Yesterday was not a good day if you got your money in stock markets. In America, the Dow Jones Industrial Average fell over 4% and the NASDAQ fell over 5%. Today the carnage is just as deep in Asia and Europe. If American and European consumers are hit with a further unraveling of their economies, where’s a person to put their money?
Bad News Gets Worse
What started with the debt fears of Greece and Portugal have spread to other countries in the EU. Spain’s crippling unemployment rate has been a huge factor in preventing the country from getting upright and now there are concerns that the banks in both Spain and Italy are carrying too much of their country’s debt and they aren’t exactly being forthcoming about the true value of government bonds.
All of this is sending shock-waves through the financial markets in Asia, Europe, and the Americas. After a huge plunge yesterday, European and Asian markets both opened lower today and continued the path that sent them spiraling down, yesterday.
Legislatures in America had to fight vigorously the past couple of weeks to pass a solution to the debt limit and in that time, corporate and working Americans have lost a great deal of faith in the willingness of Capital Hill to do anything meaningful to help what looks like a dreaded double-dip recession.
Consumers Buoy the Economy
Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent of Americans account for about 40 percent of consumer spending, says Michael Niemira, chief economist at the International Council of Shopping Centers.
Long periods of drops in stock prices suppress consumer spending as people see their wealth shrink. And consumer spending accounts for about 70 percent of economic activity.
Luxury retailers like Tiffany & Co. and Saks Fifth Avenue have had continuing strong sales the past year. They benefited from a stock rally that started a year ago. MasterCard Advisors SpendingPulse says its index of luxury sales at restaurants, food boutiques, department stores and clothing stores, surged 12 percent last month.
But the Dow’s plunge could now threaten upscale retailers. The economy, Niemira notes, is “more dependent on spending at the high-end so (a drop in luxury sales) could have a bigger effect.
The Dow has seen a plus ten percent drop in the past week which is the signal for a market correction. Double that and you’re entering Bear Market territory. The stock market is the weather vane of any country and it’s ability the forecast what’s ahead is uncanny. If things continue to get worse in the Stock Market, it could mean that the US in indeed headed for another slowdown.
Where to Invest?
Developed countries have many things in common, but the most obvious are that they are big and they consume. Consumption needs goods and goods need the water ways, ships and containers that transport them. But what happens when that consumption dries up?
That’s the best reason we have for being in Asia. At Pacific Tycoon we are in the heart of Asia, supplying the developing world with the containers that are needed to transform these countries into the world’s next super powers.
American dominance has subsisted on the drive by its population to create, engineer, and develop things, to turn dreams into realities. As the cost of doing so keeps rising, more and more people are opting against immigration and staying in their home countries to do these things there.
The Asian boom is upon us. The talent, education, and work ethic are all here and are all driving India, China, South Korea, Ghana, Qatar and many others into the next century of consumerism, that is moving away from the west.
The New Consumers
I was speaking with a foreigner who lives in Siem Reap, Cambodia yesterday. He owns a vanilla farm there. He was amazed at the number of Chinese that are coming in and visiting. At the airport, he was telling me how he noticed all these people in the latest fashions and most high-tech gadgets. “I had no idea where they were from,” he said. “Then I saw their passports and every single one of them were from China.”
The one thing the west does the best is to focus on materialism. It’s so ingrained into their subconscious that many don’t even realize it. It’s plastered on t.v. shows and movies, all of which get seen overseas. That lifestyle, that carefree lifestyle, is envied from across the oceans. That envy is spreading and it’s bringing the necessary goods with it to the doorsteps of these developing countries that want it, that crave it, that think they need it.
For owners of shipping containers, that’s about the best sound we could hope to here. Contact Pacific Tycoon to see how this momentum can be put in your favor.
Image: StockMarketInvesting
Source: YahooFinance, YahooFinanceBreakout
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