VERSACE: Where have all the green shoots gone?

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By Chris Versace

OPINION/ANALYSIS:

Last week I touched on how I thought the combination of continued weak economic data over the past few weeks and the direct and indirect impact of higher interest rates and fuel prices were poised to take their respective toll. Like most people, I like to be right -- or at least more right than wrong; however, in this, there is little fun to be had in being correct with the news flow shifting to the negative once again.

At the same time, there is increasing conjecture for a second stimulus plan. The question being asked more and more is -- where have all the green shoots gone?

Do I have the precise answer? No. I say that because the data points that I monitor have not had any real sustainable positive move in the past several months and the anecdotal data points have not been much better.

"Anecdotal data points?" Yes, Virginia, I did say that, and I suspect at least some are wondering what I mean by it. Not all information that investors use is the hard weekly, monthly or quarterly data such as weekly jobless claims, industrial production and gross domestic product. Now I'm not saying that those data points are not important, because they are, but there are other signs and data points around us that can be as insightful as the "official statistics."

To borrow a line from Buffalo Springfield: "It's time we stop, hey, what's that sound? Everybody look what's going down."

In those words is the essence of what we mean by capturing anecdotal data points -- stop and look around in your daily life, be it at the grocery or drugstore, a shopping mall or outlet stores, or whether people are eating out at all or are going to Morton's or McDonald's, or buying groceries at Whole Foods or Costco. Are people going out on the town, or simply taking in a movie at the local Cineplex, or are they staying in with their popcorn and goodies to watch the latest rental via Netflix?

There are numerous examples of anecdotal data points to choose from. One of the more interesting is the number of driveways on my street that get a morning paper. It's down to nearly half of what it was compared with last year. While the cost of an annual newspaper subscription is far below that of the daily cover price, it makes me think whether people are stopping their subscriptions or just reading online.

Another data point is the shift away from an elaborate summer vacation toward more local things as part of a "staycation." This is an example of a conscious effort to pair back or trade down. Another example would be shunning takeout or eating out all together in favor of eating at home. Now this is where it can get interesting if we don our investor cap.

Let's say that we notice a trend of people eating at home more, which has been the case. Carrying it one step further, we may have noticed that consumers are not buying their groceries at Whole Foods but may be opting for Kroger, Safeway or perhaps even Costco. Who stands to benefit from this theme, which we have dubbed for better or worse "the cash-strapped consumer?" We could survey our friends, neighbors and co-workers to determine which grocery chain they are favoring or we could instead think about what they are buying more of, regardless of where.

In my mind, a prime beneficiary is the spice and marinade behemoth McCormick & Co. Inc., which offers flavor products -- including spices, herbs, extracts, seasonings and flavorings -- and other specialty food products to the entire food industry. As we eat more at home in the prime grilling season, we are more likely than not to season, marinade and baste more, particularly if we are trying to pare back expenses. This is even more likely in my view if we are trading down the cuts of meat we are eating, from filet mignon to burgers or chicken breasts to legs.

In terms of the mall -- are more of your friends buying from the shopping mall, the outlets or ferreting out deals online? I've noticed more than a few boxes shipped via UPS from Champion, a part of Hanesbrands Inc., as the company has had some extraordinary online opportunities. By comparison, I have not seen anywhere near the amount of Nike gear as I did, say, 12 to 18 months ago.

In terms of shopping mall or outlet, I have seen and continue to see more people buying from outlets that are offering compelling deals in order to pry disposable income dollars away from people. By comparison, if I go to one of the shopping malls near where I live and work, all I see are consumers without bags walking the mall with yet another storefront closed.

With that in mind, I have seen more restaurants close their doors. Even one of the local Starbucks by me closed -- of course there are three more within a three-mile radius, but the idea is that one of them closed while McDonald's is making a full press on coffee. Guess what? The one that closed was in spitting distance of a McDonald's.

The point is there are many signs around that us that suggest the consumer is still clinging to every dollar he or she can as jobless claims remain at lofty levels and unemployment levels continue to trend higher. As such, it comes as little surprise when the Consumer Comfort Index continues to be not only negative but at its lowest levels in the past 13 weeks.

To turn the dial a bit, I have begun to think about what anecdotal signs would point to a sustained improvement. There are several, but the one common element they all share is the consumer starting to spend more. I'll be keeping my eyes open for smoke signals.

• Chris Versace is the director of research at Think 20/20 LLC, an independent research and corporate access firm based in Reston. He can be reached at cversace@washingtontimes.com. At the time of publication, Mr. Versace had no positions in companies mentioned. However, positions can change.