The Independent Investor: Pet Care Remains Recession Proof
Titus joined Bill's family two years ago.
This year, we will spend approximately $48 billion on our pets, vaulting the pet-care sector to the seventh or eightth-largest retail sector in the U.S. That's an almost 5 percent increase versus last year's spending, and revenues are expected to top $56 billion by 2014. What's fueling this steady growth is the 62 percent of American households who now own one or more pets that squawk, bark, whinny, meow or otherwise make their wishes known to us.
It's not simply about food bowls, water dishes and rubber balls either. Spending has expanded into new areas. Pet services, from doggie day care and pet sitting to grooming and spa emporiums, have sprung up in every city in the nation. The purchase of over-the-counter medicines, nutritional products, insurance, veterinary and other services have also fueled the startup of countless small businesses while making the larger players even larger. Even pet cemeteries are on the rise.
Internet sites have also joined the pack with blogs and websites covering everything from pet health, adoptions, food, nonprofit charities to social networking sites like "Dogster," where owners of pets can bond, exchange information and post photos of their pets.
The pet-care phenomenon is not only confined to the U.S. The global pet food market, for example, is growing strongly this year with cat treats, premium dog and cat food, and dietary and health supplements leading the charge. Brazil is the largest food market for pets behind the U.S. while India and Russia are the fastest growing countries. Euro monitor, a respected research organization, is predicting that global pet shops and superstore outlets will grow 13 percent between this year and 2014.
So what is fueling this pet-centric spending mania? Despite a struggling economy, high unemployment and a consumer who is largely on a spending strike everywhere else in the landscape, our tendency to humanize our pets supersedes all these drawbacks.
"Humanization," according to scholars (and marketers) who study the human-animal bond, is the modern tendency to see our pets as junior members of the family rather than in their traditional role as animals or beasts of burden. These fur babies have become so important in our lives that we would no more consider a serious cutback on spending for them than we would for our human kids.
In many ways this phenomenon is more a comment on how we humans have changed. Although we have our cell phones, our e-mail, our Facebook pages and a hundred other electronic means of communication, the awful truth is that we are becoming less connected from our communities with every passing day. More of us live alone, get divorced, opt out of having children, move long distances from our family and spend more time at work and less in community involvement. For many of us, instead of hugging another person, we hug our cats, dogs or iguanas.
Over 83 percent of pet owners call themselves their animals "mommy" or "daddy" and 56 percent of dog owners buy their pets Christmas presents. The biggest boost in spending is coming from empty nesters, baby boomers, who have transferred their money and attention from grown-up children to their pets.
I confess to fitting that profile. We have a 2-year-old Lab named Titus who costs us a bundle each year. We both work and until recently we dropped him off at a day-care center five days a week. We are planning a week's vacation in Maine and you can bet he will go with us. Calling around for reservations, I've been surprised at the number of pet-friendly hotels we have found. Best Western, the world's largest hotel chain, for example, now offers more than 1,900 pet friendly hotels around the world.
Now that we live in Pittsfield during the week, we have hired another pet sitter, Renee DeRagon, the proprietor of Love Us and Leave Us, who got started as a canine sitter/walker in 2006.
"I've handled over 200 different dogs over that time," she said, "and I have a steady client base now of over 100."
Renee makes a pretty good living taking our Titus and other dogs on adventure hikes for a couple of hours a day.
For those who are unemployed or looking to start a new business, you might want to look at pet sitting. Pet sitters can earn between $12 and $22 a visit with the national average at $16 an hour. In many cases, dog sitting may only involve visiting a house, give the pet a bathroom break, feeding him and maybe throwing the ball a few times. That takes half an hour tops.
If you build your clientele until you are making 10 visits a day, that's $160 a day or $4,880 a month. That's not pocket change, especially if you are out of work. There are no expenses, nor certifications required and few barriers to entry. All you need do is love animals. So far Love Us and Leave Us has been good to Renee.
"I bought a house this year and I was shocked at what I'm making this year," she said.
"I feel like a rock star in the dog world," admits Renee, who was a restaurant cook before her new career, "the dogs love me, but it is the pet owners that you need to know how to handle. This career does require good customer skills."
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@theMarket: The Line in the Sand
It would seem that a low-volume battle is being fought over that 1,130-1,150 level on the S&P 500. As I expected, the break above 1,130 occurred this week and now the bulls have to defend it while attempting to push up above 1,150.
Actually, the S&P reached an intra-day high of 1148 this week. That is the highest level since May 18. Readers may recall that the present correction and subsequent trading range in the markets began with a decline in late April from a high of 1,219. Last week, I wrote that the S&P 500 would break above this trading range.
