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Blog : Shoppers Help Wall St. Avoid Blue Christmas?
by John Whitefoot on November 30th, 2007
If penny stock investors paid heed to every headline the financial markets throw at us daily, I think we’d all be suffering from anxiety and be heavily medicated. I realize editorials are, by their very nature, ‘opinion’ and not an angelic ‘Truth’ for the ages. Still, that doesn’t stop investors from reading them beyond anything akin to face value.
If I decided to gage my buying sentiment on press release headings, I’d probably have a nervous tick and be rocking back and forth in the corner. For example, on Monday I learned late in the day that the markets had fallen on fresh credit concerns. By mid-day Tuesday I’d discovered that the markets were higher after Citigroup received a $7.5 billion investment. On Wednesday I was told that a recession was all but certain and on Thursday Wall Street continued its two day rally.
Predicting when the markets are going to rise, fall or hit bottom is best left to the Wharton boys on Wall Street with their oscillating ratios etc. All of which are basically useless.
The best way to gage how the markets are doing is not to listen to the handful of kings and queens eating cake on Wall Street…but to listen to what the average American is actually doing on a day-to-day basis. And the best way to measure that this week is by looking at the numbers recently posted on Black Friday and Cyber Monday.
‘Cyber Monday’ is the day after the U.S. Thanksgiving long weekend, and it’s when retailers kick off the virtual holiday shopping period - -luring in consumers with bargains.
Not sure if shopping is the litmus test for predicting stock market performance? With consumer spending accounting for about three-quarters of U.S. economic activity, you can rest assure the financial gurus in the shiny towers are watching us very closely this week.
One of the busiest days of the year for online purchases, Cyber Monday attracted an estimated 72 million shoppers, up from 60.7 million last year. These online bargain surfers spent a record $733 million in one day – a 26% increase over last year.
Retailers now compare Cyber Monday to Black Friday, the Friday after Thanksgiving and the first ‘official’ day of the U.S. holiday shopping season. On Black Friday traditional brick and mortar retailers enjoyed a strong start to the season, with sales rising 8.3% year-over-year to an estimated $10.3 billion. Black Friday sales usually account for between 4.5% and 5% of all holiday sales.
Black Friday’s sales spike is evidence that consumers are willing to spend despite mounting worries about a slumping housing market, a credit crunch and towering fuel prices.
Besides fighting for parking, can penny stock investors get involved on the Black Friday and Cyber Monday rush? eCOST.com, a wholly owned subsidiary of PFSweb, Inc (PFSW – Nasdaq) announced strong consumer demand measured by booked revenue and total web site visitors during the Thanksgiving Holiday weekend.
From November 22 through November 26, eCOST.com’s booked revenue increased 67% year-over-year. On Black Friday, eCOST.com saw a 105% increase in demand vs. Black Friday last year; with consumers flocking to high end electronics like High Definition LCD TV’s, GPS systems, and notebook computers.
Does a robust Black Friday and Cyber Monday just mean that consumers are turning a blind eye to ongoing economic turmoil? Most American consumers are adults and I think they grasp the inherent risks associated with having mortgages and credit card debt.
One article noted that a growing number of Americans expect the economy to tip into recession in the next year. While some analysts think an emerging consumer recession is imminent, others are quick to (you guessed it) disagree; noting that recession forecasts are unreliable and overstated.
Regardless, many think the Federal Reserve will steer the economy into a period of slow growth and avoid a recession – and expect the Fed to cut the interest rate by another quarter-point at its December 11 meeting.
But then again, who can say? For now I think the best thing penny stock investors can do is take advantage of a depressed market…and look for penny stocks that take advantage of seasonal opportunities.