Worse is not necessarily a good thing here today, so let's see. All right here we go: Retail Sales: Advance Wow. Negative: One Percent: That's twice as bad as expected Retail sales excluding Auto month over month also twice as bad as expected. Negative point Eight instead of 0.4 Retail sales excluding Auto and gas Negative point Three: Uh, so a little less bad than expected.

Uh, so the expectation there was negative 0.6 Retail Sales Control Group a negative a 0.3 instead of negative Point Excuse me Point Five Percent: Let's go ahead and get into uh, what the actual details of this are. In the meantime, we also have an import price index. Uh, that just came out so we'll go through this as well. Uh, the Import price Index.

Let's see here we've got for the import price Index month over month Came in at negative point Six We are expecting negative. Point One: Uh, Import price index excluding petroleum month over month Negative Point Six Expectations was flat Import price index year over year Negative: 4.6 Expectation was negative 4.1 Export price Index negative 0.3 The expectation was flat. Uh, so you you also had a slight revision up in the prior month from point four on those retail sales Advanced month over month up to negative 0.2 But but what does this mean? Well, what this means is things are finally starting to roll over and they're coming in weaker than any. Economist has really been projecting.

or at least certainly the average or median set of economists are not expecting the numbers to be this bad and the numbers are actually finally starting to come in this bad. which is the signed up. Yeah, the Federal Reserve has potentially, uh, kept the their boot on our necks for too long and now all of a sudden the economy is to some extent starting to drown. So let's take a look at this: Advanced monthly sales for retail and food services.

This is for March 2023 I Just read off. uh, some of the uh, the big numbers. Here's that revision that was negative 0.4 for February but this is now falling substantially. We've gone through some of the headline numbers, so let's see if we can get some charts and some details here.

Here We go All right. So we're going to look at let's look at the adjusted on the right side 2023 March So we're gonna go just to make this a little easier. Put a little box around the column we're going to look at All right. What do we have? So it looks like things that are down Or things like uh oh, we could also win the change year over year.

Yeah, let's go with we don't have a month over month change. I Think there's actually a chart that'll give us a percentage month over month? Here we go. Yeah, this is much easier. Okay March 2023 Advance Oh, this is perfect.

Uh, that's the year over year. They don't actually make this so terribly easy for us. January through March 20th Jan 2023 through March 23 from Okay, this gives you the first quarter from, uh, the quarter before that, and then compared to last year. Okay, let's look over here.

let's see where the weakening is. So furniture and home stores you actually had the first quarter do a little bit. Uh, an increase here of about 1.3 compared to the last quarter over here. What's negative? Building materials was negative in the first quarter compared to the fourth quarter, you've got health and personal care stores up, Uh, 3.1 gas stations, so it looks heavily weighted here on gas when you just solely look at the headline.

But that is why we also have retail sales excluding Auto and gas. and that came in at negative point three percent. So it looks like Auto a gas really pulled retail sales down substantially. So uh, that'll change next month as well.

Much like the PPI So that means the data is potentially not as terrible uh as as it initially appears because it seems like the big anchor here is really gas. So that's good. Again, the retail sales excluding Auto and gas. We were actually expecting a bigger drop there.

We were expecting negative 0.6 but we only got negative 0.3 So maybe that actually shows a little bit more strength in the economy than than it initially looks like. Because when you first look at retail sales and you see that retail sales advance and excluding Auto coming in twice as bad as expected. we initially think oh my gosh the the this is terrible for the economy, but it actually seems like it was natural gas. uh and potentially gasoline That uh yeah here.

gasoline stations again that that really pulled this down. So uh, what else do we have on this food and service drinking places that's probably your largest Advance right here as food service, then let's see any other fours here. Now when you get a 7.9 over here at department stores that's pretty big so you got department stores and uh, food, service and drinking place is moving pretty well here, but looks like everything else Clothing: This is barely a movement over a three month period here. Uh, over the fourth quarter to the first quarter Sporting Goods Barely a movement over here.

Uh, retail. Overall: 1.3 Okay, so let's see if we get a little bit more detail then we've got compared to the previous month. So here's our month over month data. This is going to be February or March 2023 compared to February.

So let's see what we've got in this data set here. This one shows month over month. where's gas? Month over months. Gas was still had some a movement here.

so that's interesting because here you've got that negative for the fourth quarter to the first quarter. but you actually had a slight positive here on the uh, the month over month going from Feb to March of point four percent on gas. Here you can see total retail sales 0.3 this is for retail and Food Services different from the Uh the current headline number that we just read off. So let's get a little bit more detail here.

