Signs of the times

Here's hoping those of you who celebrate Christmas had a happy one.  On the day after, some interesting signs of the economic times are out there to be dissected.

If the coverage on the big news/talk radio station here in Baltimore this morning is any indication, establishment media will be obsessed today with measurements of how retail sales did in the run-up to Christmas.  And the first reading is ugly:

Spending between Thanksgiving and Christmas rose just 3.6 percent
over last year, the weakest performance in at least four years,
according to MasterCard Advisors, a division of the credit card company. By comparison, sales grew 6.6 percent in 2006, and 8 percent in 2005.

“There was not a recipe for a pick up in sales growth,” said Michael
McNamara, vice president of research and analysis at MasterCard
Advisors, citing higher gas prices, a slowing housing market and a
tight credit market.

Strong demand at the start of the season for a handful of must-have
electronics, like digital frames and portable GPS navigation systems
trailed off in December. And robust sales of luxury products could not
make up for sluggish sales of jewelry and women’s clothing.

What did eventually sell was generally marked down — once, if not
twice — which could hurt retailers’ profits in the final three months
of year. “Stores are buying those sales at a cost,” said Sherif Mityas,
a partner at the consulting firm A.T. Kearney, who specializes in

And yet, the hedge fund set is — quite literally — partying like it's 1999:

Luxury purchases rose 7.1 percent, as the nation’s well-heeled splurged on $600 Marc Jacobs
trench coats and $800 Christian Louboutin shoes.

But for other retailers, the focus today is on salvaging something from a disastrous season:

Unsatisfied with sales so far, dozens of retailers, from the high-end to the low, will start slashing prices Wednesday morning. Kohl’s
is scheduled to hold a 60- to 70-percent off sale; Macy’s is knocking
down prices by 50 to 70 percent, and dangling a $10 coupon for
purchases of $25 or more; clothing will be 50 percent off at Saks Fifth
Avenue between 8 a.m. and noon; and Toys “R” Us is offering a
buy-one-get-one-half-off promotion.

Meanwhile, on the other side of the globe this day after Christmas, Chinese demand for raw materials is now set to grow at an even faster clip:

Metal and oil prices rose on Wednesday following an announcement by
China that it was to scrap import duties on copper, coal and aluminium,
and halve tax on oil products from the beginning of next year…

The London Metal Exchange was closed for the Boxing Day holiday, but
speculation over Chinese demand in 2008 drove Shanghai copper futures
1.5 per cent higher to Rmb58,850 ($8,030) per tonne. Shanghai aluminium
was up 0.2 per cent to Rmb18,280.

Oil prices also climbed on China’s announcement, which will halve import duty on products like diesel and petrol.

Two stories that, put together, illustrate the inexorable shift in economic power from West to East.  Americans are losing their capacity to do the one thing they've still been able to do well in recent years — spend, spend, spend — while the Chinese are increasing their capacity to make real things the world wants and needs.

The Daily Reckoning