On Friday, oil hit a new high. I saw regular gasoline at one of my local gas stations hit $3.83 per gallon; it's galloping toward $4.
Oddly enough, inflation headlines last week suggested that things aren't so terrible for consumers -- but the core Consumer Price Index disregards some key items, including energy and food. Of course discretionary items are cheaper -- many retailers have been frenetically marking down pieces of merchandise because consumers don't want them, and probably can't even afford them, because of the high price of necessities ... like groceries and gas. I bought a pair of dressy pants over the weekend that were marked down to $24 from $90 -- and $24 is less than it costs me to fill my gas tank or make a typical trip to the grocery store for food staples.
You've probably heard many experts yak that the negativity about today's economic climate is overdone and that when you look at some of the data, that things aren't that bad. I think those sentiments sound like ivory-tower yammerings, and much of the data is indeed fairly disconnected from reality, as with the "core" CPI. Sure, maybe things aren't that bad for people who have plenty of cash. But it's easy to forget about the plight of those who have lighter bank accounts than we do, and I suspect that many pundits simply aren't plugged in to the reality around them.
Time for a reality check
A good investor doesn't put his or her head in the sand or try to put a spin on reality. I look around, and I see ominous signs of change. In my neighborhood, I've noticed increasing numbers of people walking with bags of groceries. The public buses lurch to a halt at every stop to pick up and drop off groups of passengers. When I was in a drugstore the other day, a lady joked about how she's willing to scramble for any penny that someone drops "these days." Yep, "these days" are not so good for many people.
As negative as I sound, I consider myself a short-term bear and a long-term bull. I know, a strange chimeric beast, but follow me. These are tough times, yes, but they won't last forever. Right now, we're just going through a correction after an asset bubble that needed to pop. Many, many people up to this point were operating on some pretty awful suppositions, such as assuming that home values could never decrease, that it made sense to buy well above your means, and that burgeoning debt was OK because everybody was doing it -- even the government. Everything would all work out, somehow, magically.
That "magic" has become plain old bad mojo, and although things are definitely "working out," they're not doing so in the way many people had hoped.
Look around you, and keep your eyes open, but don't underestimate your ability to outdo the so-called experts. You, Fool, are keyed into reality. Then think of that adage about how cooler heads prevail. If you have the means to invest, search for solid companies with little debt and a bright future despite the short-term macroeconomic problems. Some stocks have been knocked down to crazy lows, in large part because of the recent macro problems; some people are scared and selling their stocks just because the short term is rough.
Think carefully, though. For example, will people really ditch Starbucks (Nasdaq: SBUX ) forever? Is Apple's (Nasdaq: AAPL ) relentless drive for innovation and design going to fail over the long haul? Is it very likely that people will all stop buying Garmin's (Nasdaq: GRMN ) GPS devices? A friend of mine noted that getting hopelessly lost or stuck in traffic can be a really good way to guzzle gas, and that's a precious commodity right now.
You should also consider the stocks that are doing well despite (or even sometimes because of) the difficult economic climate. Those who invest wisely in quality stocks now, despite the tough times, should come out with a stellar portfolio for the long term.
Isn't McDonald's (NYSE: MCD ) a quick and cheap source of breakfast, lunch, or dinner? How about Urban Outfitters (Nasdaq: URBN ) , which, so far, seems to be saying, "What consumer slowdown?" Wal-Mart (NYSE: WMT ) treaded water for a couple of years, but after having worked hard to fix its image, it appears to be back in its sweet spot.
Think of the future
I see no reason to paint an overly optimistic picture of the economy. The pain is real, and pretending that it isn't seems silly and naive. However, this is also an opportunity to hone our skills in financial prudence, contemplate what factors brought us to these times, and open our minds to innovative ways to make the future better -- not to mention far more sustainable than the folly of short-term thinking that has brought us to this point.
Things will get better. Good and bad economic times are cyclical, and history tells us that bad times don't last forever. Let's just hope that we come out of this situation wiser and much more fiscally solid, with common sense becoming the "in" thing.