Let's listen in for a moment on what uh CNBC is saying, but it looks like they're talking about those import prices right now. But let's listen to your oppression. Uh Austin of the uh, uh I guess it should be President Goolsby Now right? No, it's Mr President Mr President that's Air Doctor President Plenty. Potentially, He's made it very clear that I need a lot of respect.

Yeah, it seems like every time I hop over to them, they just jump around on uh nonsense here, but quickly retail. Uh, After the retail sales, we saw Treasury Yields actually jump. Uh yeah. See, look at.

That's interesting. see there. There's a lot of confusion around how this initial print came out. See, let me.

I'll just read this for you word for word and it's the same confusion I Had Treasury Yields jumped after retail sales contracted more than expected, which seems odd, but sales excluding autos and gas were better than expected, as was the control group. So in other words, the first impression is oh my gosh, this is terrible. But then when you look deeper at it, it's like wait a minute. No, this is actually not bad.

So what's happening is is if retail excluding Auto and gas can hold up at the same time as inflation is going away, that's actually a good thing. So forgive how complicated this is. This morning this retail sales report it's very complicated, but this is actually not a terrible thing. This is.

this is suggesting that import prices, which is inflationary are falling substantially faster than expected. The prior revisions for retail uh for import prices month over month were also revised towards more of a negative number. Although export prices were revised slightly slightly up, most of the numbers this month were substantially more negative than expected for Import and Export prices. Actually, all of them were.

And then retail sales. Once we pull out, the gas sector retail sales are actually holding up. So in other words, better news on inflation inflation coming down faster, retail sales holding up a little better. Let's listen to uh, this guy they're trying to interview.

you know, funeral prices. There's research out uh by Chicago Fed researchers reflecting a longer tradition of research that shows wages do not serve as a leading indicator for Price inflation. There are lagging indicators, so when people are looking at duh, this is ghoul speed by the way, one of the new Fed uh, Presidents prices six months ago. I Think we want to keep our eye on the price series, not on the wage series Austin You you said in your uh you quoted analysts in your speech saying that the tightening of credit conditions could be worth 25 to 75 basis points of Fed tightening? um do you Embrace that are you? is that a sort of an arms length I didn't embrace it even in that I said we don't know what we need to study is how big is that in in a Fed fund's equivalent and that the the ranges kind of are all over the place to uh, the median range I'd call it from the private analysis 25 to 75.

there are some people as you know they were saying 150 and 200. that that doesn't seem realistic to me, but it's something. And so if you see credit tightening, you know that that does the job of monetary policy. And this moment, uh, sometimes when when you're trying to strengthen the financial system and you're looking at at either regulatory forcing or the banks themselves trying to strengthen their financial positions and stress a lot of times that's happening when the economies in the dumps, uh, and so in a way, your financial stability goals and your monetary policy goals and end up fighting each other.

But this is not that moment. This is a moment where everything we do to strengthen the financial system to prevent that from from snowballing is actually doing the job of monetary policy. So I I don't think that they're in Conflict at this time. All right.

So not not much commentary from this guy here, but uh, some other notes. Here Retail. Uh, the retail sector on average Falls by the most in the six months after a recession starts. Now that's actually interesting because see, we're really trying to set up this.

This understanding of hey, when the recession technically begins, where is the pain right? Uh, so if we draw sort of a here's our decline. Here's our recession does: does everything in the economy sort of get worse? Or does it get better? Eventually you come out of the recession, right? Uh, and uh, generally we sort of line or gray bar. we'll use an orange bar. In this case, the period of the recession.

Eh, and uh, There's this expectation that maybe earnings would bottom right here. at the uh, oops, there we go. that earnings would bottom basically at uh, the start of a recession. That's sort of an expectation that has historically held.

There's also this belief that the yield curve re uh, or or should I say not reinverts uninverts so the yield curve would uninvert. And then there's also a note that the retail sales sector usually Falls for about six months into a recession. So retail sales seem to be very cyclically affected by what people's impression are of of what the economic state is, right? So uh, retail. Again, very cyclical.

Very, very much follows the cycle. the economic boom and bus cycle, and the fact that we're still getting smashing retail numbers here once we actually sort of extract the uh, the gas and auto segment and we just look at retail sales which aren't inflation-adjusted But uh, that's okay, They they still give us an idea of what's going on relative to the prior month and a relative to expectations. and the numbers are weaker than expectations. Well, um, but when we take out autos and gas, we go.

