A Hot Start to the Holiday Shopping Season
And some Christmas catalog nostalgia that shows us what it means ...
A few weeks back – on my way home from a meeting — I stopped at the top of our driveway to grab our mail … and got an interesting surprise.
Hidden among the bills — along with the scammy “come-ons” that seem to surge in concert with rising uncertainty and my latest issue of Popular Mechanics —was the Amazon Holiday Gift Guide … which promised to “unwrap joy” this holiday season.
Instead, the Amazon.com Inc. AMZN 0.00%↑ guide launched me back in time … nearly 50 years … to my own childhood … and memories of the famed Sears holiday Wish Book.
For generations, that Wish Book was a holiday staple. Retailing stalwart Sears, Roebuck & Co. sowed the seeds of a fun holiday season for millions of Americans, releasing the catalog in late summer or early fall — giving kids plenty of time to dream. My two younger sisters — Kathy Ann and Carol Ann — and I would spend hours perusing the catalog’s 600 pages … making lists of what we “wished” for … before finally culling it down to what we really wanted … and thought “Santa” (and, later, our folks) would realistically get for us.
Us three Patalon kids weren’t alone in that pursuit. Sears — which at one point had 3,500 stores and $50 billion in yearly revenue — first published that Wish Book in 1933, in the depths of the Great Depression. And it published one every year until 2011 (though it did revive it for a single year … in 2017).
For folks today, it’s hard to imagine the relationship Sears (the retailer) had with America (and its consumers). It wasn’t “transactional” – like with Walmart Inc. WMT 0.00%↑ … or “arm’s length” – like with Amazon.
In America’s early days as a true “consumer economy” — when miles truly meant distance and when the chasm between the agrarian wheat belt and the “big cities” was more than mere geography — Sears was the thread that stitched the nation together. Farmers could order tractors (or “conversion kits” for their Ford Model Ts or Model As) … the more-well-to-do could order a pre-fabbed home kit (some of the 70,000 sold still exist) … and the wealthy could even buy jewelry and cars.
Here on the doorstep of one of the most-important holiday shopping seasons in years, it’s not a bad time to take this shopping trip down memory lane.
The U.S. economy and a record-high stock market are careening into one of the most-uncertain stretches in years. Possible tax cuts could put more money in our pockets. But a U.S. Federal Reserve rate-cutting campaign and threatened trade tariffs could reignite the recent inflationary pressures that were the worst since the 1970s – when my pictured Wish Book first came to the Patalon household.
All of this means Wealth Builders like us must do three things:
Watch the economy carefully … to manage risk and watch for opportunities.
Maintain our long-term Wealth Builder strategy.
And, in the meantime, look for true income plays — the kind of investments that put real “cash flow” in our pockets.
And the holiday shopping season — which historically kicks off with the post-Thanksgiving “Black Friday” doorbuster deals … is a good place to start.
STILL SPENDING
The holiday shopping season is off to a hot start.
U.S. consumers spent a record $6.1 billion on Thanksgiving — a year-over-year increase of 9%, says Adobe Analytics, which tracks online shopping numbers. Black Friday e-commerce sales reached a record $10.8 billion — more than double the $5 billion recorded just seven years ago.
At this point in the economic cycle, it’s noteworthy that folks are still willing to spend money on things that make others happy: Compare to the average daily sales earlier this fall; online Black Friday toy sales were up 622%, jewelry sales zoomed 561%, appliance sales climbed 476%, apparel rose 374% and electronics were up 334%, Adobe reported.
Mastercard Inc. MA 0.00%↑ ran some studies of its own.
It found that overall Black Friday retail sales — a mix of in-store and e-commerce shopping — rose 3.4%.
In-store sales edged higher by 0.7%. But online retail sales zoomed 14.6%.
Given that 70% of America’s economic activity is driven by consumer spending, this bodes well for continued growth — at least in the near-term.
And we’ll find out more after today — another big holiday shopping day known as “Cyber Monday.” That day — which started in 2005 — is closely watched, too.
And we’ll be watching.
But for all the reasons I cited – and that we’ve been writing about here at Stock Picker’s Corner (SPC) – uncertainty looms.
Inflation is one of the biggest threats.
The rate of price increases has eased. But cumulative inflation” – how much prices have risen since 2020 – has permanently changed the calculus for what things cost.
And now “core” inflation – which excludes food and energy – seems to be accelerating anew. Prices climbed 2.8% in October, faster than the 2.7% clip in September.
The erosion of buying power is an age-old story.
Since 1976, the year my Wish Book was published, the U.S. dollar’s buying power has plunged 82%.
So maybe it makes sense that the Sears catalog’s 600 pages has plunged to the Amazon Holiday Gift Book’s 60 — a 90% decline that’s just about in line with the greenback’s drop.
Clearly, you need to be watchful. And opportunistic.
And grab income – real “cash flow” that puts money in your pocket … after taxes, inflation and prevailing market rates are factored in.
Here are two moves to consider.
AN INCOME INFUSION
If you haven’t already (as I’ve been advocating), move now to lock in strong-yielding income investments — ahead of the next round(s) of rate reductions and ahead of the $12.5 trillion “Reinvestment Tsunami.”
One income play to consider: AGNC Investment Corp. AGNC 0.00%↑, whose recent yield was 14.9%.
Here’s the Deal: AGNC is a real estate investment trust (REIT) that invests in residential mortgage securities. It’s based in Bethesda, Md., a little under two hours from my home office near the Maryland/Pennsylvania border.
One powerful “trigger” for AGNC — the stock — is that “Reinvestment Tsunami.” With trillions in fixed-income investments, investors facing reinvestment risk will be shopping for those “re-investments.” And with that yield up near 15% … the imminent Fed rate cuts … and the upside potential … well, that could drive that $9.65 share price much higher over time.
And AGNC’s buyback program will provide a helpful tailwind. In 2021 and 2022, the company bought back 17.7 million shares ($281 million) and 4.7 million shares ($51 million), respectively, says Zacks Investment Research.
Also look at Angel Oak Financial Strategies Income Term Trust FINS 0.00%↑, a Big Board-listed, closed-end fund that invests primarily in mortgage-backed securities. It aims to keep at least 50% of its holdings invested in investment-grade debt. And it also buys financial-sector stocks — both common and preferred. FINS currently trades at about $12.78 — putting it up near the top of its 52-week range of $11.71 to $13.30. Its current payout of $1.31 a share — doled out as monthly 11-cent dividends — equates to a yield of 10.2%.
There you have it: Two income plays to look at now.
We’ll be back with more stocks for Wealth Builders — and strategies — to keep you ahead of the crowd.
And here’s wishing you a happy and healthy start to this holiday season.
See you next time;
