Record Black Friday Sales Hints Towards A Bull Market

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You may think the economy is sucking wind, but how can that be with record Black Friday sales of $11.4 billion, a healthy 6.6% increase over last year?  What’s more impressive, the four-day weekend sales totaled $52.4 billion, up 16% from a year ago according to the National Retail Federation.  If unemployment and income are as bad as the media says, then people wouldn’t be spending money at record levels.

As a patriotic American, I did my part in contributing $600 of the $11.4 billion.  I bought a pair of work shoes, socks, ties, and underwear for an average 35% off.  A 13″ MacBook Pro and a round-trip ticket to Hawaii were on my list, but I didn’t make enough money online during the weekend to allow me to buy guilt-free.  I made it a pledge that the only money I would spend would be based on the money I earned during the same time period.

It’s safe to say that many people are aware that not everything is hunky dory.  We’ve got the Euro Debt Crisis, a US States Budget Crisis, political gridlock in Congress, and a stubbornly high 9% unemployment rate that makes even the most optimistic of people doubt.  How do we reconcile such uncertainty with such consumption strength?

THEORIES AS TO WHY AMERICANS ARE SPENDING AT A RECORD PACE

* Savings fatigue.  After the 2008 downturn when plenty of Americans lost more than 30% of their retirement savings in one year, spending plummeted and savings rates surged to over 5% (still pathetic, but it was negative before).  It’s been three years since the financial crisis, and 401k provider Fidelity has said that most retirement accounts are now above their 2007 highs.  People’s balance sheets are stronger now and many are simply sick of living so frugally.

* Pent up demand.  A lot of purchases were delayed over the past 3 years – from cars to homes to big screen TVs you don’t need.  When you’re in a financial crunch, the last thing you’re going to do is to replace perfectly fine, albeit old things.  Instead, you keep things a little longer and do without the latest bells and whistles.  But technology has changed drastically since three years ago.  Just look at the latest Android phones and iPhone 4S.

* It’s harder to afford property.  Banks have become more stringent in terms of qualifying home buyers.  20-25% down is now standard vs. 0% down in the go-go days.  A lot of people have given up trying to own a home in San Francisco, where median prices are $650,000 and have resorted to renting.  If you no longer have $150,000 down for a $650,000 home, that doesn’t mean you don’t have 10% down, or $65,000 in cash lying around doing nothing.  It’s a nice chunk of change, but it is not enough down to buy a median priced home.  Therefore, the temptation to spend that cash on frivolous things increases tremendously, especially if it’s been growing for the past several years in anticipation for the down payment.

* People have much more money than you think.  I’ve subscribed to this theory for a long, long time.  A person walking down the street may look poor, but in reality, they might be worth several million dollars.  It’s always better to watch what people do with their money than listen to what they say.  Why else would shopping malls and restaurants be so packed?  The median starting income for a 29 year old from UC Berkeley’s Haas School of Business or Stanford’s Graduate School of Business is around $130,000.  If they stick with their job for 5 more years, they’ll likely earn more than $200,000 each if not much more, depending on their field.  If they decide to marry each other, well then they really have a lot of extra income!  It’s not just MBA grads from good schools who make good money.  You also have dockworkers and firemen who work 35-40 hours a week making over six figures.  Dentists, lawyers, doctors, and big professional bloggers are also doing well.  You can then add on the kids who have Bank of Mom & Dad’s helping them buy cars and properties for them.  The list is endless!

STAY POSITIVE MY FRIENDS

Whether you are rich or poor, things are looking up.  Did you see the videos of chaos at Wal-Mart with people going crazy over $1.99 waffle makers?  You might scoff at people who stand in line for hours to save a couple hundred bucks.  That’s the wrong way to look at things.  Instead, realize these folks have money to spend and are patriots.  Shoppers are confidently spending their disposable income and saving our economy.

Readers, how much have you spent so far this holiday season?  Are you bullish about the economy given the record high Black Friday retail sales?  Why do you think the Black Friday retail sales numbers are so strong?

Are you bullish?

Photo: Union Square Apple Store on Black Friday, 11/25/11, Sam.

Update: Since this post, we’ve had record Cyber Monday sales, Chicago November PMI jump to 61, and US pending home sales for October up 10% MoM vs. expectations of only +2%.  Finally, the World Banks have brought out the BAZOOKA on Wed, 11/30/11 to prop the markets up!  Who wins?  Asset owners.  Who loses?  Savers.  Let’s rock!

Regards,

Sam

 

 

“Personal

Unconventional Guides

{ 27 comments… read them below or add one }

cashflowmantra November 28, 2011 at 7:19 am

I really haven’t been all that bullish, but you have been making a good case in this and some of your other posts. Maybe we just may be turning a long, winding corner and things will be getting better. It would be a welcome change.

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Financial Samurai November 28, 2011 at 7:38 am

The media loves misery. Don’t listen. Better to watch what people do with their money and not what they say.

Are you pessimistic about your own finances? Somehow I believe you are doing just fine.

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Sydney November 28, 2011 at 8:20 am

Thank goodness the sales numbers are strong. We need some good news in the economy for a change. I really hope the market rally lasts. I bought some things for myself this year and the sales were good. First time I’d shopped on Black Friday in a few years and I stuck with practical stuff. No $199 TV or $2 walmart waffle maker madness for me!

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Financial Samurai November 28, 2011 at 8:28 am

Sydney, I coulda sworn I saw you at the bottom of the pile for that $2 WalMart waffle maker spraying pepper spray! Was that not you??

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Sydney November 28, 2011 at 11:53 pm

Haha. I should driven over and brought mine, which I haven’t used in ages, and sold it for $1.75 – discount, discount!