Okay, well, that's not actually that bad. Maybe that does sort of align with the Bond market and saying hey, Maybe we're still over here, right? Because the Bond market is telling us we're still maybe three to six months away from a recession. We keep hearing people talk about Q3 Q4 for a mild recession. Even the Federal Reserve is now talking about a mild recession here.

So could it make sense That marches retail sales data are still given that they're still well within Q1 over here, or too early to really indicate any kind of recessionary pain? Yeah, absolutely. The yield curve is not uninverted, so the steepening part is usually the most painful. We still have decent retail sales, but that could be normal. Uh, the stock market tends to at least historically bottom at the beginning of a recession.

which would actually be here. We hope not in this cycle. We hope that in this cycle, the stock market is basically so convinced that a recession is occurring that the bottom of the stock market has actually come before the bottom Uh, as people don't want to miss the bottom. Kind of a psychological uh impact there.

But uh. then we believe also that Goldman Sachs tells us earnings for companies 10 to bottom six to nine months after the bottom of stocks. Which is interesting because if stocks bottomed, some of them bottomed, Let's say in December, the bottom of their earnings might be in August which is interestingly over here in around Q3. So kind of a fascinating way to add together some different data points.

And of course, nobody really knows exactly what's going to happen. We'll see, but we want to keep an eye on these things. Let's keep looking at what uh, foolsby I mean A Goosby here has to say not think that some mild recession is definitely on the table as as a possibility I Mean the the data show that and we've raised rates almost 500 basis points in a year. That's historically an indicator of slowing GDP growth.

When you get numbers like retail sales and others that are declining, you look at construction. I Think we've got to think about what's the state of growth in the country. Fortunately, the market continues to be very strong and so what is your reaction function change Austin How does the reaction change? How do you respond to a recession? There are people who have argued to me that your average Fed official actually has a recession built in and everything but GDP by pointing out that you don't get a one percentage Point increase the unemployment rate outside of a recession. Does a recession means you stop hiking? Does it mean you cut well? I Mean let's not start chasing our tail here.

It depends. Is this mild recession? if they have it. Is that being caused by the raising of interest rates? or is that a recession that's happening because of Supply conditions or things that are happening outside? Awesome. I Have a question because whenever the markets get a whiff of the notion that the FED May pause that the FED may actually consider a pivot as the prices go higher.

So to the extent that you care about or the FED does the FED care about that, that markets take it as a good sign and therefore stock prices will rally Because what we saw yesterday was very interesting. We saw a risk-on rally. so we saw, for instance, the Arc Innovation ETF Rise rally on the back of this notion that maybe the Fed's going to Pivot That sort of works against what the Fed's trying to do. Interesting point: I I I Think that's an interesting point.

I've been publicly saying from the time I took the job and and before on this program over the years. I'm not a fan of the FED tying. Let's call it its mandate or the doing of its job to how does the market reacting like I say Congress gave Fed a job which is maximize employment, stabilize price. It doesn't say anything in there about make sure that the markets stay happy or make sure nobody loses any money.

Uh, and so I'm not a fan of paying close attention to to what the market response is going to be like. Could you imagine if this guy this got Jerome Powell like I I don't think I would ever buy stocks again. I Mean you guys said you were gonna pivot into raising rates in November of 21 and rates went up and that was doing. You're scaring me right now if you look at the outlook for Rach Austin Uh, they don't believe you.

They think you're gonna cut and cut pretty deeply by the end of this year. Um, and so in a sense, the market is not doing its job for you. So maybe you shouldn't be pandering to markets. but certainly there's some what's the right word symbiosis that's necessary here that you're not getting.

Often in the past that the FED has tried to, uh, the wealth has tried to use the wealth effect to bolster balance sheets and make things better and have stock market go. And and seriously scary times it's stated zero to bolster the wealth effect to help. So that was that was. Uh, that's why we had a Fed put for so long.

If you really don't think we've ever done that to try to make things I'm not going to get in an argument about history I'm gonna just at this moment when I say we need to look at what the market is doing for us in monetary policy I'm talking about credit conditions on the ground for regular in the real economy, regular businesses. If the stock market reacts, so be it. But that's not what I Think that the Fed's primary instrument should be right now should not be using the wealth effect of stock market wealth to try to steer the economy I Think right now this credit condition is this. but the FED uses the pandemic as an excuse for saying saying it zero.

Why can't I use that as an excuse for not paying off? You weren't back here. It was a pandemic. So how are we supposed to go to dinner or lunch when there was a pain, right? Because there's a pandemic? If you forget, you went on vacation and you waited me out. Yo, you waited me out.

