After two very strong days our stock picks slipped a little today. The Dow was down 0.7% as hopes for an agreement on tax and spending changes (to avoid the so-called fiscal cliff) start to fade. Toronto was up 0.6%.
Markets may slip further unless a deal if reached this week which seems unlikely. More likely is some kind of deal on or about December 31. So, it could be another “interesting” week or so yet in the markets.
GM’s decision to move some production out of Canada should be considered sobering in terms of the competitiveness of Ontario as a manufacturing center. Trying to subsidize companies to stay in Canada is no solution. Better news was GM’s decision to buy back a huge amount of shares from the government. Apparently GM believes its share price is attractive.
I was at a large shopping center tonight. The discounting seemed vicious and absurd. What should customers think when prices are discounted by 40%, 50% and 60%? To my mind it completely erodes trust and cheapens the products. Why should anyone pay full price at any time at these stores?
Clothing retail in particular seems to be a vicious business. I don’t predict a strong future for Sears Canada or the Bay. Thinking of Canadian Tire, I don’t think they are as subject to that kind of discounting on most of their products. I worry somewhat about their Mark’s chain. What was the wisdom of getting into such an ultra-competitive line of business. Their sporting goods stores are probably less prone to discounting. I know I have never seen too many real bargains when it comes to hockey equipment for my son.
To my mind the better areas in clothing retail are the higher priced brands which tend not to have to discount heavily. Also things like the more expensive skates and bikes. They don’t have to discount as much. Dollarama does well with its strategy (not that I like the stock). Costco and Walmart will also do okay as low-cost and therefore low-price leaders. It’s the vast middle area that is very tough. Trying to compete to sell non-luxury brand items when you don’t have a cost advantage as a retailer is tough.