Dear Smart Profits Report Reader,

If you read our column yesterday, the dismal December retail figures released this morning should come as no surprise.

With stores tripping over themselves to offer steep holiday season discounts, their efforts were largely in vain, as many consumers simply weren’t financially able to take full advantage.

Even the beast that is Wal-Mart (NYSE: WMT) struggled to make much headway. As we reported yesterday, Thomson-Reuters projected a 2.8% same-store sales rise for the firm in December. But the actual results proved otherwise.

Considered to be a beneficiary of the tightened household budgets, the company reported a paltry 1.7% increase in same-store sales. As a result, it cut its earnings outlook.

Thomson-Reuters was right about one thing, though: Higher-end retailers got spanked - some of them quite dramatically. For example, Saks (NYSE: SKS) posted a 20% decline in same-store sales, while Gap (NYSE: GPS) sales sank by 14%.

So how can investors play this? If you’re like me, when bad news hits, you look to snap up quality companies on the cheap. But retail stocks are just too dangerous right now. While taking the opposite approach of the main sentiment often pays off, I expect retail to head lower for the next few months.

If you’re looking for bargains, buy the retailers’ goods, not their stocks.

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Another Bank Job

Two pieces of big news from Europe today…

First up, the Bank of England (BoE) hacked another 0.5% off U.K. interest rates this morning, taking the base rate to 1.5% - the lowest level in its 315-year history.

Ho-hum. As the U.S. Federal Reserve does, so does the BoE, as both central banks desperately scramble to stifle deepening recessions.