5 New traits of the American Consumer
At spotlight we have a definate Behaviuoral bent to our assumptions about economies and marketes and what drives them. We don't believe in models of consumer thought or behaviour but rather how a given set of circumstances may impact on that behaviour.
So it is that we find this article really interesting in what it says about American consumers. It would also naturally inform the choice of companies in an equity portfolio. you can see where Apple would fit into a portfolio and why it has done well even in a poor economic environment.
"Here are five traits that define the today's consumer--and how companies can appeal to them
Optimism. Consumers that Gerzema and D'Antonio classify as "spend shifters"--55 percent of Americans, based on their research--are optimistic and resilient...they simply seek value for their money.
Brand consciousness...they're often drawn to brands known for providing value.
Authenticity-seekers..." a desire for a more ethical and sustainable approach to consumption--and life," the authors write.
Purpose-driven. "consumerism needs to be tempered by a thoughtful awareness of its negative social and personal implications," ...research found that most respondents enjoyed cutting back and decluttering their homes.
Mature...Compared with their parents and grandparents, twentysomethings are "even more focused on achieving their goals and attaining their dreams,"
These five shifts represent some big changes from the heady days of the previous decade, where credit was easy and consumers seemed to always want bigger cars and bigger homes. Now, companies have to come up with creative answers to the question: How do you market to consumers who aren't as fond of consuming?Full article here http://finance.yahoo.com/news/5-Traits-of-the-New-American-usnews-1089751453.html?x=0
Sovereign Debt
The Euroipean periphery are, once again, under pressure from their debt burden and weak economies. Ireland is a case in point with the terribly weak GDP result overnight (-1.2% qoq) adding to its woes and making it 11 from 12 recent quarters of falls. The chart below shows that GDP is down more than 12% from the high.
The EUR/USD exchange rate finally pulled back overnight on this and the weak PMI result and we can't help but think that for all the United States economic problems now the real value of the EUR is about 1:1 to the USD. Sure DEM/USD might be different but Europe is more than just Germany and currency traders will wake to this eventually. Won't they?
Here is an interesting article on Ireland, but its really more about Europe and US banking debt. The US looks ok on this analysis. http://economics21.org/commentary/real-lesson-about-irish-austerity-plan
The debt problems of NATO countries particulalry the European ones overhang markets and growth like the Sword of Damocles. We hope that Ireland in 2010 is not the precursor it was in the Northern Summer of 2008.
So it is going to be interesting to see the Spanish Budget later today. Austerians reign supreme and it looks like Finance Minister Salgad will have to join the club. More Austerity means further weakness in growth for the region in the short term we'd guess.
http://www.bloomberg.com/news/2010-09-23/spain-faces-pressure-to-keep-up-austerity-as-euro-s-periphery-bonds-drop.html
Market Forecasting
It's a mugs game trying to forecast markets day in and day out. But it is particularly hard if, as in increasingly the case, you are the type of pundit who is as much a part of the marketing team as the markets team. So its not fair that Mark Zandi of Moodys has been targetted in this way but it is compelling to see just what being on the record can do to your record.
http://www.ritholtz.com/blog/2010/09/zandi/
For the record we used to do this type of stuff for a living and while we know how difficult it is to get it right we are not letting him off. Good economists and strategists need to look through the noise of the daily number or the media cycle and deeply understand the drivers of their markets and the theoretical and actual underpinnings of those markets. too many pundits thin slice and chase headlines rendering them talking heads.
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