bet Cramer will really start caring about all his friends getting laid off right about this time next week. But since he hates Citigroup maybe not

    The people I really feel sorry for are the ones who got duped into buying CFC stock for a long term hold…..I know of several people who are doing exactly as the big banks are….holding and hoping…..

    In August CFC tried to get customers (loan brokers) to buy it’s stock because is was such a “good opp.” at between 22 and 24 a share………


  26. Barry Ritholtz commented on Nov 26

    Hey Eric,

    I have a problem with lying down with Dogs and getting up with fleas.

    If I wanted to dis luskin on his track record, I would point to his Macro-funds, down 50 or 60 or 70% or so before they were shuttered.

    But what does that get me? His track record is out there, he’s not worth wasting the pixels on.

  27. trohat commented on Nov 26

    Semantics question: I’m trying to interpret your use of pablum, “a processed cereal for infants”. Is that like drivel — relating to what the herd is telling themselves? Never heard that usage before. Is it a NY/Street thing?

  28. halbhh commented on Nov 26


    It’s a dangerous thing.

    The sales only tell us people will tend to continue their past patterns. No more, no less.

    Trying to read it negative is just as much about replacing reality with theory as trying to read it any other way.

    The weakness, and it’s pronounced, here on the blog is too much reliance on theories without enough eagerness to shoot down your own theories!

    Objective means to search for information that invalidates your own theories, mindset.

    Objective isn’t easy.

    I’m always wary when everyone is repeating the same ideas over and over.

    That’s Mindset. Mindset usually turns out not to be realistic, because it’s like doctrine.

    Let’s be less about proving ourselves right, and more about seeking out further information and insight, folks.

    In case someone wants to mis-characterize me, let me say I’ve expected a 1/3 fall in house prices for about 2 years.

  29. ryan commented on Nov 26

    A source who works at a Best Buy over here in the Northwest says that they had budgeted to lose 16 cents for every dollar of revenue on Black Friday because they were hoping to make up for it later with repeat business. My question is, at what point does this mad discounting bottom. Can you continually give these discounts and then take them away at some point. Seems like a slippery slope.

  30. Bob A commented on Nov 26

    I wonder if we’re seeing larger numbers of shoppers because people are shopping for entertainment instead of flying or driving somewhere for the holiday.

    Not to mention hordes of Canadians flocking south to buy. At Blaine, WA friday afternoon the waits were 4 hours going south due to Canadians headed to outlet malls along I-5. They’re all manic over they’re strong dollar. Don’t know why they come down hear really because they have most of the big chains like Walmart and Home Depot up there already, but I hear they’re buying a lot of used cars.

  31. NoFate commented on Nov 26

    Based on the market today, I’m glad I bought a bunch of shorts late Friday!

    Christmas List:
    1) Short enough stocks you won’t have to work next year.
    2) Wait for lay-offs.

  32. stan commented on Nov 26

    FYI/FWIW, we went over to walk the mall Black Friday evening and were underwhelmed by the modest traffic and lack of serious shoppers. A stop at Wal-Mart was unusually quiet on Monday as well… zero wait time at the checkout.

  33. Pat Gorup commented on Nov 26

    What might have been missed in all the yap over Black Friday is that there was 5% more folks in lines that morning than in 2007 at discount retailers like Walmart.
    This would suggest to me that more folks felt compelled to stretch their Holiday dollars this year than last.
    That should speak volumes about the current state of the consumer.

  34. Joe Banks commented on Nov 26

    Colorado Springs was dead and starting to stink at almost all the retailers. The mall was so dead I wish I had brought a shovel. The local news was at the mall around 8:00 am not a single person walked by in the background. Oh yeah everything is just find move along move along.

  35. contrary canary commented on Nov 27

    I thought the shopping stats showed a 7% increase in sales. Doesn’t that in some small way bode well?

    And yet all I read here are anecdotal tales of “I drove by the mall and didn’t really see that many cars, I went inside and it didn’t seem that busy compared to how I remember it from years past, etc” – are we going with the hard numbers, or with fishing stories?

    I know it sounds much more clever and worldly to be bearish, but if the sales numbers are up so far I think you have to give that phenomenon some credence.

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