Will The Poor Have Enough To Even Shop Wal-Mart?

Sep 17, 2004

By George Anderson

A report by TheStreet.com says, “Wall Street is keeping one eye on the spending power of low-income Americans, whose endurance appears to be waning as their federal tax refunds run out.”

The concern is consumers on the lower rungs of the economic ladder have less to spend as prices on gas remain high and wages fail to keep pace with basic living expenses.

Paul Mendelsohn, chief investment strategist with Windham Financial Services said, “The data on income growth show that the upper end is doing very nicely, while middle- to lower-income people are not doing that well.”

Barry Ritholtz, chief market strategist with Maxim Group, said the poor won’t be getting any help from the government in the way of tax cuts or refunds. “No matter who wins the election, we’re going to see our taxes go up eventually and government spending go down,” he said. “That doesn’t matter if it’s Republican or Democrat. You just can’t run a half-trillion-dollar debt year after year without having some stress on the system.”

Moderator’s Comment: What do you think is the near-term outlook for retailers that cater to lower-income consumers?

Paul Mendelsohn said, “The trends in the retail sector seem to fit the economic and sociopolitical events that are taking place in the United States today.
There’s no question that the Bush tax and business strategies have been geared toward the upper class.”

He, Barry Ritholtz and others are recommending that investors look to retailers catering to the more affluent.

Mr. Ritholz said, “Because of the existing tax cuts, investors looking at retail should avoid the stores that presently cater to the lower economic strata.
I think the higher-end retailers are much more advantageous than the discounters here. But as always, with retail, you have to be careful and buy at the low end of a range.”

George Anderson – Moderator

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