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An Argument to support the Consumer
Author: Bob Lang (info)
Website: http://trade-mentor.com
Posted: February 25th, 2008 at 10:09 am EST
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We’ve heard about the pullback in the consumer, which directly affects the economy. Higher gas prices, inflation at every corner, rising jobless claims…all bad stuff. Top it with a declining housing market and you have ingredients for a big slowdown here, which is nearly 70% of GDP. However, there are signs out that may auger well for the diehard spender.
They’re BAAAAAACK!!
We’re talking mortgage refinancings. Last month saw an explosion in refinancings with the big drop in mortgage rates. Will this shore up confidence? Perhaps, but more likely improve consumer balance sheets, always a good thing. Also, putting money back into the pockets of consumers, for better or worse…will put more money back into the economy. Mortgage refinancing surges also mean the housing market and valuations may have bottomed. We should see the affects from this refinance boom in the next couple of months. What groups to look at? Retail, restaurant and consumer durables.
Cash That Check
The Government has passed a fiscal stimulus bill that will put some dollars in our pockets. At least $300, in some cases much more than that. Where will that money go? Perhaps to Walmart or other retailers. Maybe to pay for some gas, possible to pay off some debt. Whatever the case, the 150 billion of stimulus will likely head right back into the economy, generating at least a 1% increase in GDP. Temporary help, for sure. Clearly something to help start the engines.
Housing ‘It’
Much of the chatter about recession and pullbacks in the economy has forced homeowners to ‘rethink’ their situation. Travel abroad is expensive. In fact, traveling in the US is costly with higher oil prices. We’ll see many out their forfeiting their vacations in order to stay home. Further, the spending ‘around the house’ will increase…hey, we’re not going anywhere, so let’s do that house project we’ve been putting off for years. More business for Home Depot, Lowes and material firms. And let’s not forget about cocooning…with a great emphasis on staying home to entertain. Big screen TV’s, movies on demand; consumer non-durables, food and energy are big areas to look for.
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Bob Lang, Economics, Stock Market
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