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PKamp3 November 28, 2011 at 8:51 am

You guys need to come to the South Bay, haha. Our pace of life is plenty fast for the adrenaline junkies, and you can get a house in a decent school district for the price of a condo up there (not calling it cheap down here, but I’m just saying “in comparison”). Maybe compromise in the Peninsula – some place that has a BART station?

Anyway, my haul was a UPS/power conditioner (more concerned with the UPS part) for my media center, one of the Playstation 3 deals… and like Will Ferrell in Old School, a bunch of stuff for the house.

Also, toss me in the bullish camp!

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Financial Samurai November 28, 2011 at 9:37 am

I donno man. Maybe if I had 4 kids and was over 45-50 I’d move down to the South Bay, but before then, I’d much rather live in SF! You a fella with a big family btw? It’s good for public schools for sure.

Hillsborough is pretty nice, but the houses are like 50% too big for what I need.

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MoneyCone November 28, 2011 at 9:43 am

The market always does well during election years. We are almost there and frankly people are fed up with all the doom and gloom.

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Financial Samurai November 28, 2011 at 11:14 pm

Always? Nothing is a guarantee, but sounds good to me! I’m looking forward to lots of empty promises!

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Financial Independence November 28, 2011 at 12:13 pm

For me it is hard to believe that 401K is above 2007 highs…for example
Dow was hitting 14,000 back then, even if it was 13,000 on average, it is 11,500 now or 15% less.
On a portfolio with 1,000,000 it means 150,000. Did people manage to accumulate additional $150,000 over 3-4 years?

I believe that there is no incentive to save money nowadays – the inflation is raging, stock market performance extremely bad, interest rates on
the deposits ridiculously low. Why delay your life for tomorrow?

Myself I spent 0 dollars and 0 cents over the black Friday. Just been a patriot. It is better to invest them into creating work places and businesses.
Innovation for tomorrow & financial independence for me and my family.

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Financial Samurai November 29, 2011 at 12:24 am

The average 401K balance size is around $80,000, so it is very easy to recover contributing just $6,000 a year.

And yes, even with fat tail $1 million 401K portfolios, they are higher than 2007 peaks b/c with these type of portfolios, you have company match and profit sharing which often add to $49,000 a year for 3 years + performance.

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krantcents November 28, 2011 at 5:41 pm

We spend the same every year because my wife and I have stable employment. I think the jury is still out whether the market will turn bullish. The Black Friday news is certainly bullish and I expect more bullish news, however there is still problems in Europe that will affect us.

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Financial Samurai November 28, 2011 at 11:13 pm

No doubt about volatility. I just feel there is more upside here than downside. We can’t count out the US consumer, no matter how bad things get.

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Tushar@EverythingFinance November 29, 2011 at 5:47 am

I think Black Friday has been better than the previous years.

Although I never contributed towards it. :)

I usually never wait for sales. I buy it when I need something.

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Financial Samurai November 29, 2011 at 2:34 pm

Come on man, gotta contribute and pitch in to save our nation!

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Jackie November 29, 2011 at 11:13 am

I think the economy is improving too. We spent about $562.50 for our new dishwasher, so that was a pretty big chunk of change (especially compared to what we’d normally spend on Black Friday: $12 or so including breakfast.)

As a side note I love your pledge.

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Financial Samurai November 29, 2011 at 2:33 pm

Good stuff Jackie! Thanks for helping out the economy!

Just secured another small client, so now I can buy more socks! Lol

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Andy Hough November 29, 2011 at 2:23 pm

It could also mean that people have less money to spend and are grabbing the bargains quicker.

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Financial Samurai November 29, 2011 at 2:32 pm

Maybe, but doubt it. If I had less money to spend, I’d just spend less money by not shopping until I got more money!

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Financial Samurai November 30, 2011 at 6:54 am

Wow, look at the November PMI data today at 61 and World Banks getting together and coordinating a super ease! Let’s see if the Dow can hold onto a 380 point surge! 11/30/11.

Let’s go bull market! lol

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Hunter - Financially Consumed November 30, 2011 at 9:48 am

It’s a positive sign, there’s no question about it. Auto sales are also significantly up year over year…amazing what a slight decrease in fuel prices will do. Retail sales is just one indicator, and needs to be considered with the glut of foreclosures yet to be sold and the bigger issue of European sovereign debt. How do economists sleep at night?

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Financial Samurai November 30, 2011 at 7:36 pm

Donno, but nobody should listen to an economist. It doesn’t matter if they are right or wrong, they will always be gainfully employed!

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101 Centavos November 30, 2011 at 8:57 pm

I hear that pepper spray sales are through the roof!

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Robert @ The College Investor November 30, 2011 at 10:18 pm

I’m actually bearish. Black Friday sales were fair – not great – and the weekend sales were dismal. The start of the season is proving to be positive, but weakly positive. We shall see if people come out and spend more as the holiday gets closer.

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Financial Samurai December 2, 2011 at 6:43 am

Really Robert? The weekend sales were up 30% YoY, how is that dismal? November non farm payroll rose another 120,000+ today and the unemployment rate is now down to 8.6%!

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Cynthia December 2, 2011 at 1:04 am

I did my part in contributing $450 of the $11.4 billion. With the help of CouponSnapshot’s coupons & deals and the “Humane” stores,I got a pair of cotton boots for my mom,a sheep-skin jacket for my dad, a dress for my sister and a wonderful perfume for myself. Really fruitful holiday! :-)

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Financial Samurai December 2, 2011 at 6:42 am

Nice job helping the economy Cynthia! America thanks you! :)

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