8/14/07

Economics

July retail sales were up .3% versus expectations of a rise of .2%; ex autos, July sales increased .4% in line with expectations; June retail sales were revised from down .4% to down .2%. both the July sales and the June revisions are positive signs that the consumer is not collapsing.

On the other hand, last week’s sales by major retailers as reported by the International Council of Shopping Center fell again, this time by .9%; though sales were up 2.3% on a year over year basis. The brutally hot weather country-wide was blamed for the disappointing results.

June business inventories rose .4% in line with expectations; June business sales declined .3%--a mildly disappointing number.

The producer price index (PPI) rose .6% in July versus expectations of an increase of .2%--oil was mostly to blame. The core PPI was up a modest .1% versus expectations of up .2%. Our inflation forecast remains on target.

The June trade deficit rose $58.1 billion versus expectations of an increase of $61.1 billion--the recent weakness in the dollar the explanation.

Politics

Domestic

International War Against Radical Islam

The Market

Technical

Fundamental

The announcement by Goldman Sachs that it was investing an additional $3 billion in a quantitative arbitrage fund (‘quant’ funds have also been victims of the sub prime problem) helped stabilize the Market. Great spin, but it has little to do with the current credit problems. It is still NOT time to buy the financials.

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