Dismal Results by Retailers Point to a Sequel to 1929

Several retail stores reported their monthly same store sales results as compared to June of 2008 this morning. All were down significantly and only one reported a decline, which was better than what analysts had been forecasting.

June 09 Same store Comparisons

Company Target Limited Gap Stores Abercrombie &Finch

Symbol TGT LTD GPS ANF

% of Change -6.2% -12% -10% -32%

Better/Worse Worse Worse Worse Worse

than estimates

Company Wet Seal Childrens Place Stage Stores Costco

Symbol WTSLA PLCE SSI COST

% of Change -11.1% -12.1% -12.6% -6%

Better/Worse Worse Worse Worse Worse

than estimates

That Costco was the only one to beat expectations is very telling because the company is known for selling its goods at deep discounts. My argument since October of 2008 is that it is likely that the consumer has adopted the same behavior that occurred after the crash of 1929. The new-found behavior of 1929 included a yearning by consumers to purchase goods and services at ever lower prices. The declines across the board for the retailers and the better than expected results for Costco indicate that the probability is increasing that the current recession could be the sequel to the 1929 depression.

The results of the retailers and Alcoa’s report of a 42% decline in revenue for its second quarter suggest that the threat of deflation is also alive and well. For more information on deflation and why I believe it poses the biggest possible risk for the U.S. and global economies I suggest a review of my article “The Boogeyman is Deflation.”.

Investors should continue to be cautious and should keep 80% of their liquidity in short term (less than one year maturities) U.S. government bonds. The remaining funds can be invested into a diversified portfolio, which is made up of companies, which reside in the online financial sector. For more information on the bear market and for my recommendations go to www.bearmarketnavigator.com.

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Company Symbol % (+/-) Worse/Better

Target TGT -6.2% Worse

Limited LTD -12% Worse

Gap Stores GPS -10% Worse

Abercrombie &Finch ANF -32% Worse

Wet Seal WTSLA -11.1% Worse

Childrens Place PLCE -12.1% Worse

Stage Stores SSI -12.6% Worse

Costco COST -6% Worse

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