There's something incredibly bizarre about listening to the state of retail right now versus the state of the mind of the average investor. The shopper is thinking about hunkering down, not going out. The companies that are doing the best are the ones that have something brought to you, not you to them.
If you didn't know any better, though, when you parse the conference calls of the major retailers you would think that there's nothing really wrong, nothing to be feared. With the exception of the discussions about how to keep their employees safe, it's almost as if there's nothing wrong out there are all.
I say this because one thing is certain, the consumer is spending like crazy, like there's no tomorrow. These year-over-year comparable store sale gains from the likes of Home Depot (HD) , Lowe's (LOW) , Walmart (WMT) , Target T (GT) and Costco (COST) are extraordinary. It is like the consumer, after being pent up for months, descended en masse on these stores to buy things.
Yet credit card debt's getting paid down aggressively: $10 billion in the third quarter after a $76 billion paydown in the first half. Bankruptcies are at historic lows. Foreclosures are plummeting. It's like there's no pain to the consumer bottom line at all.
How can this be? One thing is for certain, no one on the calls seems to understand what's happening. They are proud of how they are doing, how much share they are taking and how much better than they thought they would be doing with such high unemployment and no more stimulus.
So, you know what? I'm going to take a crack at it because it's not that the consumer is spending like an undisciplined hooligan. In fact, it's the opposite: the consumer is wisely purchasing what is needed to make their home their school, their home office and their primary location for recreational entertainment and not much more, beyond a car that may be needed, often second hand, to get around town if the homeowner shifted from the city to the country.
First, I think there is a level of fear that is keeping people inside that isn't talked about enough. It's not just that there's nothing to do or see: many stores are now open. I think that there are just plenty of people who aren't up to doing anything and that fear precludes them from impulse spending. We in this country are fantastic at impulse spending but now it seems pretty contained to over-ordering on Amazon (AMZN) .
Two, we, as a people got to the point that as soon as we have disposable income we seem to have spent a disproportionate amount going out on the town, spending it on food and drink. Remember, I am not being pejorative about this -- I owned a restaurant and a bar -- but people seem to be willing to spend a lot of disposable income on food and drink and that's dropped dramatically. They were already going to the movies less, but that's gonzo. I think that hanging out at home instead of going out means saving a lot more money than we realize. That's something to think about when this era is over.
Three: I think we are all beginning to realize that we spend a ton of money on vacations at expensive hotels after exorbitant ticket prices for where we have to go. When people say we are a service country not a manufacturing country, we have come to realize that service is expensive and we are either afraid to seek it or don't even care for it when it's offered.
So, what's left? I think it's the money we spent at those big retailers to make ourselves happy in our homes and not more than that. I think this is a defining, almost puritanical moment for our country. We've become a nation of forced savers. What I wonder is will we, when things open up, necessarily go back to our old ways? Whether it be a pro game that costs us $300 a night, or a swanky dinner with two cocktails and a bottle of wine where we drop $400, or a trip to Disneyland for $5,000 or double that if you pay up, or $80,000 for a year of college with room and board, I wonder whether we won't question why we just don't stay home and save the big spend for much rarer occasions.
In short, maybe we are going to be like our parents or our grandparents or even great grandparents where the kind of spending we do is a sin or a waste or a shame. Maybe that will be bizarre consequence of the lost year that is the great pandemic of 2020.