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Wednesday, November 15, 2006

Wal-Mart, Home Depot, Target: Looking for some holiday cheer - Nov. 14, 2006 (WMT)(HD)(TGT)

By William Trent, CFA of Stock Market Beat

A couple of months ago, we addressed the prospects of slowing consumer spending by saying, “Slowdown? Maybe. But if you have the right merchandise consumers will still spend more than they earn.”

Now we get a similar assessment from CNNMoney:
Moreover, since consumer purchases fuel two-thirds of the economy, these two months provide a vital temperature-taking of the overall health of the nation’s economy.Any significant slowdown in consumer spending immediately raises concerns that the economy as a whole will likely follow.

So how do things look so far? Despite the retail picture being a little muddy this year, analysts for the most part seem to agree that consumers are not yet shying away from shopping.
They’re just becoming more cautious and more picky about where they shop.

Betting against the consumer is always a long shot. Sometimes they come in, but usually they don’t. Given the housing weakness, this may be the year for it. However, it’s not something we’ll put a lot of money on.

The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

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