Saturday, January 11, 2014

How the Fed is Making Luxury Stores Boom and Low-Income Stores Suffer

Yahoo reports:
Numbers for Tiffany & Co. was great this past holiday season. Not so for Sears and Kmart. One strategist blames it on Fed policy. Here's why.
For high-end retailer Tiffany & Co., the holidays were very happy indeed. For Sears Holding Corporation, the parent company of Sears and Kmart, the busiest shopping period of the year was miserable.
Tiffany saw its sales increase sales by 4% in the last two months of 2013. Except for Japan, Tiffany saw its sales up in every region. On the flip side is Sears, which watched its same-store sales drop by more than 9% for the last two months of 2013 while its sister company Kmart saw declines of nearly 6%.
According to Steve Cortes, founder of Veracruz TJM, the different results by these two companies had everything to do with the type of consumer each one caters to.
"I think that what we're seeing between Tiffany and Sears doesn't have a ton to do with those companies respectively," says Cortes. "Rather it's a macro reflection of quantitative easing."
Cortes is referring to the Federal Reserve Bank's monetary stimulus which had the central bank buying $85 billion of US Treasury and mortgage bonds per month over the past year alone. That kept bond prices up and, thus, interest rates down while adding dollars into the financial system. The Fed has pursued various forms of quantitative easing since the financial crisis began but is now planning to begin tapering it.
"Quantitative easing has been fantastic for the wealthy, for the owners of assets," says Cortes. "It's been anything but fantastic for lower and middle income folks who are being squeezed greatly by this quantitative easing policy."

(ht Bill Bergman)


  1. C'mon Jerry! Straighten us out here. What's the real deal buddy?
    Come O Oracle! And spread thou this Gospel of Keynes to us, the unwashed drooling heathen.

    1. The article does not bother to explain how "lower and middle income folks who are being squeezed greatly by this quantitative easing policy." Hard to address an argument that is being made since one is not being made. Is he referring to inflation? The CPI for October was down .1% and unchanged in November.

      It's correct that the Fed's dual mandate pumps up the stock market by driving down interest rates. The wealthy see the greatest benefit. If you believe in trickle down economics, then everyone should benefit when the wealthy have more money to throw around. That's how QE is supposed to generate consumer demand and inflation. QE is supposed to boost the economy the same way a tax cut for the wealthy boosts the economy. Don't forget it was Milton Friedman's idea.

  2. Liberalism’s peak fiat wealth is seen in Sotheby’s, BID, 500% rise in the last five years, reflecting risk appetite, and the seigniorage of monetary stimulus, and risk-on investing, produced by the sovereignty of the leveraged speculative investment community, and democratic nation state banker regime, in a riskless trade, reflecting the world central banks policies of investment choice and credit stimulus of Global ZIRP, working through schemes of the debt trade investing and the currency carry trade investing. Most definitely Sothebys, BID, is a retail specialty organization for the wealthy, it is not Ross Stores, ROST, nor is it Wal-Mart, WMT, that is retail stores for the poor. Trust in the monetary authority of the Speculative Leverage Investment Community, produced great wealth.

  3. QE funnels money to the wealthy. If that's the intent then it is a raging success. If that's the intent why not come out of the closet with it? Do you not think the public deserves honesty from its duly appointed servants? If it's not then the humane response must be recognize it as an unintended consequence and admit QE is a failure.

    The free market is not "trickle down". It is the result of voluntary trade that both sides of the trade come out ahead (or at least have that expectation going in). Nothing "trickles" anywhere. While it is true that the wealthiest will likely come out farther "ahead" than the poorer there is a major difference between the free market and QE. With the later the gain occurs at the expense of the poorer while with the former it does not -- it benefits both. Arguably the smaller gains made by the poorer have a greater marginal impact on their quality of life than the greater gains provide for those that are richer.

  4. Are you confusing wealthy and productive?