The James Dicks Blog

The past year has been very rough on traditional investors; investments have blown up in the faces of people who had been religiously putting funds in 401(k) plans and IRAs and chances are their home values have crumbled around them as well. Thousands more got caught in a layoff and are now forced to use what is left of their savings to simply survive, while thousands more have lost their homes to foreclosure. It was the kind of year that people will talk about for the rest of their lives; just like Grandpa used to talk about the Great Depression of the 1930s.

Many businesses have collapsed under the stress of this fragile economy; some are still alive but running on the fumes of what they were able to scrape together soon after the recession hit them. Like I said, it’s been a tough year but it is not impossible to overcome. Now it’s time to rebuild our personal and professional lives.

As we enter the holiday season, I see the effects of this economic downturn hit yet again. Corporate CEOs and HR managers have had to do what was in the best interest of their companies – normally that means trimming the employee roster – at least for the time being. We’ve all had to determine where costs can be cut to generate needed cash flow so American companies can stay “open for business” and start to mend our damaged economy.

The same goes for families across the U.S. trying to find their “new” paths to personal financial freedom. Many of you were doing everything correctly and thought you had it made, only to discover that traditional methods of investing just didn’t work anymore and established family traditions had to be cut or done away with all together.

I’ve heard more and more people say that this year’s holiday season will be different – this year there won’t be as many presents given to as many people as there have in the past. Charitable organizations are already feeling the pinch because there are fewer donations coming in this year than in previous years. For many charities, the recession has delivered a double blow. There have been sharp drops in donations tied to increasing demand for their services in these difficult economic times.

Maybe it’s time for us all to start cutting back and simplify our lives. Perhaps we all should cut back a bit and use the extra time and money to get closer to our family and friends. Read more to your kids and grandchildren, and get interested in what your spouse is working on in the kitchen or out in the garage. Invite your friends over to play a board game – these are all things that will allow us to reconnect with people; something that is probably long overdue.

Like “Grandpa’s Great Depression,” we must now find new ways of doing things; changing our lives is not an option anymore. Prior to 2009, Americans were not savers – today more and more of us are starting to put money away for that proverbial “rainy day.” American business now understands that their consumer base has changed their spending habits and has had to get creative to keep things moving forward. This is all positive. These are all things that we should have been doing all along. Maybe if we had done so, the economic situation would not have hit us all so hard.

So this year, instead of indulging ourselves in a rich holiday season, maybe we should focus on what we have remaining in our lives. We need to center on giving thanks for the food and the time we can share with our family and friends, and celebrate the things that we believe in; commemorate the holiday traditions that make our lives meaningful. And one more thing, don’t forget to spend a little quiet time with yourself this holiday season, reflecting on the past year and looking toward the future with optimism.

Happy holidays,

James Dicks

An economist once told me that the factual “story” behind any economic report or event is almost entirely based on sociology, the study of how human society actually operates and reacts to outside actions. It is certainly apparent that when the economy is either “booming” or “busting,” the spending habits of the global consumer normally change dramatically.

Those who watch our national economic situation know that our nation’s economic foundation is based on whether the American consumer is in a spending mood; two-thirds of our national economy is based on whether the public is willing to spend their hard-earned dollars at the nation’s retail centers, car dealerships, or within the service industry sector. But when things start to go bad, as they have over the past 18 months, spending habits can change drastically, damaging the economic infrastructure until consumer confidence finally starts to mend.

There are some economists and business leaders today who believe that the current global recession has not only forced consumers to prioritize their spending habits but it may have changed the consumer consciousness to the point that American businesses will have to determine whether or not they are dealing with a customer base with an entirely new spending attitude. Some business leaders believe that is the case.

The CEO of the J.C. Penney Company recently gave an interview to voice his concerns about today’s shifting consumer behavior. Myron Ullman recently said that the U.S. consumer has a lot of anxiety and is very concerned about how upcoming changes in healthcare may affect their finances in the immediate future. He continued by saying that consumers are suddenly coming to the realization that “they may need to save more than they had originally planned. Their spending habits have changed to reflect this for the foreseeable future.”

He’s not alone; the corporate leadership of Best Buy, Drugstore.com as well as CEOs from the service industry (Hotels, Theme Parks, Restaurants, Rental Car Services) are all starting to realize that the U.S. consumer may never return to the spending habits of the past and that a change in their selling and advertising strategies might be necessary.

While people will continue to consume, they question now is what will they buy, when will they buy and where will they buy. Name brand products are taking a backseat to generic or store brand items. Malls are beginning to show signs of weakness – more and more stores are closing while consumers make their way to other, cheaper alternatives. Instead of going to one of the major mall’s “anchor stores,” they are now heading to places like Wal-Mart, Target or K-Mart to purchase the things their families “need” rather than the things their families “want.”

The economy is beginning to show signs of life for the first time in many months. Consumer spending was up in August by the most since 2001, indicating the biggest part of the economy is starting to rebound from its worst slump in almost 30 years. The 1.3 percent increase in purchases was larger than forecast and followed a 0.3 percent gain in the prior month that was bigger than previously estimated. By the way, incomes were also up at a 0.2% rate.

While all that may be true, the level of consumer confidence continues to be the key question. As I mentioned earlier, economics is all about sociology and until the American consumer starts to feel more positive about spending their money at the “corner store,” restarting the U.S. economy will just have to wait.