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Tuesday, December 15, 2009

The Christmas Tree Indicator

One of the popular parlor games on Wall Street these days is trying to predict how the holiday shopping season will fare. If sales rise from last year, that may bode well for the economy heading into 2010. If sales drop, well, that's not such a good sign.

Like many things related to Wall Street investing, you could do exhaustive, detailed analysis to come up with a prediction, or, you could pick one indicator that has some historical significance and run with that. As it relates to predicting holiday sales, it turns out that, "Christmas tree sales can be a good gauge of the strength of the holiday-shopping season," according to The Wall Street Journal.

So far, this simple indicator looks positive. Christmas tree sales were up 6% the weekend after Thanksgiving and 3% the following weekend when compared to the year earlier period, according to ISI Group survey data as reported by the Journal.

Helping to corroborate the Christmas tree indicator, the Commerce Department reported last Friday that retail sales rose 1.3% in November, which was double the rate expected by economists surveyed by Bloomberg. Consumers also seemed to be feeling a bit cheerier as the Reuters/University of Michigan preliminary index of consumer sentiment for December rose to 73.4 from 67.4 the month before, according to Bloomberg.

The good news doesn't stop there. Credit Suisse and JPMorgan Chase & Co. both raised their fourth-quarter GDP forecast to a gain of 4.5% from the 3.5% pace projected at the start of the week.

The recommentation: Go out and buy two Christmas trees. But wait until Christmas Eve.
You can go to Home Depot and buy that $60. tree for $5.00...and there's no limit.

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