Real Vision Talks Retail Sales, Recovery, Banks, and Buffett
Your Real Vision Daily Briefing for October 16th, 2020
Senior editor, Ash Bennington, and managing editor, Ed Harrison, look forward to the relevant themes.
- Retail sales numbers are a valuable indicator because they are tied to consumption patterns; it’s a good sign that there was no pullback in a month where the PUA had already rolled off.
- It’s generally accepted that we’ve been in a statistical recovery since June, but we are not in an organic recovery fueled by growth; government stimulus has been keeping the economy afloat.
- Warren Buffett selling the bulk of Berkshire Hathaway’s holdings in Wells Fargo suggests that he is anticipating more downside risk to come.
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Retail sales and industrial production numbers provide a good macro picture of what’s going on today that’s going to be driving markets for a while, Ed Harrison told Real Vision during today’s Daily Briefing.
Harrison said that retail sales numbers are a valuable indicator because they are tied to consumption patterns, and that is where the rubber hits the road. If production goes down on a month to month basis, it can be made up as long as consumption patterns remain the same, so consumption is the thing to pay attention to, he said.
He believes it is a positive sign that there was no pullback in a month where the PUA had already rolled off. However, he said it could be pent up demand and it is just one month of data, so we’ll have to see if it follows through.
Harrison also talked about the general consensus that we’ve been in a statistical recovery since June and his conversations with David Rosenberg about how this recovery is a result of the government artificially propping up the economy.
We are not in an organic recovery that’s being fueled by actual growth; rather, government stimulus has been keeping the economy afloat. Still, Harrison believes that there could be scenarios going forward where this can become a self-sustained recovery even though it began as the result of massive government largesse.
Harrison wrapped up the interview with his thoughts on the news that Warren Buffett is selling the bulk of Berkshire Hathaway’s holdings in Wells Fargo. He thinks it is interesting given the bifurcation between sales/trading/markets-oriented banks and retail-oriented banks and said it is something to keep an eye on.
He found it notable that Buffett doesn’t want Wall Street style leadership at the bank he is heavily invested in, and said we should take that as a note from a value investing perspective. All of this suggests that Buffett believes this cycle isn’t over and there’s still downside risk to come, Harrison said.