Also last week I raised my price targets on gold (to $1,350 per ounce) and silver ($36 per ounce) as well as other precious metals. If those metals continue to steamroll higher, I may have to bump up my estimates in the weeks ahead. Both metals continued to make new highs after the Federal Reserve on Tuesday said they were ready to increase their quantitative easing measures a second time if the economy continued to slow. Investors obviously are betting that QE II is in the cards because both commodities took off just minutes after the meeting.
"Explain that to me," asked one client over sushi at Shiro's this week.
Quantitative easing, for those who are unfamiliar with the concept, occurs when the Fed buys securities (in this case, Treasury bonds and mortgage-backed securities) in an effort to inject more money (stimulus) into the economy. Of course, more money in the system can mean higher inflation down the road if that money is used to buy goods and services. So far, that has not been the case.
All that money continues to sit on the sidelines, earning next to nothing because the banks and corporations are afraid to spend it. Since market participants discount today's actions into the future, investors are assuming that QEII will happen and, at some point down the road, that money will be spent. That will almost assuredly trigger a higher Inflation rate, so buy gold and silver now in anticipation. Of course, the best laid plans sometime go awry. Since gold and silver, along with other commodities, are generating big returns, most players are buying first and asking whether it's a good move later.
While commodities take center stage, the bulls and the bears stand toe to toe. Between them, is drawn a line in the sand that could determine whether this market rolls over once again and trades down 10 percent, or continues higher, maybe back to the April highs. I'm betting higher for now. What the bears don't understand is that the game has changed. The Fed has basically given investors a "put" on the market. Either the economy continues to grow or the Fed will come in and backstop the economy with QE II.
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The Independent Investor: How Will Wall Street II Play on Main Street?
"Greed is good. Now it seems its legal."
— Gordon Gekko, 'Wall Street: Money Never Sleeps'
The Oliver Stone-directed sequel to the 1987 film "Wall Street" starring Michael Douglas, Shia LaBeouf and Josh Brolin, opens Friday in the aftermath of two years of financial crisis that almost sank the global financial structure and put 9.9 percent of Americans on the bread line. Will this new film heighten or lessen Main Street's disenchantment with Wall Street? I'm betting the former.
The story opens with the nefarious Gekko, older and supposedly chastened, getting out of jail to regain his place within the financial power structure. I can't help but think how the victims of the convicted Ponzi schemer, Bernie Madoff, or the half-dozen other crooks that were indicted over the last two years will feel about that. Will we wonder if someday we'll see the same justice system release convicted culprits of this decade's financial crimes?
As it is, most investors (up to 90 percent) already believe the stock market is unfair to the little guy. The majority of us are only now realizing that stock brokers, financial advisers and insurance agents are not held to a fiduciary standard under current SEC rules. As I've written before, a fiduciary is someone who puts your interest above their own and their company.
So many retail investors have already given up on the stock market and its unscrupulous professionals that brokerage houses have begun to report disappointing earnings because of the anemic volume and lack of participation by individual investors. Analysts have been cutting their earnings estimates for the money center brokers as well.
It is my opinion that most Americans have still not forgiven Wall Street for getting us into this mess and with so many Americans out of work, why should they? As I've written before, the new financial regulations bill passed a few months ago was a farce and did very little to protect you and I from the financial services industry. Many of the excesses that got us into this mess are still very much alive on Wall Street today.
So when you pay $12 or more for a ticket to see the movie, be prepared for some in-your-face celebration of money and power. The characters in the movie will be flaunting the latest in power clothes and accoutrements, according to a story in Thursday's Wall Street Journal.
I was working at a global brokerage house in Manhattan when Mr. Gekko first descended upon our consciousness. I admit to emulating his "look" even though by the end of the show he was carted off to jail in ignominy. I found myself, along with just about everyone else I knew who was making the big money on The Street back then, squandering quite a bit of money dressing in contrast-collar shirts, expensive cuff links and two-tone suspenders. The new movie will feature custom-made $2,000 to $3,000 suits, handmade shoes and watches that are so expensive that I can't pronounce their brand names. How is that going to play with you and I who continue to cut corners, make do and forgo new clothes for our kids this school season?
The point is that this new "power style" was copied from what the people on Wall Street are wearing today. That's a far cry from most of us who get along in our LL Bean khaki dress pants and "wrinkle-free" blue oxford, button-down, dress shirts. Now don't get me wrong, I like dressing down and would never want to go back to those days of pinstriped three-piece suits, watch chain and wing tips. But just seeing those actors glorifying a culture that has driven most of us to the wall and gotten away with it makes me see red. To me, "it's about doing the right thing," words that I lifted from a line in the movie. But Gekko sums up the credo of Wall Street, which got us where we are today and will continue to drive the financial industry toward its next melt-down when he replies
"No, it's all about the money."
See it and weep.
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@theMarket: Precious Metals Gain While Stocks Mark Time
As investors waited for stocks to make up their mind, gold and silver took off this week. Gold made new highs while silver's price level is higher than at any time since 1980. The question is will stocks follow that lead or fall back as they have the last two times the S&P 500 reached this level.
