WSJ had an interesting article about how “chain-stores are holding bigger markdowns in reserve trying to gauge how long shoppers will wait for better deals to emerge.”

Some interesting statistics from the article, including how more shoppers this year are holding out shopping in hopes of better sales. Apparently “Nine of 10 people waiting to finish their holiday shopping are doing so to get discounts of at least 50%”.

What does this mean for shoppers and retailers? A walk around the mall will show you that there’s plenty of inventory out there waiting for shoppers, and so I am fairly confident shoppers will find plenty of deals around Christmas and in the New Year post-holiday sales.

Of course, there are some items in higher demand that might sell out early and will never go on sale, such as designer brands and of the moment must have items in the size you are looking for. However, if you are looking for generic top or sweater, be prepared for some good bargain hunting in a few weeks.

Halloween was just 10 days ago, but you wouldn’t know that based on all the sales right now in the stores. It feels like the week before Christmas to me!

Sears and KMart are have “Black Friday” sales every Friday until Christmas. Friends and family 25%-40% off sales are the norm, not the exception.

This is great for shoppers who want to beat the holiday rush, because you’ll get great savings and selection without having to fight the crazy crowds and last minute shoppers.

Keys to holiday shopping this year:

• Check for coupons and sales before you shop online or hit the malls
• Even if you forgot your coupons at the mall, just ask the cashier if there’s any discounts they can give you
• Check the outlets for some steals on summer/fall items (if you live in one of the warmer states, or don’t mind giving out of season items)
• Don’t wait until the last minute… that’s when you get frantic and spend too much for something no one really wants
  

Along with Jim Cramer from Mad Money, I am personally calling a bottom on the real estate market for summer 2009.

Today’s Fed move basically is giving everyone a ~4% 30 yr fixed mortgage. Mortgage is either less or equal to rent in a lot of the markets.

Additionally, people will be refinancing, stimulating end consumer spending, driving overall economy. Confidence will increase. Home prices will stabilize/increase.

Yup, I’m using this blog to make a bottom call on real estate, and proclaiming it as the ultimate deal of the year.

TARP

There’s been a lot of news around the new stimulus package. But what about TARP? How are we fixing the root of the problem, and get money flowing in the system again?

Yes, the subject matter is difficult (assets that are impossible to value, securitization, the lack of appetite for all sorts of financial products that provided so much capital in the past two decades). But it is the root of the current economic problems we are facing, and worth discussing.

Main Street

In the past two to three months, the economy has been on this downward spiral, and now the impact is truely felt. I personally know at least half a dozen people out of work across different industries and companies. It’s scary.

On slightly more positive note, my older uncles and aunties don’t seem as worried and have a longer term perspective. One said, “this isn’t that bad! At least you still have food and aren’t going hungry like in the war times!”

I know the economic environment is scary right now, so much that even people with money are not spending as much because everyone seems to be in conservation mode.

But here I am proposing a new way to live… and it’ll help stretch your money in the long term.

Spend less money when economy is booming, and spend more when it’s hurting

When you are spending when economy is down like it is right now, you just get a lot more for the same dollar you are spending. Things are on sale at 50% off or more. I mean, you can get a Tag watch for 50% off or more in the LVMH friends and family sale right now! And it’s not just about luxury goods. I just got a 4-star hotel in the soho area of London for $100USD per night for an upcoming trip. But during economic boom, you would never find such good deals and might even have to pay a premium.

It’s all about supply and demand. When demand is high (during the boom), prices are high. When demand low (right now), prices are low. So doesn’t it make a lot of sense to buy low?

Spend money if you have it. Go travel, redecorate your house, buy that expensive watch or purse you’ve craved for so long. You are no only saving yourself money in the long term, but also helping the ailing economy out.

It was only a year and a half ago when I was walking by a super crowded Louis Vuitton store and wondering, who are these people and where are they finding all this extra cash for thousand dollar purses all of a sudden?

I think we know the answer now… their homes (and maybe stocks). It was the best of times where your home value was going up and stock market was doing well. Refinancing lets all these people take cash out of their home which was worth so much. Money was limitless it seemed as the upward trend continued.

What are you going to do with all the money and money “you earned” in your home? Splurge on stuff for yourself! Flaunt your wealth!

Well, that was pre-credit-crunch era. These days, the opposite is happening. Home prices coming down. Stocks plunged. People’s “piggy bank” shrunk. And even though the 30 year fixed mortgage rate right now is historically low (Wells Fargo has it at 4.75% with 1 pt right now), this still doesn’t allow people to “cash out” unless they have a lot of equity built in to their house. Banks are getting stricter having learned a recent lesson in loose lending policies, and now taking the “fair market value” of the house, and then requiring you to have at least 25% down, before they let you lock in those juicy low rates. So all in all, most people can’t cash out, but might even have to put money in to lock in low rates.

And now with the economy where it is, people are worried about getting laid off. Stock markets going sideways and not rallying. Home prices flat or still declining. All making it harder for consumers to spend and part with their money.

So what does this all mean? There’s less money to spend.

When will it get better? When the factors above improve.

What does this mean for retailers? A tough time this holiday season and 2009. Look at the stock charts of some of the major retailers like Nordstrom (JWN), JC Penney (JCP), Liz Clairborne (LIZ). It’s painful, but probably already discounting a bad 1H09.

But we all are still wondering, when will things get good enough so consumers are spending like they used to? Even if housing bottoms in 3Q09 as experts like Jim Cramer predicts, how many more months before people can use their house as a piggy bank again? (or will they ever now with the tougher lending standards?) Maybe hope and pray the stock market would rally and that would help consumer confidence?

What’s notable this year for the weekend before Christmas shopping at the mall:

• Things are on sale like they are the week after Christmas in previous years
• Traditionally expensive gift giving items like cashmere sweaters at Banana Republic are over 50% off ($35 ish) and really cute wool jacket only $130 (about half off too)
• Christmas items at places like Pottery Barn are already 50% off, and the Christmas inventory looks almost untouched
• High end places like the Kate Spade store having 30% off everything sale
• Bloomingdale’s extra 40% off all already on sale purses and wallets
• Williams-Sonoma having a 20% off everything in the store sale the 4 days before Christmas

Will see what happens after Christmas. Still lots of inventory everywhere…

How do you turn a block of gold into a lump of coal? By buying gift cards to a retailer that goes bankrupt in a few months.

I just finally tossed the Sharper Image gift card in my wallet after realizing there is no hope of ever getting even a penny out of that.

It’s easy to pick up gift cards instead of picking up a gift, but it’s a risk to receive gift cards these days, as retailer bankruptcies are on the rise.

If you are thinking of buying a gift card, buy one for the local mall that your friends and family shop at. I guess even for gift cards these days, you need diversification in your portfolio!