Retail sales look like they increased 8% to 10% in March 2010, according to the International Council of Shopping Centers. Assuming the numbers are correct, and this is perhaps a very big assumption, a number of mitigating factors led to the unusual rise, including an Easter holiday that fell right in the beginning of April and very mild weather in March after a February filled with snowstorms. Nevertheless, mainstream media reports heralded that "consumers are finally coming out of hiding" and that happy days are here again.

The April 7th edition of the New York Times had some of the most positive reporting, stating that the U.S. consumers' mood has gone from panicked to cautious to "almost a bit giddy" - a quote from Mark Zandi, chief economist for Moody's Economy.com. In coverage elsewhere, Jackson Bros., Boesel & Co. noted that this is season when chain store sales increase and that they saw interesting possibilities in Woolworth, Grand Union, and J.C. Penney (JCP).

Today's coverage in the Times noted that "import cargo volume in March also suggested a strong month for retailers," having risen for four months in a row and being up an estimated 6% in March according to the National Retail Federation. Other publications reported that rail freight loadings in the week that ended March 21st gained more than they usually do in March and had hit a new high for the year. The implications are, of course, that this indicates that retail sales will be getting better in the future.

The Times upbeat coverage also included, "sales are simply much stronger than companies had expected,” and the improvement extends to some of the most costly items including autos with Ford (F), Toyota (TM) and General Motors (GMGMQ.PK) having robust sales increases in March. The Times did concede that incentives such as no-interest loans may have been responsible. Other sources reported that one major automaker had its third straight monthly gain of around 50% and its highest sales since last June. Dodges, De Sotos, Plymouths, and Fargos were apparently flying off the lot in March... March 1931 that is.

While the New York Times article was published on April 6, 2010, the other articles cited were published 79 years ago in early April 1931 - two years before the economy hit bottom during the Great Depression and many more years before the U.S. managed to crawl out of the economic devastation that the downturn had caused. Rosy media reports in 1931 did not mean that the economy was getting better and it is quite possible that they don't indicate that in 2010 as well. Mainstream media wants to tell the 'everything is getting better' story and managed to do so in 1931 when the U.S. economy was actually falling off a cliff. Investors should assume little has changed with media reporting since that time.

What has changed since the 1930s is that the Federal Reserve is pumping huge amounts of liquidity into the financial system and the government is spending huge amounts of money it doesn't have to keep the economy functioning. Retail ETFs, such as RTH, XRT and PMR, are trading at two-year highs. While a realistic analysis of the macro picture may not justify such high stock prices for retailers, liquidity is responsible for the ongoing rally. The party should continue as long as the Fed continues to supply free booze. Once it stops doing so, expect one big hangover.