The Commerce Department reported today that the "can't say no" consumer spent more money last month. The report also indicated that wages went up as well. I think it is safe to say that the consumer will continue to spend until their borrowing power is completely exhausted.
I come from the old school that a product or service is only worth what one is willing to pay for it. As long as consumers continue to spend money on "stuff" (things they don't really need), the American savings rate will continue to hover a very low levels.
As investors we need to watch what consumers are fascinated with since that is where the money will continue to flow. A few days ago, I said;
The attitudes and habits of the spending public drives corporate profits. This is why many market legends study philosopy and investor psychology. If you know what is going on with the" little people", you can make tons of money. All you have to do is pay attention.
If you have any teenagers or college age kids, you know that this generation is being bombarded with sex. Sex sells. Sex is being glamorized on MTV, VH1, as well as many prime time TV shows. Sex sells clothing for companies like Abercrombie & Fitch (ANF) and American Eagle (AEOS).
Unless you are blind, you cannot ignore what is happening. These are investment themes that are rarely reversable, or talked about. No one in the financial media wants to talk about why this trend is so profitable.
There is very little you can do to change the public's fascination with something, but there are a lot of investors making money off of it.
There are many businesses that make billions of dollars off the publics facination with sex. At one time, only the mafia had a corner on this market ( prosititution, liquior, gambling, and drugs).
Here is a list of the publics current addictions, and a few companies that are making a killing from it;
Suggestive Clothing/ Teen Marketing
Limited Brands (LTD) Victoria's Secret markets to youth through MySpace, Facebook, MTV, and youth-oriented blogs.
Abercrombie & Fitch (ANF): present models in suggestive poses wearing little to no clothing.
American Eagle (AEO): Get ready for spring break!
Nicotine
Altria Group (MO) & Reynolds American (RAI) : According to the Centers for Disease Control and Prevention (CDC), roughly 22 percent of all high school students are regular smokers. And each day, 4,000 kids under 18 try their first cigarette.
According to a Dartmouth study, 60 percent of the smoking in popular films was seen in the youth-rated movies (G, PG and PG-13).
Caffeine
Starbucks (SBUX): College kid's and young adults love Starbucks.
Alcohol
Diageo (DEO), Anheuser-Busch (BUD), Constellation Brands STZ):
Sex Drugs
Pfizer (PFE) :Viagra, Eli Lilly (LLY): Cialis, and Bayer Pharmaceuticals,GlaxoSmithKline (GSK) and Schering (Levitra): Believe it or not, these drugs are also being used by young adults.
GlaxoSmithKline (GSK): Valtrex for genital herpes (nice piture by the way). Their ad slogan is "When you treat her everyday, you can protect him too". It looks like GSK is has both sides covered.
Some investors may call these stocks, "sin" stocks, but any way you cut it, their products are selling like hotcakes.
