Something For Everyone...

Something familiar,

Something peculiar,

Something for everyone:

A comedy tonight!

We've got some store sales,

We've got retail sales,

Something for everyone:

A comedy tonight!

Let's start off with the ICSC-Goldman Store Sales, in which we reflect on last week's major retail chain store sales. The week ending 2/5 saw sales increase 2.2% for the week. And this week - well, the week ending 2/12 - they're fallen 1.4% for the week. But nobody really pays too much attention to this particular metric, except as an indicator for overall retail sales figures, so that's not likely to drive the market around. Not on its own, anyway.

Ah, but retail sales? Now retail sales are huge. If you remember the December figures, they were up 0.6%, or "only" 0.5% ex-auto. The analysts are feeling optimistic, and calling for 0.5% growth in January (with growth still sitting at 0.5% if you strip out auto sales). So that's the analysts. And what does the US Census Bureau think? Well, for the first time in a while, the US Census Bureau is saying that the analysts were a trifle optimistic. The January advance estimate has total (seasonally adjusted) US retail and food service sales for January up 0.3%, while the ex-auto sales were also up 0.3%. Not great, but not terrible either.

Nothing with kings, nothing with crowns;

Bring on the lovers, liars and clowns!

Empire State Survey,

The Redbook measures,

Nothing portentous or polite;

Tragedy tomorrow,

Comedy tonight!

Let's start with the big dog of the pair: the New York Fed's Empire State Manufacturing Survey. This isn't the biggest and most important of these surveys - that honor goes to the Philadelphia Fed's survey - but this is nothing to sneer at. The general business conditions index was at 11.92 for January, and the analysts are expecting that to go up to 15. The survey results beat that handily, rising to 15.4.

The Redbook report, as you may remember, is yet another measure of sales. It pales before the might of the Retail Sales figures we just discussed up above, but it's still something of a leading indicator. And the indications are pretty good. Last week they were largely in agreement with the ICSC-Goldman Store Sales. This week, they deviate - Redbook store sales are up 2.2% (this is a year-over-year figure, though).

Something imported,

Something exported

Something for everyone:

A comedy tonight!

Something in stock,

Something that's not,

Something for everyone:

A comedy tonight!

As a lovely companion to the trade balance figures from last week, we now have the Bureau of Labor Statistics' US Import and Export Price Indexes. Back in December, export prices were up 0.7% for the month and import prices were up 1.1% for the month. Analysts never actually seem to weigh in on this one, so let's skip straight to the January results. The US import price index was up 1.5% for January, while the export price index rose only 1.2%. The import costs were driven by a 3.9% increase in fuel prices. What gains we had in export prices primarily came from agricultural exports, which were up 3.2%.

And business inventories? Well, in November they were up 0.2%. For December (and yes, there is a two month lag on this), the analysts are expecting a 0.7% increase in inventories. Now, before we go on to what actually happened, let's talk briefly about why anyone would care about business inventories. Why do we care? Well, they are serve as an indicator of future production and sales. No company - producer, wholesaler, or retailer - builds up massive inventory supplies without immediate plans to put them to work. So, if inventories are up, the companies with the increased inventories are likely expecting things to improve.

So, back to the US Census Bureau for the December 2010 Manufacturing and Trade Inventories and Sales report. And business inventories are overall up 0.8% from November.

Nothing with gods, nothing with fate;

Weighty affairs will just have to wait!

Nothing that's formal,

Nothing that's normal,

No recitations to recite;

Open up the curtain:

Comedy Tonight!

Quadruple Witching?

"Fair is foul, and foul is fair,

"Hover through the fog and filthy air."

The day is upon us. As a reminder, this is the day on which stock index futures, stock index options, stock options, and single stock futures all expire. Traditionally, it's a volatile day in the market.

There Ain't No Good Guys. There Ain't No Bad Guys. There's Only Comcast And Level 3 And They Just Disagree

Let's set the stage with some music:


On the surface, it looks like a David and Goliath story: Level 3 Communications (with a $1.64 billion market capitalization) versus Comcast (with a whopping $41.85 billion market capitalization). It is, as Level 3 Communications tells it, a story of a large-cap corporation threatening the livelihood of a company that only qualifies as mid-cap on a good day. In the words of Thomas Stortz, Chief Legal Officer of Level 3:

“On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content. By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider.

