David Nelson, founder and president of Finance & Resources Consultants Inc., said, "What drives the numbers is the customer." [image-nocss] Nelson said that there is good news, too, for the economy as a whole--the U.S. economy has seen six straight quarters of real growth with gross domestic product (GDP).
The numbers from CSX, the industry's largest operations and financial database, paint an even rosier picture. Subscribers reported that gasoline volumes were up 9.75% and in-store sales were up 6.78%.
But there are still plenty of concerns as the economy continues to recover from its most prolonged downturn in more than half a century.
Looking beyond raw employment numbers, Nelson said that LFPR--the labor force participation rate--is at 64.2%, the lowest level since the early 1980s.
In addition, fully 45% of those now unemployed have been so for at least six months. Reading between the lines, these are c-store customers, because consumers comprise 70% of U.S. GDP.
Higher gasoline prices also are a concern as consumers find ways to cut costs. He said that Nielsen Analysts found that sustained higher prices would lead to trip compression, less eating out, more value-conscious shopping alternatives and more couponing. Plus, every $10 increase in a barrel of crude oil cuts economic growth by 0.2%.
The biggest problem areas, meanwhile, are related to housing, banking and public debt. The housing industry, Nelson said, will take at least until 2015 to come back.
Banking also has considerable challenges. On average, less that 10 banks a year fail. In 2009, 140 failed, and another 157 failed in 2010. This climate makes the lending environment less than enjoyable. Or as Nelson put it, "working with your banker is like a colonoscopy--you don't enjoy it a bit."
As for the public debt climate, consider that it took the United States 224 years to accumulate $6 trillion in debt. In just the past 10 years, it has added another $8 trillion in debt. The end result is low private and national savings have created low net domestic investment. Nelson called this current climate a "travesty." These three issues are going to have to improve if the country is going to see a sustainable economic recovery.
Meanwhile, economist Walter Zimmermann (pictured), the chief technical analyst for United-ICAP, Jersey City, N.J., said that he believes in optimism, just not as it applies to the current economy--and especially not when it allows investors to overvalue Wall Street. He said behavioral influences including a "herd mentality" oftentimes influence everything from commodity prices to consumer confidence.
Though describing the economy as recovering in terms of productivity, other trends such as jobless figures, home values and other indicators do not bode well going forward.
"The good news is I don't see a high probability for an all-out depression," he said, but added that numerous signs indicate a second dip to follow what has currently been an "anemic" recovery.
Zimmermann named a bullish commodity market as one of the signs of a looming selloff, one that could lead to a second "dip" in the economy. As an advisor to investors, he noted that such a situation indicates a time to sell, with the only question being when.
"I tell people it's like standing on the tracks and you see a train coming," he said. "Do you want to get off too early or too late?"
Other signs of a market bubble about to burst include: A bidding war for stock exchanges. The percentage of cash held by mutual funds at an all-time low. The circulation speed or "velocity" of currency being "Fed induced" vs. spurred by actual consumer spending. Multiple indicators showing stocks as overvalued. Consumer credit is plummeting. Housing starts at multi-year lows. Pointing to federal control of interest rates, Zimmermann said the government's policy of keeping rates "ultra low" to zero is creating the environment for "speculative bubbles," ones that ultimately burst and send the values of stocks tumbling. He said interest rates should be controlled by market forces and should reflect the "actual risk of borrowing."
On the gasoline front, he did warn of a potential spike in Reformulated Blendstock for Oxygenate Blending (RBOB) rack prices potentially in the $4.50 to $5 range if negative circumstances surrounding blending occur. He said Houston has already experienced the shuttering of a couple of plants in the area and that any "dramatic or unique" logistical issue may trigger a spike.
Ultimately, Zimmermann said the middle class is "getting crunched, and wealth creation is not happening."
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