The Best Short in This Market: Restaurants
by Michael Shulman 10/23/08
The markets are still churning and bouncing far more than what have seen in the past, but there is a sense of normalcy creeping in. Will that normalcy drive stocks up, keep them flat or drive them down?
Down, baby, down.
The trade in the market today is the recession.
More and more investors are realizing that the recession will be deeper and sharper than previously forecast. And how do consumers react to a recession?
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They slow down spending in some areas and stop it altogether in others.
They suspend their Netflix (NFLX) accounts. The company just announced its subscriber count fell yet again.) They drive a little bit farther for slightly cheaper gasoline. They buy store brand products -- although I bet they stick with Kraft (KFT) Macaroni & Cheese, the original comfort food. And, speaking of kids, they buy cheaper toys.
And to pay for these toys, still-expensive gasoline, and more-expensive grocery bills, not to mention higher insurance premiums, they cut back on the truly unnecessary.
And king of the unnecessary is restaurant dining.
Restaurants Starved for Business
This is not just my opinion. It's based on hard data from the most-recent ChangeWave consumer spending survey, which showed the worst drop-off we have ever seen in restaurant spending.
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