The retail sector has seen some dramatic declines over the last six months. People are losing their jobs, their houses are being foreclosed, and wages have become stagnant. All of these factors spell doom for the retail sector. During a recession, people still spend money they just spend less and often spend it at discount retailers. Some of the best discount retailers include names like Wal-Mart (WMT), Big Lots Inc. (BIG), Family Dollar (FDO), and Ross Stores (ROST). These companies should survive just fine. With that said, 90% of the retail stores will not be fine and should see dramatic declines in key indicators such as their same-store-sales and sales-per-square-foot, which will lead to declines in their share prices. I am not advocating that investors put their money to work in the retail sector, but if you must, the discount retailers would be your best bet.
The Congressional wrangling is over, the final House of Representatives and Senate votes tallied, the President’s signature affixed: $789 The American Recovery and Reinvestment Act of 2009 is now law. Among the major earmarks this broad economic stimulus package designed to revitalize flagging industries, the so-called “shovel ready” ones are well represented. $27 billion has been set-aside for highway construction alone, no doubt to the relief of Caterpillar (CAT) the financially struggling manufacturer of earthmoving, construction and material-handling machinery.
Still reeling from the effects dealt by the current economic crisis, the financial sector took another blow this time landing where it hurts most, close to its heart! This was bitter to no end as it points to one of its big boys in the community being the culprit of a fraudulent (Ponzi) styled scheme. The accused is former NASDAQ chairman Bernard Lawrence Madoff and until recently chairman of Bernard L. Madoff Investments Securities, the vehicle he used to siphoned $50 Billion from unsuspecting and clueless investors.
The real estate market in the U.S. has experienced significant price declines in the last five years, dropping as much as 40% in some areas of the country. The hardest hit markets are California, Nevada and Florida. These markets experienced some of the fasted increases in real estate prices starting in 2004; hence it is no surprise that these markets have been hit the hardest. Prices are now back down to their 1991 levels, so why aren’t people rushing to purchase properties that a few years ago, at much higher prices, were thought to be great deals?
In January 1920, an Italian immigrant discovered an arbitrage potential in international reply coupons – IRC. By purchasing IRCs for stamps in Spain, and then exchanging them for postage in the USA, he could net a profit. Forming a corporation called “Securities Exchange Company”, he decided to raise capital by selling investment coupons with a guaranteed 50% rate of return in only 45 days. Investors lined up. A required $1,000 dollar investment returned $1,500 for a gross of $500. Investors were so pleased from the results that they re-invested their earnings. Over the better part of 1920, approximately 15,000 people invested, and reinvested. Investors used their life savings; homes were mortgaged and assets were liquidated. People continued to reinvest their profits. Money was being made hand over fist. After only 5 months, the Securities Exchange Company had made several million dollars.