Friday, November 23, 2007

Black Friday

What is black about the day after Thanksgiving? The media dubbed the day after Thanksgiving as Black Friday ostensibly because it is one of the busiest shopping days before the Christmas holiday in the U.S. If it is a day for strong sales and hopefully profits, it seems more appropriate to call it “Green Friday” as in the color of money. Apparently, the reference to profitability, i.e. “in the black,” had a better ring to it.

Data shows that the day after Thanksgiving is actually a day filled with a great deal of activity but not so much buying. Everyone heads to the mall to look at what they will by two weeks later on sale or buy on-line over the week-end. Retail stores actually open early, add extra customer service people and stay open late.

It is during the last week-end before Christmas day that cash registers really start to ring. Indeed, the most significant shopping day of the year for the last eight years has been the Saturday before Christmas. Cyber Monday, the first Monday after Thanksgiving Day, is also shaping up as significant shopping date for on-line purchasing.

It seems likely that investors will be focused more keenly than ever on retail data for the 2007 holiday shopping season. With the price of a barrel of oil edging toward $100 and home foreclosures almost double that of last year, the ability of the consumer to keep the U.S. economy humming along is in question.

Some have argued that the U.S. consumer is still quite powerful. A very low unemployment rate and creativity has enabled the average household to fit higher transportation costs into their budgets. Furthermore, some data suggests that householders are only dipping into their home equity to finance a small percentage of their purchases.

After massive write-offs by major financial institutions related to sub-prime mortgage lending, investors need some good economic data in the coming week. Strong results from Black Friday could be just the news investors need to paint the rest of the market-year “in the black” as well.

Unfortunately, the small cap sector is not likely to excel compared to larger stocks. Indeed, no sector appears to have investor interest right now. Now more than ever the ability to sort through individual names will be a key to successful plays leading into the new year.

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