It’s not the economy, stupid…

Written by Scott

Topics: Uncategorized

…but they want you to believe it is. Yes, unemployment has risen slightly, and foreclosures are up, but don’t believe the scare tactics of politics. It’s an election season.

Here’s my simple way of viewing the health of the economy, and it involves only 2 stocks: Starbucks and Walmart.

If the economy begins tanking for real, discretionary spending should begin rapidly drying up…and Starbucks should be a very good indicator, since most of us don’t really need their over-priced and often over-bitter espresso. In other words, Starbucks stock will drop rapidly. That hasn’t happened. Their overly rapid expansion, coupled with loss of quality on their part and more competitiveness in the market has recently hurt them, but their stock is at the level it was in fall of 2003. Nobody was decrying the economy then.

As for Walmart, if families begin to really hurt financially, I would expect shopping at Walmart to increase as a very viable way to stretch their dollars. Really hasn’t happened. Again, their stock levels are about, coincidently enough, where they were in early 2004.

Yes, some market corrections are clearly in order. But is government interference in it necessary, when things aren’t nearly as dire as they would have you believe? Or perhaps would our time be better spent in looking at the events that led to the current sub-prime mortgage issues (which are the prime cause –almost exclusively–for most of what is happening

  • Excellent points. Apple products are my "Starbucks" indicator. People are buying up their super expensive and not exactly needed gadgets. The market isn't all that bad.But there have been very stupid things done in the world of money which have led to some pretty nasty situations. ~Luke