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Did you finish your holiday shopping yet?
I have and mainly because I was one of those die-hards who woke up at 4:00 AM to take advantage of the big, Black Friday day-after-Thanksgiving sales. But let me tell you, standing in line at five in the morning in late November in Montana is not my idea of a good time.
I was able to get a few great deals on some electronics my children wanted. So I’d have to say it was worthwhile. I was surprised, though, at how sparse the crowds were.
Montana, however, isn’t the epicenter of the retail shopping universe. So I poked around to see how the rest of the country’s retailers are doing.
The quick answer: AWFUL!
U.S. Retailers Fear a Shopping
Apocalypse this Holiday Season
The National Retail Federation (NRF), which represents the nation’s 1.6 million retailers, expects holiday sales to show the weakest gain in six years.
And so far, it looks like the NRF could be right …
In November, retail sales decreased 2%.
They aren’t picking up as we get closer to Christmas, either. Retail sales for the six weeks through December 13 are still down 2% from a year ago.
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What money Americans are spending is not finding its way to the mid and upper level retail stores. A survey of 1,000 consumers by America’s Research Group showed that 49.5% versus 32.2% last year said they were doing their holiday shopping at Wal-Mart.
Those numbers clearly show that distressed consumers are looking to pinch pennies.
And there are plenty of reasons why:
- Unemployment is rising …
- The credit crunch has made it almost impossible to qualify for loans …
- IRAs and 401(k)s have been chopped in half … if not more …
- And real estate continues to get clobbered on all fronts.
Look, I’m not pointing this out to sound like Mr. Grinch. It’s just that retail sales represent two-thirds of U.S. gross domestic product (GDP). So investors should be very worried that this retail weakness is going to push our economy into an even deeper recession.
Meanwhile, it will be a very different holiday shopping season across the Pacific …
Miracle on Nanjing Road: It’s
A Wonderful Life for Chuppies!
China’s economy isn’t feeling a consumer spending pinch at all. In fact, the Chinese National Bureau of Statistics reported that retail sales soared 20.8% on a year-over-year basis in November.
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| China is expected to become the #1 luxury market in the world within 10 years. |
What’s more, Chinese consumer spending is projected to reach $1.3 trillion this year.
Those Chinese shoppers aren’t just buying chopsticks or tofu, either. They’re buying big ticket goods like crazy.
Get this: As recently as five years ago, the Chinese bought only 1% of luxury handbags. Now, according to a Goldman Sachs survey, the Chinese are the third-largest consumers of luxury goods, accounting for 12% of the market. And within 10 years, the country is expected to become the #1 luxury market in the world.
I’ve seen it with my own eyes — Louis Vuitton and Gucci handbags are more common in Shanghai than Manhattan. And the city’s Nanjing Road is now the equivalent of what 34th Street in New York City once was.
Talk about an economic miracle!
And that’s why I suggest you …
Put the Power of China’s Booming
Retail Sales into Your Portfolio
The reason for the spending spree is simple: China is creating a new bulging middle class estimated to be 100 million to 150 million today. And that number is expected to DOUBLE by 2015.
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| Chuppies have money burning holes in their pockets and are fueling the boom in Chinese consumer consumption. |
These “chuppies,” or Chinese yuppies, are educated and have money burning holes in their pockets. As a result, Chinese consumption is estimated to increase by a whopping 18% a year over the next decade.
And to keep its economy booming, yesterday China cut interest rates for the fifth time in three months. The central bank also reduced the proportion of deposits lenders must set aside as reserves by a 0.5 percentage point.
These measures are likely to be supplemented by a second stimulus plan aimed at spurring consumer spending following a 4 trillion yuan ($584 billion) package in November that was focused on infrastructure!
My point is simple: As an investor, you do not want to put your money where the consumers are cutting back and pinching pennies. Rather, you should consider investing in countries with economies that are still growing.
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And right now, China is where that’s happening!
I continue to believe individual companies, such as China Mobile (CHL), that cater to the chuppies, will be huge winners.
Or if you’re more of a mutual fund investor, consider a fund that targets Asia, such as U.S. Global China Opportunity (USCOX).
Either way, it will add some holiday cheer to your portfolio.
Best wishes,
Tony
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