Xyrus

Consumer ETFs: Retail and Consumer Discretionary Are Whipping the Indexes

Consumer discretionary is doing well because the average individual has all the financial know-how of a grapefruit.

The savings rate in the US is negative, consumer debt is at record levels, and we have unprecedented numbers of people going late or defaulting on their loans and credit cards.

And as Walmart et al. have shown, people aren't taking their FED checks (that our children will be paying for, thanks congress) and paying off their debts, or even putting it away for a rainy day. They're spending it on discretionary items.

One definition of insanity is doing the same thing over and over again and expecting a different result. That's the average consumer. They're once again spending (borrowed) money in the hopes that it somehow makes their debt go away.

Congress, of course, also hopes that by going deeper into debt (FED checks), that they will somehow stimulate the economy. Of course they're wrong. Those checks won't last more than a month or two, especially with prices spiraling up. Then we will see what consumer spending is really like, given the somewhat poor state of the economy.

By all means play the consumer discretionary angle. But you may want to get out before August. However, in a slow economy Walmart is always a good bet.

~X~