The headline above, from The Wall Street Journal, November 29, 2009, captures well the muted optimism among shoppers this holiday shopping season. The sub-headline, however, might be even more telling: “Aggressive Sales Lure Hordes of Shoppers, but They’re Still Slow to Open Wallets.”
The Financial Times echoed these sentiments, reporting that shoppers were maintaining a “utilitarian focus that has replaced bubble-era excess.” Purchases reflected a “prevailing tone of practicality,” with common household items like vacuum cleaners, coffee makers, towels, and bedding among the popular items sold.
Overall, shoppers spent close to $11 billion on Black Friday according to The Wall Street Journal, an increase of roughly half a percent over 2008’s dismal showing. Let’s face it—last year was an unmitigated disaster for retailers as shell-shocked shoppers went into a fear-induced hibernation. The fact that this year’s numbers were only a half a percent better is not much cause for celebration.
The consensus among retailers appears to be that things aren’t that bad…but they are still far from good. Increased sales of basic household goods are certainly better than no sales at all, but they are a far cry from the extravagant (and highly profitable) spending on luxurious discretionary items of the mid-2000s.
So, what are investors to make of Black Friday 2009? One view might be that we should get used to it. This could be the “New Normal.” It may also be what a modern-day depression looks like. The economy does not tumble year after year; it stalls out. It contracts by, say, a percent or two one year, then returns to tepid growth for a year or two before falling into contraction again; and the cycle repeats for a decade or more.
This is precisely what Japan experienced throughout the 1990s and 2000s. The Land of the Rising Sun has yet to recover from its credit bubble of the late 1980s, and the country’s aging demographics virtually insure that it never will.
The United States is not Japan, of course. It is a different country with its own unique credit and demographic issues with which to contend. Still, Japan’s experience is instructive. It teaches us that there is no fast recovery from a massive credit crisis accompanied by aging demographics.
Brad Berger, CFP
Cornerstone Financial Strategies LLC