“On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions.

“Level 3 operates one of several broadband backbone networks, which are part of the Internet and which independent providers of online content use to transmit movies, sports, games and other entertainment to consumers. When a Comcast customer requests such content, for example an online movie or game, Level 3 transmits the content to Comcast for delivery to consumers.

“Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet.

“While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast’s decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast’s subscribers at all, unless Comcast’s unilaterally-determined toll is paid – even though Comcast’s subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.“

Can't you already feel your heartstrings being tugged by this press release? Brave Level 3, a (comparatively) tiny company - almost a mom-and-pop home business, really - is being menaced by the faceless corporate juggernaut that is Comcast. Should Level 3 fall, nothing will stand between Comcast and an absolute iron-fisted mastery of all data in the internet!

Or maybe, just maybe, there is more than one side to the story. Maybe, just maybe, Comcast also has something to say about this. Maybe someone like Joe Waz, Comcast SVP, External Affairs and Public Policy Counsel, might have a different take.

Level 3 has inaccurately portrayed the commercial negotiations between it and Comcast. These discussions have nothing to do with Level 3's desire to distribute different types of network traffic.

Comcast has long established and mutually acceptable commercial arrangements with Level 3's Content Delivery Network (CDN) competitors in delivering the same types of traffic to our customers. Comcast offered Level 3 the same terms it offers to Level 3's CDN competitors for the same traffic. But Level 3 is trying to gain an unfair business advantage over its CDN competitors by claiming it's entitled to be treated differently and trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast and its customers.

To quantify this, what Level 3 wants is to pressure Comcast into accepting more than a twofold increase in the amount of traffic Level 3 delivers onto Comcast's network -- for free. In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business onto Comcast and Comcast's customers, instead of Level 3 and its customers.

Level 3's position is simply duplicitous. When another network provider tried to pass traffic onto Level 3 this way, Level 3 said this is not the way settlement-free peering works in the Internet world. When traffic is way out of balance, Level 3 said, it will insist on a commercially negotiated solution.

Now, Level 3 proposes to send traffic to Comcast at a 5:1 ratio over what Comcast sends to Level 3, so Comcast is proposing the same type of commercial solution endorsed by Level 3. Comcast is meeting with Level 3 later this week for that purpose. We are happy to maintain a balanced, no-cost traffic exchange with Level 3. However, when one provider exploits this type of relationship by pushing the burden of massive traffic growth onto the other provider and its customers, we believe this is not fair. To use Level 3's own words:

"To be lasting, business relationships should be mutually beneficial. In cases where the benefit we receive is in line with the benefit we deliver, we will exchange traffic on a settlement-free basis. Contrary to [other ISPs] public statements, reasonable, balanced, and mutually beneficial agreements for the exchange of traffic do not represent a threat to the Internet. They don't represent a threat to anyone other than those trying to get a free ride on someone else's network."

So. Maybe, just maybe, Level 3 isn't being entirely forthcoming. Maybe, just maybe - this is crazy, but hear me out - maybe Level 3 has embellished the truth a little. The little guy in the fight isn't always the honest one, after all.

Who do I believe? Frankly, I tend to assume that all corporations will lie to, cheat, steal, and kill anyone and anything in their paths in the pursuit of the all-mighty dollar (or yen, or euro, or ruble, or yuan, or whatever else profit can be expressed in). So, I assume that both Comcast and Level 3 are lying about (excuse me, I mean spinning) what happened.

I don't think Level 3 cares in the slightest about "net neutrality". They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

I don't think Comcast is attempting to extort anything out of Level 3. They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

Business as usual. That's all this is.

PIIGS! What's The Matter With PIIGS Today?

PIIGS!
What the devil's wrong with these PIIGS today?
PIIGS!
Who could guess the they would turn out that way!
Why can't they be like we were,
Perfect in every way?
What's the matter with PIIGS?
What's the matter with PIIGS?
What's the matter with PIIGS today?[1]

Plenty. That's what.

