I don't want to get into one of my "commercialization of Christmas" rants, but my biggest issue with the whole Christmas shopping season is that Americans fall for this blatant scam every single year.
Now, I'm not here to fight the culture wars, but I do have an agenda: to tell you the truth - and point you toward "unreasonably" good profits.
With that said...
They already screwed up Christmas, and now they've screwed up my favorite holiday, Thanksgiving, with this destructive Black Friday con.
In fact, if I were ever CEO of a retailer, I'd gather all the executives during our first meeting and ask them, "What's your Black Friday strategy for next Thanksgiving?"
Anyone who had plans would be fired.
Hear me out...
These Numbers Don't Even Come Close to Adding Up
You see, retail is 70% of the U.S. economy, and 20% of all retail sales are in the fourth quarter. If you work that out, it means that 14% of the entire U.S. GDP is a result of consumers buying holiday gifts, with most of the sales taking place in the three days between Black Friday and Cyber Monday.
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Horse----... don't fall for it. Too many people already have.
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The news this week has been all about these two "hot deal" holidays. Analysts have pored over the data looking for clues on how the holiday will do and the future of some retail stocks.
Recently released numbers have shown that online sales for Cyber Monday soared, while in-store sales stayed pretty flat and didn't really move up from last year's numbers. No surprise there. In fact, Cyber Monday shoppers spent a record $5 billion online in 24 hours, making it a 16.9% increase in dollars spent online compared to Black Friday last year.
As we've seen all week, pundits have been pontificating about which retailers will benefit and see higher stock prices as a result of Black Friday and Cyber Monday sales.
I can save them some time and trouble: Black Friday results mean absolutely nothing at all. Not for the U.S. economy, and not even for the retailers themselves.
Most of the stuff sold on Black Friday was going to be sold during the holiday season anyway. What retailers have done is brought it forward into one weekend and marked down the prices, damaging margins. It is not a smart move on their part.
The interesting thing about all this Black Friday perusing is that most of it is wrong. The numbers will be revised several times before the end of December, and many erroneous conclusions will be reached based on incomplete data.
Even highly accurate numbers wouldn't tell you much. Consider the fact that in 2007, Black Friday sales were up 3.2% after an impressive gain of 6.2% the year before. Looking at that data, one would think the economy was in great shape.
Of course, we all know now that precisely the opposite was true, as toxic real estate assets were building up on bank balance sheets, and the economy was about to fall off the precipice. Like I said, Black Friday sales tell us nothing about the health or direction of the economy.
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It's even worse at the individual company level, and JCPenney is a perfect example of this.
The struggling department store sent out a press release Monday morning stating, "Hundreds and, in some cases, thousands of shoppers lined up outside our stores for popular items such as the cook's air fryer, Xersion puffer jackets, diamond jewelry and smartwatches, Nike athletic apparel and shoes, and toys."
Does anyone really think that the fact that JCPenney held a fire sale this past weekend means it will magically turn a corner and put its troubles behind it?
Not even close.
In fact, it would take a Christmas miracle to make that happen, not a one-day Black Friday rush. Having hundreds of people running to your store to buy stuff at super skinny margins does not indicate these same people will be back next weekend - or ever again.
Black Friday is like retail mirage. It sounds too good to be true - because it is.
On the other hand, Wal-Mart sales declined by 9% in 2016, so investors should probably avoid the stock, right? Wrong.
The stock has climbed by about 40% in 2017, so those who used the Black Friday tea leaves to guide their course missed out.
The sales on Black Friday at any given chain are irrelevant to the long-term profitability of the company and direction of the stock price. The total sales tell us nothing about the strength or direction of the economy.
It's all noise. It's no good for anyone, really
So Here's the Right Thing to Do
Some retailers even open on Thursday afternoon to get a head start on Black Friday. Even if I were the world's greatest shopper, I wouldn't go to a store on Thanksgiving to buy a giant TV that's one or two hundred dollars off.
Believe it or not, there are better ways to spend your money. Instead of falling for this scam, you can buy unreasonably good stocks of excellent companies and get a return on your money instead of wasting it on things you - and others - don't need.
And you can do better with your valuable time, too.
Instead of going the mall, take a long walk, volunteer to serve dinner at the homeless shelter, or hide in the closet with a bottle of Cabernet and a good book. If we don't go to the mall, no one has to work for $8 an hour on a holiday selling PlayStations and iPhones.
Take my advice this holiday season and ignore the noise. It'll be the best present you ever gave yourself - and your family.
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About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.