A blowout retail-chain-store-sales number of plus-10 percent for the year ending March trumped the growing disaster in Greece, with the Dow managing to finish trading yesterday ahead by 30 points. Retail stocks were up big across-the-board. So far this morning, the Dow has tacked on another 40 points.
Bottom line: This big retail number confirms my view that the economy is actually much stronger than most people think.
We’ve got a V-shaped commodity boom; a V-shaped retail-sales and retail-stock boom; a V-shaped profits boom; a V-shaped ISM boom; and the beginnings of a V-shaped jobs recovery. I don’t know how long all this will last, but the next 6 to 9 months look pretty darn good on the economic front.
On the negative side, the Greece story has disaster written all over it. The bond market vigilantes are issuing yet another wake-up call. A run on the Greek banks is developing, and the overnight repo funding market in Greece is dead.
The question now is whether Greece will ultimately default. And there’s also a contagion question at play. And what about all the French banks that own the Greek bonds?
On a more positive note, at least the prospects for a China trade war seem to be diminishing, with Treasury man Tim Geithner’s renminbi diplomacy in Beijing. No one really knows for sure if the Chinese will in fact revalue their currency, or, as investor Jim Chanos worries, whether China is facing a prosperity boom and real-estate property bubble that may sink its banks if it goes bust.
But one thing is for sure: Right now, the U.S. economy is outperforming everybody’s expectations.