Up until this week, most people (including myself) were betting the market would roll over for a third time and head back to the lows or make new lows. However, thanks to recent economic data that has shed a more positive light on the health of the economy, bullish sentiment among investors has increased to slightly over 50 percent, the highest reading in two years, according to the American Association of Individual Investors. But before you start jumping up and down just three weeks ago those same fickle investors registered the second largest bearish stance in two years. It just indicates how confused we all are about the future direction of the stock market.
In addition, most of us have a trust issue with this market. According to a recent AP-CNBC poll, nearly 90 percent of investors with less than $50,000 and 75 percent of those with $250,000 to invest, believe the stock market is unfair to the little guy. One indication of that sentiment is the continued light volume. Normally after Labor Day volume increases, but the opposite has occurred. That's another sign that market participants are not willing to be burnt a third time. So far this attempt to break out of this four-month trading range has been skittish at best.
All week the market has inched up and down tentatively extending its reach upwards without actually touching the 1,130 level on the S&P. Even if it breaks that level, there is no guarantee that it won't swoon sometime in October. With this much negative sentiment, the contrarian in me is whispering "what if."
What if the markets confound us all and do break out? I must confess that based on the recent economic data and the market's ability to hold the lows over the past few months, I've decided to give stocks the benefit of the doubt here in the short term. However, I am in the "show me" camp. I won't trust this market until I see volume expand and volatility begin to dampen down.
Regardless of what the market does now, I still want to keep some powder dry (cash) at least into October. Further out, I expect a rebound in stock markets which could last for the next two or three quarters.
This is not rocket science. Historically (since 1900) markets do better after mid-term elections, with the uptrend continuing through the first and second quarter of the following year. Couple that history with a growing probability that the GOP will regain sufficient seats in Washington and you have the ingredients for higher markets in the future.
As readers know, I have never believed in a double-dip recession and I have been expecting the economic numbers to improve as more stimulus money is spent and the economy strengthens. That appears to be happening, which will give some fundamental support to my forecast of the market's expected gains.
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Independent Investor: Precious Metals New Bull Trend
The recent price action in precious metals this past week convinces me that a new bull run in gold and silver is underway. For those investors who have yet to add some exposure to precious metals, now would be a good time.
That's not to say that these commodities will have a straight run higher from here. That would be too much to ask. There will be continual pullbacks in gold and silver. These corrections are usually sharp, fast and excruciatingly painful for those who are risk adverse. So if you don't have the stomach for volatility and turbulence, precious metals is not your cup of tea.
Back in May, gold and silver both hit my interim price targets of $1,250 an ounce of gold and $19.50 an ounce in silver. I then warned investors that there would be a period of consolidation.
"Wait for the pullback," I advised, "and then add or initiate new positions, but be prepared to wait. These commodities can back and fill for several months before resuming their move higher."
Fortunately, that scenario turned out to be accurate. I have been waiting patiently for both metals to decisively break above my interim price levels. I believe they did this week with gold reaching $1,275 an ounce and silver hitting $20.75 an ounce.
"So where do you see precious metals going?" asked one investor from Becket, who has a substantial holding in gold.
I believe gold can easily reach $1,350 an ounce before suffering another bout of consolidation. It could go higher, and I believe it will, but the timeframe depends upon a lot of variables that have no clear outcomes right now. In the case of silver, $30 to $36 an ounce is my ballpark estimate. Obviously silver has a substantially higher percentage gain ahead.
You would have to go way back to early 1980 to match the price of silver today. For those who were around back in the day, silver was in a huge run caused by two brothers, Nelson and William Hunt, along with a consortium of partners. At its peak, this silver pool owned more than 200 million ounces of silver. Its purpose was to buy silver as a hedge against inflation since at that time private citizens were prohibited from owning gold. The Hunt brothers cornered the market. The COMEX changed the rules and the Federal Reserve intervened in the market as well. The silver price collapsed and languished for well over two decades.
For many, precious metals offer a "safe haven" given the shaky state of the global economic recovery. At the same time, nearly every central bank in the world wants to prevent their currencies from gaining strength in order to facilitate increased exports. In addition, most governments have opted for an expansionary monetary policy in order to prevent deflation and kick start their economies.
I suspect that gold moved this week on a bet by speculators that the Federal Reserve will shortly stimulate the economy through additional quantitative easing. Investors are also betting that industrial demand for silver, as well as palladium and platinum, (which are also reaching new highs), will continue to increase in the future.
Investing in precious metals is risky, at best, but it's been the only game in town for investors lately. George Soros, the famed billionaire investor, recently warned that gold was the "ultimate bubble" and that "this is a period of great uncertainty so nothing is safe." I agree with that opinion. However when nothing is safe, a little gold is still better than no gold at all.
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