Retailers Sing the Blues on Black Friday

After the turkey, mashed potatoes and stuffing have been eaten in gluttonous proportions and all of the football games have ended many individuals and families will then sit down and plot their strategy for the biggest shopping day of the year, Black Friday.

This year however thanks to the economic crisis that has gripped the U.S. and the rest of the world since mid-September Black Friday may leave retailers blue.

Normally the lure of deep discounts is enough to lure shoppers to stores hours before they open as they hope to snag that inexpensive flat screen television or incredible bargain on an article of clothing.  But that was the past and now in addition to pricing many items below cost to get consumers to open their wallets stores are adding extra discounts or giving away gift cards with purchases just to stimulate traffic. 

When the crisis first started the Christmas season for retailers was looking very bleak and reported sales figures by the major retailers only confirmed the toll the crisis was having on consumer spending.

But that was before gas prices dropped like a stone to less than $2.00 a gallon nationwide bringing smiles to the faces of consumers.  Yet this will probably not be enough to save the retailers from one of the worst seasons in the last two decades.

The main reason is that we still have a housing slump and foreclosures are continuing apace despite the efforts of the federal government and banks to stem the tide.  Couple that with exceptionally tight credit and portfolios that have been decimated in many cases and you have a pretty poor outlook.

For me, I might venture out to look for a bargain on some items, but I am only talking about things in the $20 range at best.  I don’t plan to map out any particular strategy or arrive early enough to freeze to death just to buy something that I probably don’t need. 

With my own portfolio back to 2004 levels and having seen some $170 k erased since the market’s peak, I am in no mood to splurge on anything.  My losses are probably small by comparison to many as I had a larger cash position than at any time in my life which for the most part spared me from losing even more money.  If I had stayed away from financials I would actually be doing quite well overall, but that’s another story.

I hope that I am wrong and that sales and profits are strong on Friday, but with deep discounting likely to be the norm, I am not optimistic.

It will take a lot of time to restore consumer confidence and anyone who thinks Obama will be able to wave some magic wand to solve this crisis is dreaming. 

The Democrats won the prize they have been seeking for the last eight years but it came with a huge downside in a slumping economy and credit crunch.  If Obama and the congress don’t turn this around quickly 2010 will be a very ugly year for them and 2012 even worse.

 

McCain’s Socialist View

In Hamlet Lord Polonius offers his son dome advice as he returns to school;

Neither a borrower or a lender be;

For  loan often loses both itself and friend,

And borrowing dulls the edge of husbandry.

Perhaps John  McCain would have benefited by having read some of this sage advice before announcing his own economic rescue proposal during Tuesday night’s presidential debate.

As if it wasn’t bad enough that our government has already bailed out Fannie Mae, Freddie Mac and insurance giant AIG at taxpayer expense and the president signing the $700 billion bailout bill now McCain is jumping on the bandwagon in an effort to lure voters to his side.

Under McCain’s plan the government would purchase some $300 billion in mortgages at their full value and then re-write them to take into account the current home value and make the payments more affordable to homeowners.   It sounds great if you are a homeowner who is struggling to meet mortgage payments and is now upside down due to falling home values but why should taxpayers foot the bill for someone else’s mistakes?

Most of the homeowners who are in trouble purchased more home than they could afford thanks to easy credit and low interest rates that were only guaranteed for a short period of time.  When the rates reset to market rates suddenly these homeowners found themselves rapidly falling behind on their mortgages.

Now in desperation to attract voters McCain has come up with a scheme to help out these troubled homeowners by turning the government into a mortgage lender and servicer.  How in the heck does that benefit most taxpayers?  Neither the mortgage holder or the borrower will lose undet this plan as the government will essentially make them whole. That’s financial responsibility?

Or what about homeowners who used the inflated value of their home to borrow more money and are really in the hole.  The taxpayers are supposed to bail them out as well.  I have a friend who is in sch a fix.  He borrowed against his home  to fix it up for sale and when it came time to sell the market was far too soft for the price he sought.  He has lowered his price several times but is now at the point where if he did sell he would owe the bank money so he is considering walking away from the house.  While I have sympathy for him I think he should pay the price for being overly optimistic on what price his house would fetch.  A the same time at least he borrowed to legitimately improve the home.  Most home equity borrowers took their  booty and spent it on vacations and investments that have now turned south putting them further into debt.  Now they too are looking for the government to bail them out as well.

Who’s to say that the McCain plan isn’t just another step along the path to socialsim?  Since when does a capitalsit society ask the government to step in and in essence nationalize the financial system?

Yes this economic crisis is painful.  Costs for food and energy are putting a squeeze on the middle class like they haven’t seen since the Carter years.  Fear and panic on Wall Street is as bad as it has been since the crash in 1987 if not 1929 as politicians of all stripes have preferred to to put their fingers in the dike rather than take strong decisive action to calm the markets.

The end result is that this plays right into the hands of liberal Democrats who stand to clean up in November and pick our pockets starting in January.  Voters should beware of what they wish for when they vote for change next month.