There is an article in The Wall Street Journal caught my eye this lovely Tuesday morning, as Sara Murray took a look at how families cut back on spending in 2008. According to the article, consumer prices increased nearly 4% when compared to 2007; but pre-tax income increased less than 1% - or $472 for an average family. Yes, the average American family made $472 more dollars in 2008 than it did in 2007. Breaking it down even further, the overall spending per consumer unit (which includes families, single people, or cohabitants) increased 1.7%, or $848, in 2008. This was the smallest spending increase since 2003. The biggest drop was in apparel spending (4.3%) while families spent 8.1% more on eating at home (which computes out to $279 per family).So, what can the average investor learn from this report? First, it may not be a bad thing to invest in supermarkets - as people were spending more money on eating at home. Of course, this means that restaurants could suffer; as more people eating meals at home mean less people eating meals at restaurants. Second, the savvy investor could capitalize on big-box stores (like Costco:NASDAQ:COST) or on discount retailers. When people are trying to maximize the value purchased for their money, buying in bulk and buying high-quality generic brands make the most sense.
What about the year to come? Watch for entertainment spending to drop. According to the report, this factor inexplicably rose from 2007 to 2008, something has to give there, as entertainment spending should be the first thing cut (notice I said should). In addition, watch for the food spending trend to continue. I know in our modest abode the trend is to cook at home rather than to eat out - thanks mainly to the budget. I expect the trend to spend less to continue, of course, there is a reason that we ended up in this mess. Perhaps there will be enough irresponsible spenders to push the spending higher - but I hope that the personal income will increase a bit more to make up for irresponsible spending.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
10-08-2009 @ 2:29PM
Richard Ballard said...
Perhaps garden supply companies are another good investment. IMO backyard vegetable gardens will become popular in the coming months. Richard Ballard http://www.myspace.com/rjballard