How's The Consumer?
Since I started this blog I've tried to keep a consistent message as it pertains to the most important data point this cycle. How's the consumer? That may be obvious given the consumer makes up two thirds of the American economy, but it is not the most important data point in every cycle. We've talked about housing, discretionary industries, cyclicals, retailers, consumer oriented technology companies and durables.
Over the last few days we've seen Wal-mart announce their worst same store sales figures in about six years as I recall. Wal-mart has enough problems in a foolish change in strategy they are attempting let alone any economic weakness. There's a general consensus the "wealthy" will pull through this slow down. Or, as you may have heard it said, this is a great economy if you are a skilled worker. I surely beg to differ. Such a premise denies the basic principals of economics and capitalism. The wealthy become so by riding on the backs of the middle class either figuratively or literally. Or, if you want a simple analogy, look no further than nature's stasis. Upsetting the food chain or ecosystem usually has consequences well beyond the obvious. Often the smallest change may have catastrophic consequences. How might this play out economically? It could be the companies wealthy Americans own or run have products the middle class relies upon. It could be that with wage disparity or wage malaise, the masses elect politicians who are more focused on more equitable income distribution. It could and likely will be a whole slew of reasons. But, ultimately, when the masses are not enjoying wealth appreciation, that is not a good sign for society as a whole as we've seen time and time again. Most specifically, as Eric Hoffer would point out, societies where the masses have already tasted success.
So what about the upper income segment of the economy? I consider Whole Foods a proxy for upper income Americans. To a certain extent, shopping at Whole Foods is a luxury. It is discretionary. Indeed food stuffs are a staple but paying four times the cost of merchandise available down the street at Wal-mart Superstore is not a staples business. Well, Whole Foods is definitely taking it on the chin over the last year. When the consumer is cinching their belt, $4 per pound apples aren't at the top of their shopping list. Today, as I post this at 2pm, Whole Foods is down $14 or 25%. Any down turn of significance will be shared by all.
Over the last few days we've seen Wal-mart announce their worst same store sales figures in about six years as I recall. Wal-mart has enough problems in a foolish change in strategy they are attempting let alone any economic weakness. There's a general consensus the "wealthy" will pull through this slow down. Or, as you may have heard it said, this is a great economy if you are a skilled worker. I surely beg to differ. Such a premise denies the basic principals of economics and capitalism. The wealthy become so by riding on the backs of the middle class either figuratively or literally. Or, if you want a simple analogy, look no further than nature's stasis. Upsetting the food chain or ecosystem usually has consequences well beyond the obvious. Often the smallest change may have catastrophic consequences. How might this play out economically? It could be the companies wealthy Americans own or run have products the middle class relies upon. It could be that with wage disparity or wage malaise, the masses elect politicians who are more focused on more equitable income distribution. It could and likely will be a whole slew of reasons. But, ultimately, when the masses are not enjoying wealth appreciation, that is not a good sign for society as a whole as we've seen time and time again. Most specifically, as Eric Hoffer would point out, societies where the masses have already tasted success.
So what about the upper income segment of the economy? I consider Whole Foods a proxy for upper income Americans. To a certain extent, shopping at Whole Foods is a luxury. It is discretionary. Indeed food stuffs are a staple but paying four times the cost of merchandise available down the street at Wal-mart Superstore is not a staples business. Well, Whole Foods is definitely taking it on the chin over the last year. When the consumer is cinching their belt, $4 per pound apples aren't at the top of their shopping list. Today, as I post this at 2pm, Whole Foods is down $14 or 25%. Any down turn of significance will be shared by all.
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