Now you're not allowed to pay for my own business. I'm going to settle this once. I Don't have the kind of time to deal with this anymore. Like this guy's a jerk.

Oh he's evil and he's a I Don't get it like he's not being funny, he's being mean. Uh, this guy's weird. He's scary. Why is he at the fad? Rome What the hell Oh my.

God Like he was supposed to give us commentary on on uh, retail sales and instead we got I don't want to go to dinner with you Joe I showed up to do my job and you were in vacationally. You're a douche like wow. Um, okay, so like I don't even know that I So much care what that guy has to say. Uh, you know one thing I thought was remotely interesting as much as I'm frustrated by Mr foolsby whatever here uh is is uh, this idea about oh well, it depends what caused the recession.

Is it basically, uh, the cycle that caused the recession or is it rate increases that caused the recession? I Do think that's an interesting point? Uh, and it's one that's worth diving into. So there are different recessions that you can have. Let's draw this out so it makes it a little easier to understand because there's so so much going on. Uh, sometimes when we draw it out, it's a little easier.

So uh, the two different main kinds of recessions that that I think we're talking about here are the idea of: okay, do we have the kind of recession that is now destroying inflation right? So there's that. We'll call it the Uh. recession. Uh, number one.

The inflation. Destroyer that's what we'll call recession number one. And uh, then there's the recession number two, which is just the Uh. fundamentals are screwed.

The recession right? Like everything's screwed. Uh, obviously we. We would hope and think that the most mild of the two would be the inflation. Destroyer Over here, this would uh, presumably be the Uh the more desirable.

The reason for that is because that's the Fed's goal. And so if if this is the goal, this is the goal. Well, if this is the goal, then obviously when the recession has destroyed inflation when, uh, anyway, what inflation is destroyed there we go, Then Uh. then ultimately you can end the recession by cutting right? Uh, and now, Like I mentioned yesterday in a video, this the basically the cancer of inflation is gone.

So even though the symptoms are still bad, you have weight loss and hair loss and you're sick and stuff. Now the cancer is gone or going away. Markets can actually rally. Markets can rally on this kind of uh, dare I say pivot I would call this more of a U-turn Uh, because the FED is done right That that's that's good So that would be good.

In recession number two, you have screwed fundamentals, but at the same time, inflation has not been destroyed. Well, then you have real problems right? Then you're in the worst case scenario. Uh, this is in this scenario on the right. You probably don't want to own stocks right now, and in the scenario on the left, you probably do want to own stocks.

So that gives you a little bit of a breakdown on retail sales. Uh, and and the Fed's reaction to recession? let's quickly see some more. Wall Street Reaction here looks like, well, headline retail sales were weaker than expected. Even accounting for revisions, the narrow Aggregates like control were slightly better than expected.

Still, the overall picture is pretty weak. spending as the first quarter came to an end, import prices also fell more than expected. Uh, not entirely clear why. front-end yields are skyrocketing higher.

So front end yields is a reference to what's going on in the bond market. You've got the 10-year moving up about uh, six basis points and the two years moving up about 11 basis points. That is odd. Uh, I think maybe Ah That's that is weird because technically, if you have import prices falling and retail sales not as bad as expected uh, the oh I I could understand this I know why.

Okay, all right. I I think I think I have an understanding. Okay, so import price is falling faster is good for us getting out of that recession right or prevent potentially preventing it. which seems like a long shot.

At this point it seems like it's going to happen anyway. Retail sales being better is good. Uh, so you have inflationary numbers coming down with retail sales coming in better than expected. So why would the treasury market potentially send yields up? In other words, why would people potentially be dumping bonds and doing something else with their money? Because maybe they realize inflation is going to be dead sooner than we expect without having to go into a deep recession.

It seems like the more people believe we're going into a deep recession, the more they buy bonds, and the more we believe we're not going into a deep recession. the less they buy a bonds. That's why during the banking crisis, everybody was jumping in to buy bonds because they're like flight to safety. everything's going to hell.

And the less the banking crisis seemed like an issue. the more, uh, the the more relaxation we saw on some of those plummeting yields on treasuries. And that's why I think we're sitting at about 3.52 right now, as opposed to the 3.32-ish low that we ended up getting to. So very, very mixed picture here, but hopefully that gives a little bit of insight into what actually happened here with the retail sales.

Uh, I would call it a little a little messy there, but I think we got to the bottom.