The European Union and the IMF have given up on getting Greece to abide by the timetable it originally agreed to when it borrowed 43% of its GDP. Originally, they were going to get 6 years to repay 110 billion euros in loans. Now, the EU and the IMF are getting ready to push it back to 11 years. Somehow, Paul Thompson (the IMF official in charge of the Greek bailout) believes that

"This (the extension) would give markets the signal: 'Don't worry about the repayment of the 110 billion euros, this is not going to affect your claims'."

I'm going to segue off into my own sordid past for a few moments, and reveal that I spent 9 months working as a credit card collector[2] for a (different) company not-to-be-named.

What does this have to do with anything? Well, when we set up a payment program that extended out the amount of time the debtor had to make payment in full, that was good for the collector. We got bonus points for "saving" the debt each month for the duration of the program.

But, when the program was over, we fully expected them to be in debt still. Because all it did was delay the problem.

Now, I know that this is inductive reasoning and potentially flawed. There are differences between household debt and sovereign debt[3]. But I don't think that, in this case, they're all that different.

Meanwhile, Ireland is set to sign the loan papers for an 85 billion euro bailout. Tens of thousands of Irish took to the streets to protest this, and it is fully expected that this will mark the end of Prime Minister Brian Cowen (of the increasingly appropriately named Fianna Fail party). As Prime Minister, that is. The protests aren't that violent yet. Not like Greece, where protesters showed their displeasure with the bailout by murdering three bank workers who had nothing to do with it.

Oh, and in non-PIIGS news, the apologetic North Korean government has put surface-to-surface missiles on the coast of the Yellow Sea.

"We will deliver a brutal military blow on any provocation which violates our territorial waters," KCNA said.

For purposes of understanding North Korean press releases, "provocation" is defined as:

-noun

1. anything looking at us
2. anything that the crazy man in the seat of power thinks might be looking at us
3. having a bigger dick than the crazy man in the seat of power
4. being something that the crazy man in the seat of power thinks might have a bigger dick than him
5. breathing

So, yeah. I don't think there's really anything left to say about this that hasn't already been said.

[1] I now owe Lee Adams an apology as well.
[2] Feel free to hate me now.
[3] Truly staggering dollar amounts, for one thing.

We Few, We Merry Few, We Band Of Cashiers

With enormous apologies to the Bard.

RETAIL EMPLOYEE. O that we now had here
But one ten thousand of those men in the USA
That do no work to-day!

MANAGER. What's he that wishes so?
My own employees? No, my team;
If we are mark'd to work, we are enow
To earn our company profit; and if to live,
The fewer workers, the greater share of honour.
God's will! I pray thee, wish not one cashier more.
By Jove, I am covetous for gold,
I care who doth feed upon my cost;
It yearns me if men my garments do not wear;
Such outward things dwell in my desires.
And if it be a sin to covet honour,
I am the most offending soul alive.
No, faith, cashier, wish not a man from home.
God's peace! I would not lose so great an honour
As one man more methinks would share from me
For the best hope I have. O, do not wish one more!
Rather proclaim it, team member, through my host,
That he which hath no stomach to this day,
Let him depart; his holiday time shall be approved,
And payment for time off put into his purse;
We would not work in that man's company
That fears his fellowship to work with us.
This day is call'd the Black Friday.
He that works this day, and comes safe home,
Will stand a tip-toe when this day is nam'd,
And rouse him at the name of Black Friday.
He that shall work this day, and see old age,
Will yearly on Thanksgiving feast his neighbours,
And say 'To-morrow is Black Friday.'
Then will he strip his sleeve and show his scars,
And say 'These wounds I had on Black Friday.'
Old men forget; yet all shall be forgot,
But he'll remember, with advantages,
What feats he did that day. Then shall our names,
Familiar in his mouth as household words-
Wall-Mart, Target and K-Mart,
Best Buy and Sears, Pottery Barn and Dillards-
Be in their flowing cups freshly rememb'red.
This story shall the good man teach his son;
And Black Friday shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And cashiers in America now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That worked with us upon Black Friday.