Pump It Up!

November 29, 2011

Yesterday, I put another $20 worth of gas in the old Jeep — and, lo and behold — the price of a gallon of regular has dropped four cents to $3.95 in just two weeks.

After seemingly being stuck at $3.99 a gallon for months, it was odd to see a difference in the numbers.
Prices are down in California and the rest of the US, but way-higher than last year.

From the LA Times: The average price of a gallon of regular gasoline in California today is $3.710, according to AAA. Prices in California have fallen by 13.1 cents a gallon over the last month, but a gallon of gasoline cost only $3.164 on the same day last year. The current price is also 29.5 cents a gallon higher than the old record for this day, which was set in 2007.
National average is down 5.6 cents over the last month to $3.295 a gallon, although just one year ago at this date the price was at $2.86 a gallon — still nearly 20 cents higher than the old record.

(Illustration found here).

Beer prices at my store carries a similar characteristic as gas at the pump — the cost goes up by a dime one week, drops a nickel the next, providing a happy incentive to the buyer for the moment, seemingly unaware total price has gone up a quarter the past month.
Way up, a little down, up again, then down a little less — a process which eliminates price shock.

Oil itself is also getting banged around.
From liveoilprices: In London, Brent crude oil futures for January 2012 delivery was trading at $109.01, 08.30 GMT this morning on the ICE Futures Exchange.
And WTI: US Light crude oil futures for January 2012 delivery was trading at $97.79 a barrel, 08.15 GMT this morning in electronic trading on the NYMEX.
Prices are choppy due to the horror of the 17-nation Eurozone blow-out, which forecasters seem to think will lead to a break-up of the confederation, and eventually-quickly to a break-up of whatever kind of global economy the world is experiencing right now — investors continue to shun European government bonds, driving interest rates up and thereby digging a deeper hole for countries that need to refinance debt.

The US is hiding, or just too scared to come out and play.

In deflecting the shit across the pond, the US received a temporary/smoke-screen-bounce for the economy from Black Friday/Cyber Monday, which pumped up retailers for the upcoming big-spending holiday season.
Reportedly, last Friday was the largest single-day sales in US retail history — Overall, Black Friday 2011 sales set records, pulling in $52.4 billion, according to figures from the National Retail Foundation.
And yesterday, a record again with nearly $1.2 billion (yes, that’s billion) spent on Internet buying — nearly half-a-billion dollars more than last year.

Despite overall records for the weekend, which now includes Thanksgiving, (was) up 16 percent from $45 billion last year, according to a survey by the National Retail Federation, the money may not be there for the next month.
From CNN Money:

“Black Friday is only one piece of the puzzle,” noted NRF spokeswoman Ellen Davis.
“You could have the best Black Friday in the world but the rest of the season wouldn’t match up and that’s what happened in 2008.”
Typically, sales over Black Friday weekend comprise 10 percent of total holiday sales.
But, in 2008, experts believe many consumers rushed out during Black Friday weekend to take advantage of the best bargains then hunkered down for the rest of the season.
“A lot of people went out as a result of desperation because they knew the deals were really good,” Davis said.
“In some ways, the economic environment is very similar to 2008 but shoppers are acting very differently.”

The difference is in cash on hand:

The strong holiday sales figures thus far underscores how bargain conscious American consumers still are and it doesn’t guarantee those strong results will hold over the next several weeks,” said Greg McBride, Bankrate’s senior financial analyst.
“Consumers are still worried about their savings, job security, debt and net worth,” he said.

All ingredients for staying alive.

And all this could be just another wad of bullshit — Barry Ritholtz at The Big Picture says: If it’s the Monday after Black Friday, then its national hype the fabricated data day!
In other words, all that information in the above might be just inflation of results.
And Ritholtz, who’s one of the better dudes putting financial shit together, even goes so far as to wager a bet:

Here is my challenge to the CEOs of the National Retail Federation and ShopperTrak: $1,000 to the charity of the winners choice that your forecasts for Black Friday, the Thanksgiving weekend and the entire holiday shopping season are wildly off.
I bet you your forecasts miss the mark by at least 10 percent-20 percent (though I believe its closer to 40-50 percent).

Pump it up, then pump it down, shake the facts all around.