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  • Getting Rich Off The Poverty Trade [Edit or Delete]0 comments
    Jun 4, 2012 4:38 PM | about stocks: DLTR, ROST, SHW, AZO, TLT, WMT, DTG

    The poverty trade: getting richer as Americans become poorer

    One of the upsides of supposed economic weakness is that Americans feel increasingly dour about the economy and stock market, further compounded by a perpetually weak labor market. This is a positive because it not only increases the odds of further fed easing, but presents numerous investment opportunities though the so called 'poverty trade'.

    There's two pertinent points:

    1. Americans are downgrading their standard of living, but not decreasing their total spending as shown by consistently strong monthly consumer spending data. This means they are shopping at Ross instead of Macy's or Dollar Store instead of Walgreens, but they are buying more cheap junk to offset the lower price.

    2. You can profit off this trend by buying stocks that profit off the poor and frugal such as Dollar Tree (DLTR), Ross (ROST), Autozone (AZO), Dollar Thrifty Automotive (DTG), and Sherwin Williams (SHW).

    I also NO longer recommend stocks like CMG GOOG UGA PCLN NFLX BIDU or even AAPL. These are too volatile when better alternatives exist like ROST and SHW. I would rather make 30% in a strong market and lose only 10% in a weak market than make 40% in a strong market and lose 25% in a weak market.

    Here's the takeaway: Designate 1/2 your trading account to the aforementioned stocks and the other 50% to TLT.

    The last time I recommended TLT it was on May 14th; it has surged seven percent since then versus a four percent decline for the broad indexes for a total outperformance of eleven percent.

    TLT is still a huge buy because there is zero likelihood of a resolution to the European debt problems and the world is still awash with infinite liquidity. It's like Dumb & Dumber over in Europe now. No one knows anything. No one knows how to fix anything. There is no grand bargain, no collation, nothing. It's just gonna keep muddling along, providing buoyancy for risk-off assets like treasuries. Even if there is a compromise, the gains will be short lived because its such a hopeless mess over there.

    Back in America it's like Beavus and Butthead with Obama apparently unable to give a speech without inadvertently parodying the TV show with his constant um's and ah's. Yes, America, you elected a butthead for president. Don't you feel proud?

    Obama's intrade numbers keep plunging. Yet again, I reported this story weeks ago and only recently has businessinsider picked up on it.

    I also wrote that the Bain attack ads would fail (which they have) and that the job situation would worsen (which it has).

    Despite being a Romney and Bain supporter I will concede that if he wins he will be powerless to reverse the Anemic labor market, pain at the pump, record debt, or falling home prices. A Romney presidency will be a continuation of Bush's policies, which will be bullish for equities but won't do anything to remedy the pervasive pessimism about the economy or the attainability of American dream. Don't expect Romney's business experience to create very many jobs.

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