With Thanksgiving behind us and the fun and festivities of the holidays officially here, it truly is the season to be jolly. And yet, it is also a season to be careful, traders say, given the nervous state of the markets, all of the external distractions, not to mention the existence of some widely held beliefs that could actually turn out to be giant potholes rather than the tailwinds many investors are counting on.
As part of our Thanksgiving week coverage, we brought in veteran trader Kenny Polcari to flag a few areas that he thinks could hold danger and catch you off guard as we wind down the year, and we began with housing. Fresh on the heels of the latest data that showed better than expected results in existing home sales and housing starts and permits, Polcari's first caution-zone is to avoid drinking too much of the eggnog, so to speak, that floats within the "housing is back" story.
"They keep telling you that it looks good but you have to be very careful when you look at housing data," Polcari warns in the attached video, adding that you can't compare what goes on in the northeast with what's happening in Miami or Las Vegas or Phoenix.
He concedes that housing is "turning around from the depths of the lows" and is "trying to find a bottom." Try telling him that the recent 10% increase in the national median price of a home is reflective of what's really happening in America, and you're apt to get both barrels!
"Prices are up 10% from $80,000," he says of the badly beaten markets where three bedroom condos can still be had for $100,000. "I'm not saying the housing market isn't trying to find a bottom, in fact, I think for a lot of the country it is. But I don't live in the middle of Idaho, I live here."
In a similar vein, Polcari's second mythical target takes aim at job growth, GDP and more generally, the commonly espoused theme that "the economy is picking up."
"I'm not trying to be a Grinch here, but again, I don't see it," he says, "especially in my own industry" where overall headcount in the banking and financial services business is down nearly 200,000 from the pre-recession peak.
In fact, unlike those who are looking for continued slow and steady improvement in GDP, Polcari says, "as we move into the new year, I think there's going to be a recession in 2013."
For the record, a survey of 60 economists done last week by Reuters showed GDP estimates of 1.6% for the 4th quarter, 1.5% for Q1, 2.1% for Q2 and 2% for the full year 2013.
Finally, and perhaps most seasonally fitting, our trading pro takes aim at the swirl of shopping activity and analysis that fly beneath the Black Friday/Cyber Monday banner. Specifically, Polcari addresses the adage that as these two marquee days go, so goes the whole season.
"Be careful this year because they've now created two extra weeks," Polcari says, noting the combined punch of what's known in the retail industry as a "calendar shift" and a super early Thanksgiving. "Towards the end of the month when they talk about retail sales for the month, you have to put it into perspective. How much can you really compare, year over year, when this year has two extra weeks in it," Polcari argues while disclosing his preference for online shopping and that he wouldn't be caught dead in a mall.
So yes, it is the season to be jolly, but it is also a time to be skeptical, and not fall into a mythical traps.