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Stock Ideas Investors Daily Edge The Return of Cheap go to Dollar Tree (DLTR)
Stock Ideas Investors Daily Edge The Return of Cheap go to Dollar Tree (DLTR) 
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By George Kleinman The following is an excerpt from Larry Livingston's book Reminiscences of a Stock Operator, which is based on the story of Jesse Livermore, one of the greatest traders of all time. |
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| The Return of Cheap go to Dollar Tree (DLTR) |
| Friday, 19 September 2008 | ||||||||
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The market is a funny place. So much so, that it reminds me of fashion. Fashion, if you didn’t realize, is built on trends. Yesterday’s sexy, low-rise jeans make way for today’s more conservative high-waist jeans. Just like the market favors treasuries today, only to shun them tomorrow. And consumers are the same too. Today it’s the iPhone… tomorrow it’s the Google Phone. Three weeks later, it’s something completely different. From Flat Screens to Wal-Mart So I ask that you think back a few years, to the middle of the housing boom and notice what was in fashion. Flat screen TV’s, imported leather furniture, mahogany desks, and granite counter tops. It was a time when the appearance of being wealthy mattered much more than being wealthy. People pulling $50-$80k out in home equity felt like they had just hit the jackpot. We were in a new market… one where home prices went to the moon and you could keep refinancing your house every year and extract more and more equity from your home. Everyone bought into it. They put themselves in way too much debt and are now left suffering the consequences. Suddenly the inventory of flat screen TVs, imported leather furniture, mahogany desks, and granite counter tops are piling up. Nobody can afford to buy the expensive stuff anymore. They now shop at Wal-Mart just so their paycheck will eek out enough meals for the week. Welcome to a World of Falling Asset Prices This has a huge effect on the population’s psychology.
We were in a world where most people felt compelled to buy a home because the next day, the home may be out of reach. But that is slowly changing. Back to school sales were god-awful this summer. Well, let me take that back. Back to school sales did horribly until retailers discounted everything as much as they could. And out came the bargain hunters… It seems this entire American population is turning into a world of bargain hunters. My girlfriend has always been one. She brags about buying a 45-cent tank top at Ross. My mother is the same way. But now days when I walk into stores, I can’t help but overhear people talking about the latest “deal” they found. One might talk about going to a gas station slightly out of the way, to save 15 cents a gallon. Another might brag about how they switched their home and car insurance to save $100 a month. Some people are removing the extra’s from their phone bills…deciding to eat out less… and to ignore Starbucks altogether. The psychology of America has done an about face in just the past year. The nation seems to have turned from a nation of spenders, to savers on the brink of foreclosure. There isn’t a penny to spend on non-essentials. And that means the prices for non-essentials continue to drop more and more. People are ignoring Target and instead going to Wal Mart (WMT). They are taking a good, hard look at discount retailers like Dollar Tree (DLTR) and spending more money there. In fact, these companies are among the select few retailers in America to see their share prices climb during this bear market. And as cash-strapped consumers become even more cash-strapped, more people will flock to these companies and others. Cheap is back. Stay Free, Charles P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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