Tomorrow is Christmas. Not to sound so cynical, but it really is one of those things that has turned into a consumer driven holiday. Given that, it gives great insight to where we are as a nation economically and where we might be headed for the next year.
This year looked to be a bad year for retailers. Many people were blaming the subprime mess and credit crisis for the problems. Others believed that the consumer was worried about a recession. But it looks like there may have been a slight last-minute rush to the stores. However, I wouldn't rush to crown this a great success. Other reports I read are that Credit Card debt is rising, so much of this consumption may indeed be borrowed from the future.
This holiday season will be crucial to myself because it will dictate a lot about where I think the economy is actually going this year, and thus my investment strategy. You see, people vote with their wallets. It is an important psychological thing for people to buy things during this time of year as to not disappoint their loved ones. If people aren't spending, they are worried about the future. If they are worried about the future, they must see things on the horizon that really worry them.
I've been a natural bear for a while, so I need to temper whatever news comes out about the consumer with my own internal bias. I would be shocked if this holiday season turns out to be a success as I think the wealth effect will be working in reverse. People are starting to realize that their home is not an ATM. I think it is happening slower than it should, but it is happening. If people feel poorer, they will spend less, and the economy numbers will be affected.