Sigh. The pooring of America has taken a very dark form - the return of Spam.
I somewhat joked about this in a few previous entries, one regarding the measure of inflation by the government (i.e. substitution effect) [Apr 8: Now on to Airline Inflation]
Now the way the government reports inflation they have a cute thing called "substitution" - when something gets too expensive (beef) their measurements assume you move down (substitute) to a lower value item (say... spam) - so hence your inflation is flat or maybe even goes down. That's the magic of government reporting.
And just a few weeks ago in one our earnings roundups I mentioned how we will trade down to Hormel's jewel of a product
Dicks Sporting Goods (DKS) - while this is a Wall Street favorite this is exactly the type of product that a poorer America will have to cut back spending on. So instead of going out and playing golf or sports that actually require exhaling at a fast rate, we will continue to sit on our behinds and play video games from Gamespot (GME). And instead of eating healthy, we'll be eating cheap - such as SPAM from our friends at Hormel (HRL).
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So it is here folks; the substitution effect is in full force. This means as Americans have moved from steak (2004, paid for by home equity) to hamburgers (2006, hmm my home went down in value and my wages are not keeping up with gas prices) to... spam (2008, recession? what recession - government reports say everything is rosy!), the government can now say inflation is negative.
- Sales of Spam — that much maligned meat — are rising as consumers are turning more to lunch meats and other lower-cost foods to extend their already stretched food budgets
Now I have not spent much time since summer 2008 talking about the government hocus pocus that is the inflation report. But for recent readers, trust me it is a lot like the employment report.... if indeed Ben Bernanke is able to reinflate this economy you will see very little of it in official government reports of CPI and PPI. Just like we saw little of it last year; or my favorite way to measure it... inflation was benign excluding food and energy. i.e. as long you don't eat, heat your home, turn the lights on in your home, or drive a car - you had nothing to worry about. This is yet another government report that over the years has been massaged to make bad things go away- the "substitution effect" above is among my favorite ways 'they' adjust this number. Also wages are an extreme overweight in the CPI (consumer price index) so as Americans face stagnant wages, the government report will show inflation far below reality - just check your medical bills, tuition bills for the kids, et al. Meanwhile, ask Mrs. soccer mom what she is ALREADY seeing in the grocery aisle even in the depths of recession. And not just in the SPAM aisle.
But I digress - we'll get back to the facetious CPI numbers I am sure by next fall or winter, especially if Uncle Ben is successful in stagnating the nation in paper printing prosperity. Geez Louise, this was supposed to be a happy go lucky post about the "good things" happening in the economy but when I think of government reports I always go off kilter.
Anyhow on to the "good news" aka super green shoots front: AP - Hot in Recession: Chocolate, Running Shoes, Spam. As you read this remember to repeat the dogma: The US Consumer is back, 2006 is right around the corner, house ATMs have resurfaced, and I need to buy consumer discretionary stocks because that's the "Wall Street playbook" as we emerge from every recession.
- It's not all doom and gloom in the U.S. economy. Some products are bucking the recession and flying off store shelves. Sales of chocolate and running shoes are up. Wine drinkers haven't stopped sipping; they just seem to be choosing cheaper vintages.
- Gold coins are selling like hot cakes. So are gardening seeds. Tanning products are piling up in shopping carts; maybe more people are finding color in a bottle than from sun-worshipping on a faraway beach.
- Strong sales of Spam, Dinty Moore stew and chili helped Hormel Foods Corp. post a 6 percent increase in first quarter sales in its grocery products unit.
- Consumers have trimmed household budgets and postponed buying cars, major appliances and other big-ticket items. Yet they still are willing to shell out for small indulgences and goods that make life more comfortable at home, where they are spending more time. "People are much more focused on their homes and their immediate happiness and they're buying things that they can use themselves -- seeds, fishing equipment. Lipstick and chocolate are small rewards that make you feel better."
- Profits in the first three months of 2009 at Hershey Co., the nation's second-largest candy maker, surged 20 percent and beat Wall Street's expectations. Kraft Foods Inc. reported double-digit growth in macaroni and cheese dinners -- the consummate comfort food. (it's not comfort food; it's cheap food)
- "If you're used to eating out, maybe you're now buying a high-end steak at the supermarket," said Bill Patterson, a senior analyst in Chicago with Mintel International, which supplies consumer, product and media intelligence. "If you eat at home mostly, maybe you are going down from the branded product to a private label."
- The financial meltdown produced more interest in home safes. Coin dealers are awash in customers as investors big and small see the safety of gold.
- But economic woes are as rough on the tummy as they are on the wallet. Chicago-based market researcher Information Resources Inc. reports that sales of laxative liquids and powders rose 11.5 percent for the 52 weeks ending April 19. Sales of stomach remedy tablets, including Pepto-Bismol and Phillips brands, climbed 8 percent. (the growth in these items I assume are related to financial stress; apparently the green shoots were not quite so apparent on Main Street as they have been to Wall Street)
- There's no statistical evidence, but dentists such as Dr. Matthew Messina in Cleveland, Ohio., are seeing more people with tooth-grinding injuries. "The body responds the same way to a real threat, `There's a burglar in the house,' as it does to a perceived stress like `I'm worried I'm going to lose the house,'" Messina said.
- Guns are selling well, too. Total firearms sales rose 27.5 percent at Smith & Wesson for the three months ending Jan. 31. It's not a sudden interest in hunting behind the increase; hunting firearm sales at the company declined during the quarter by 46 percent. Gun sales are being driven by concern that the Obama administration will tighten gun laws. But people also are feeling a level of fear and heightened interest in self-reliance as they weather the recession.
- "They are looking down the road going `What could happen here?'" Underhill said. "I think a lot of Americans are truly scared. One of the things that tickles is our pioneer ethos, which is, `I feel better with a year's supply of toilet paper' and `Maybe I should start canning and pickling.'" (I don't understand this fear - simply look at the stock market which is signaling all will be well in "4-6 months" just as it did 3-4 times in latter 2007, and throughout 2008 - I mean how wrong could an indicator be that has forecast 5 of the last 0 recoveries?)
- The number of home vegetable gardens is predicted to jump more than 40 percent this year, compared with two years ago, according to the National Gardening Association. Sales of vegetable seeds such as green beans, tomatoes, cucumbers, squash and lettuce climbed 30 percent as of March at W. Atlee Burpee, a large seed company in Warminster, Pa. (I have about 4 stories under this heading that I have not had time to write a full entry on - home gardening is taking off, both here and in Japan - pooring 101)
