Personal Finance Advice

Usually the holiday shopping season begins the day after Thanksgiving, the so called Black Friday, the busiest shopping day of the year.  However, if you’ve been to the mall in the last month you might have noticed that some retailers began their holiday promotions rather early this year.  You have to admit, it’s kind of creepy seeing Christmas decorations up already with Halloween barely over.

Why the rush?

Well frankly, retailers are worried about the holiday shopping season.  With the notable exception of Walmart, the nation’s largest retailer, most retailers overall had a very poor fall season.  While the weather was to blame for some of it, there is also a general feeling that consumers may be reluctant to spend as much as they have in past years.

Fears over the state of the economy with rising food and energy prices are mostly to blame for this general perception.  So retailers are taking action, they want you to spend your money before those higher gas and heating bills start to take their toll on your wallet.

Quite a few stores were open on Thanksgiving with one day sales and early bird specials.  Many consumers took advantage of this opportunity and tried to beat the hectic rush of a typical Black Friday.

With retailers being so proactive, many analysts on Wall Street feel that the industry will rebound from it’s poor fall showing.  The sales figures for this weekend will be an important indicator in determining if this will be true or not.

Whatever the case may be with retailers desperate for your cash, consumers are benefiting from these fears and savvy shoppers will be able to find some great deals out there.

Since the abandonment of the Bretton Woods System of fixed exchange rates in the 1970’s, the dollar has had it’s fair share of ups and downs.  Currently the dollar is on a sharp downward trend, losing about 30% of it’s value over the past few years.

Factors currently contributing to the weak dollar

There are a number of factors that can contribute to a weak dollar and some of them are interrelated.  The ones that are currently to blame are as follows:

• Lower relative interest rates compared to other countries
• Large annual trade deficits
• Higher relative inflation rates compared to other countries
• A weak domestic financial market

It is important to note that the value of dollar would be even worse were it not for the large annual government budget deficits which attracts foreign investment that finances our national debt.

Winners and Losers

Some are helped by the weak dollar:

• U.S. firms have stronger exports with cheaper relative goods which are priced in dollars.
• Foreigners find it cheaper to vacation in our country.
• Foreigners find it cheaper to invest in our markets.

And of course some are hurt by it:

• Consumers have to pay more for imports, which in turn contributes to inflation.
• Americans find it more expensive to vacation in foreign countries.
• U.S. individuals and businesses find it more expensive to invest in foreign markets.

Another important note is that while our exports have improved somewhat, we still have a trade deficit.  While the trade gap with China has been making headlines recently, it is our dependence on foreign oil which is the main culprit.  Our demand for oil is relatively inelastic to the price, meaning no matter how high the price rises, demand will only fall slightly as there is certain amount that we must have in order to maintain our industries and our current lifestyles.

What is troubling is the news that OPEC has had recent discussions of de-pegging the price of oil to the dollar and instead use a market basket of currencies.  This will mean even higher prices for oil in the future and larger trade deficits which will in turn further weaken the dollar.

Who would have ever thought that after the tech bubble burst in the late 90’s, tech stocks would reclaim their position as the kings of Wall Street in such a relatively short time frame.  Like a phoeonix rising from the ashes, tech stocks continue to climb higher and higher.

Tech’s rise has slowed somewhat recently, based on the news that Cisco Systems has seen orders fall from banks due to the ongoing trouble in the financial sector.  However most experts remain bullish on the sector and expect stock prices will continue to rise into 2008.

In the past, the manufacturing sector was the power house of our economy but those days are long gone.  There is no question that tech is now the main strength of our economy.  Growth in the Internet has seen companies like Yahoo! and Google become the darlings of Wall Street.  Even it’s role in our everyday lives continues to grow, if you’re like me, you know you want some nice high tech gadgets this holiday season.

While our role as an economic superpower seems more in danger with every passing day, world wide demand of our tech products will only continue to grow as more and more third world countries become industrialized.  While we still see intense competition from Japan and other Asian countries, our tech industry has more than met the challenge.

Arguments can be made that it’s only because of the success of the tech industry that has kept the U.S. economy from a full blown recession.  Many analysts agree that in the event we do enter a recession, tech will fare better than most sectors of the economy.

With the implosion in the housing market and it’s subsequent effect on the financial sector, tech remains the ray of hope that could lead us through the dark times.