The US Consumer is Broke, Time to Short Retail and Auto Stocks?
Barron's interviews (paid subscription required) two LA-based short sellers, Lee Mikles and Mark Miller, partners in (guess what) Mikles/Miller Management. Their viewpoint:
...the consumer is broke and he doesn't know it yet. But he is about to find out. All the buckets that propelled consumer spending are empty now, whether it is the increase in mortgage debt, the increase in consumer debt or the reduction in the savings rate. No one statistic will tip the scale at the end of the day. But one very obvious and very curious statistic is that we have dipped into a negative savings rate for the first time. That is not only unsustainable, it is sustainable only for a few months. That's important to note because it tells you consumers are borrowing money to make debt payments. The U.S. consumer has become payment driven. He is driven not by the aggregate amount of debt he possesses but by the amount of the payment. And now the consumer has not only taken his savings rate to nothing, it has turned negative.
Surprisingly, Mikles and Miller don't recommend any retail stocks as short candidates (unless you count the car manufacturers as retail stocks). Instead, they focus on autos, finance companies and airlines:
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