Jimmy ‘Ze Big Mouth-The Sky Is Falling’ Cramer sings many tunes. Some 15 months ago he frightened investors world-wide with his ‘fire in the theater’ antic on NBC’s Today show. He told listeners that if they needed any investment money over the coming five years they should sell immediately what they owned in stock and put it in cash.
Less than a year later, with no mea culpa, Le Grande’ Mouth pops up again on the same show and tells people to buy-buy and buy everything of what they just sold-sold-sold. So what happened to waiting 60 months? Why did so many people create tax burdens when they didn’t have to? It simply proves that even people who have experience (Jimmy ran a hedge fund successfully for years) don’t have a clue as to what is going on. Professional money managers learn at an early age to talk out of both sides of their mouth to keep out of trouble. Jimbo forgot that simple rule. Hedge your comments.
Lately the stock market has made significant moves to the upside and more people are paying attention. So what is stoking this new confidence in the economy and especially the American spender?
First a little history lesson. Peter Lynch who took a small cap mutual fund called Fidelity Magellan and built it into one of the nation’s largest asset based open ended managed fund used to do his walk down Main Street to find new investment opportunities. He talked to consumers and business people. He liked the retail sector and was one of the first who discovered the Gap as a place to put investor’s money which was just about the same time millions of teen age girls were squeezing themselves into the Gap jeans and tops. The point is that retail is a leading indicator of how the economy is growing. Lynch was an advocate of this simple research tool, talk to people. And he also understood as goes the consumer so goes the economy.
You can use this same investment technique when you go to Macy’s, the corner butcher shop or trendy cafe ask the wait staff how’s business. You’d be surprised how people who work at these stores are willing to talk about their business. You will learn by simply asking if the store is seeing more people than they did a year ago or even since the holidays. You can also discover if people are spending more by simply asking. You’ll get a better handle on the economy by doing this than if you ever listen to Cramer. A client of mine used this simple technique years ago and discovered Panera Bread. The money she made off that observation has paid forever her visits to Panera, her fav cafe.
Now to the present- Officially the Big Box stores are reporting better than expected earnings. More people are spending more money even though we are still officially in a depression and unemployment is as close to double digits as Kid Rock is to Pamela Anderson. However, the retail stocks are suddenly seriously outperforming the Dow Jones Industrials and this is telling us that we are on the road to recovery. There should not be a double dip recession the way people are spending and as investors we should be looking for entry points to commit even more money.
The American consumer may be more debt adverse than ever before but it can do what no other nation of peoples can do and that is move global economies with its spending. Jim and Mary Next Door Neighbor can make global happy faces with their charge and debit cards. No other country can boast of that.
If you have questions about this blog call Paul at 877 783 7080 or write pstanley@westminsterfinancial.com. Share this blog with someone who cares about money.
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