Photo courtesy of Banalities
Investment advisers often give the advice to get defensive when times are tough. Investors typically run to sectors like health care, defense, and consumer staples. On September 29, 2008, they ran to only one stock on the S&P 500. That’s right; every single member of the S&P 500 lost money that day, but one lone gainer. Campbell Soup Company, the ultimate frugal culinary staple, actually increased shareholder value that day. So what’s the lesson?
Frugal Living is Making a Comeback
Between increased sales of Spam and Campbell’s silver lining on an otherwise dark day, it appears frugal living is making a comeback. The evidence is incontrovertible, but the jury is still out on the reason behind people’s new found affinity for all things frugal. Is it because they don’t have a choice? Perhaps. In some cases I imagine people have little choice regarding spending decisions. When we are in budget stretching mode around our household, soup and grilled cheese sandwiches are as popular as steaks and baked potatoes. Even if people can afford to make more luxurious purchases the market turmoil has consumers running for the soup aisle because suddenly other money goals take a priority.
Of course we won’t know if sales of Campbell Soup are really higher during this period until quarterly reports are shared. I think the soup-maker’s ability to rise to the top when the other 499 members of the S&P 500 were getting hammered is indicative of just how shaky things are, economically. It is almost as if investors had given up on every other sector, every other company, and said, “The only thing that will survive this collapse is gool ol’ Campbell Soup.” Just like that hearty cockroach behind the fridge (I know, bad analogy), Campbell was the only one strong enough to survive such a nuclear sell-off.
Does This Mean the End of Luxury?
Yes, probably in the short term. Of course, there will always be an element of the population that can afford $1200 purses and $60,000 cars, but for the average person the option is no longer there to stretch for such conspicuous consumption on borrowed money. Times of living the good life compliments of the Visa card are over. While this will create some short-term pain in the market, particularly for high-end retailers, it is probably a good thing. People have been financing too much of their lives in an effort to live way beyond their means. It’s about time we got back to the basics–spend less than you earn, save for a rainy day (and a sunny one), and eat more Campbell Soup for dinner. Anyone have a coupon?