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The past three days I've been driving through the South, heading back to Nebraska for the Summer, trying to avoid viscous Spring storms that have blanketed the mid-section of the South. My path has taken me through parts of Florida, Alabama, Mississippi, Louisiana, Arkansas, Missouri, Iowa and tommorrow, Nebraska. My observations have been consistent. WalMarts and McDonalds are packed with customers while enclosed shopping malls and Starbucks aren't. America has traded down.
I'm not talking about just the unemployed or those that have experienced housing and credit problems. All of my acquaintances have been spending less and re-evaluating their lifestyles. Net Worths are still large and incomes, though reduced, very adequate. Still all feel compelled to spend less and wiser. This is good for our future, but going to be difficult for the present. The entire country is reverting to a Warren Buffett lifestyle. America is starting to live within its means.
The market has been bouncing back with avengence lately, although it does appear to be driven more by short covering than conviction buying. The move has been especially good to low priced stocks. Little thought has been given to the change that I have described. Many old, worthy companies will not be worthy of the bounce back as the consumer isn't going to participate like he/she has the past decade.
I don't think the rally will last, but if I'm wrong I think the safest bet is to go downscale and own those names that are attractive to a newly wise consumer, low, middle, or upper income.
Bill Kabourek
thecrustycreditanalyst.blogspot.com
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