Marc Courtenay's  Instablog

There has never been a better time to be a consumer. According to many reports including one by the Associated Press today, America is on sale in a big way."The Great Recession has caused massive job losses and hardship for millions, but it has also fostered a shoppers' paradise. Anyone who still has the means to spend can find unheard of deals."

Have you been to a Costco (Nasdaq:COST) lately? Having just returned from my local Costco, I can say " I've seen everything from cameras to watches to DVDs to clothing at prices I haven't seen for many years". It's downright deflationary!

"Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century. Items rarely discounted -- like Tiffany (NYSE:TIF) engagements rings -- are now. The two biggest purchases most people make -- homes and new cars -- are selling at steep price reductions." And the Associated Press isn't exaggerating.

In Salem, Oregon beautiful homes with spectacular views of the Cascade Mountains and the Willamette River are selling for less than $100-per-square-foot. In Ventura County California we've seen homes near the ocean that were selling for $1.5 million just a year ago now "on sale" for $850,000, and the prices just keeps dropping.

"This is the new normal," says Donald Keprta, president of Dominick's, a supermarket chain in the Midwest, which just cut prices by as much as 30 percent on thousands of items. "We aren't going back."

And the "new normal" on prices of just about everything might even have further to fall. This is one of the reasons that Consumer Confidence is dropping and unemployment keeps rising. The AP article tells it like it really is all across the USA. I also know first-hand, having just completed a fact-finding trip from the east coast to the west coast of the United States.

"What's happening now has been building for years. Wal-Mart Stores Inc. (NYSE:WMT) introduced "every-day low prices" many years ago. Amazon.com (Nasdaq:AMZN) redefined the idea of bargain prices during the late 1990s when it helped introduce online shopping.

"After the 2001 recession, automakers introduced zero-percent financing to boost sales. McDonald's (NYSE:MCD) "Dollar Meals" made fast food even cheaper.

"But until the Great Recession came along, consumers hadn't seen anything yet."

Last fall's financial meltdown triggered a collapse in stock prices and home values and destroyed 11 percent -- $6.6 trillion -- of household wealth in six months.

We also saw the end of "easy credit", which had fueled the consumption that defined the economy for most of the past decade. The credit freeze appears to still be lingering.

"Those who still have jobs don't want to spend as they once did. There is a new societal pressure to be careful and smart when buying almost anything. From Chicago's Miracle Mile to malls around Orange County, Calif., it was once a status symbol to trot around with armloads of shopping bags with designer names on them. Now, it's considered ostentatious.

"Traditionally, manufacturers and retailers lowered prices to clear inventory. Today, they're cutting prices because consumers are demanding it. If it lasts, the ramifications will be wide-ranging.

"There's almost a new morality to spending," Liz Claiborne Inc.(NYSE:LIZ) CEO Bill McComb told an investor conference last month."

Frankly, that is why the only large-cap stocks I'm willing to commit new money to at this point are the Consumer Staples and food companies such as, General Mills (NYSE:GIS),Pepsi (NYSE:PEP), Kraft Foods (NYSE:KFT) and Ralcorp (NYSE:RAH).

And even some of these companies might see their stock prices fall in the weeks ahead. In other words, even blue-chip stocks might be going on sale over the next few weeks.

By the way, short-term it appears that after the correction that we saw last week in stock prices we might be starting this week in an "over-sold condition", so ironically we might see stock prices rise for a couple of weeks before they hit the "bargain basement" once again.

 Disclosure: I own shares of KFT and I'll be trying to buy some shares of GIS tomorrow below $64 a share.

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