This holiday season is going to be weak weak weak
The holiday season, the time where people go all out on their credit cards to buy things they don’t need won’t be anything like that of last year, or probably like any time this decade. This holiday season can’t be funded by credit, won’t be profitable like it was last year and will likely cause a far greater problem later this year.
The way stock earnings work is a comparison between the same quarter of the year before. EPS growth is always compared against the same quarter last year to give an idea of how the company has done in the same market environment. The problem is, last year around this time consumers still had plenty of credit to use and home values to borrow against. This year that is no longer true, there are plenty of people struggling to make the house payments and feed themselves yet alone buy thousands of dollars of gifts on credit.
Even more startling beyond my mild observations is the consumer confidence rating which stands at a 16 year low. We have to go back all the way to the 1992 housing bust to see the kind of numbers we’re seeing right now. That’s a scary thought for all of us who watched a minor recession pan out to billions in investment losses and real estate portfolios demolished.
Simply don’t rely on the retailers and consumer electronic sellers to do anything this holiday season. If anything, take on a short position of the companies that deal with consumer products. I think GameStop (GME) is the perfect stock to short in a worsening economy. Firstly because its product sales depend on disposable income, and the largest margins are in its used products which it will certainly be flush with when people realize that cashing out their game collection might not be a bad idea.
