Wednesday, October 22, 2008

Luxury and Comfort Products May Face Bleak Future

As middle-class consumers face more obstacles to make ends meet, they'll eventually gain a new perspective on their daily,weekly and monthly purchases. They'll be forced to make difficult choices regarding the personal items within their budgets, and as a result, various items they once valued as essentials will be reclassified as "comfort" items.

The Consumer Confidence Index conducts monthly surveys of 5,000 U.S. households to measure confidence in the status of the U.S.'s economy, and the September report revealed a slight confidence increase, but the summary included this warning:

Consumers' short-term outlook improved again, but overall remains grim.

If you combine the CCI's warning with certain stock trends, I believe there's a dark future ahead for any corporation that produces luxury or comfort items.

Remember Sharper Image, the chain of fancy stores that sold all of those over-priced toys,high-tech gadgets and gifts you loved to fiddle with? It filed for bankruptcy closed half of its stores a few months ago.Satellite Radio is also feeling the negative effects of the economy.  Look at XM-Sirius Radio's stock during the past three months. When the FCC approved the XM and Sirius Merger, shares sold at $2.42, but as of 11:45 today, it was at .35 cents.

Conversely, the bargain retailer Family Dollar has flourished during the past three months and Standard & Poor's Equity Research raised its rating of Family Dollar to a "Strong buy."

 What's the lesson we can learn? If you're an average American, consider the stores and brands you favor during hard times, and apply that same logic to your short-term stock investments.

(Top image is from joemustknow.com)

Posted By Matt O'Hern at 12:28 PM
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