Urge to Splurge - By Joe Dunbar
As 2011 gets in gear, we find the stock market rising despite rapid increases in many key commodities. They are throwing the term stagflation around on the financial shows and websites. some economists don't see any reason to believe we are in danger of rising prices and unemployment. They cite improvements in the US job market.
My email each week includes a decent number of questions on my view of the impact of higher oil prices on food cost. In a straightforward manner, I let them know my feelings are price increases are guaranteed. Since we now see major ethanol production from corn, the same grain used for feeding livestock and making high fructose corn syrup is being consumed by major energy companies as an additive to gasoline.
Source: Morningstar.com
Look for more clients requesting a touch of luxury in this year's events. The urge to splurge has returned although caviar and foie gras may still be considered extravagant. Corporations and families may order pricier menu items and open their wallets for a few extras at the next party.
While most homeowners have seen their home equity decline since the 2006 peak, we have also seen a major reduction in personal debt. Credit card companies are back with the mail offers of 0% balance transfers (along with 3 to 4% upfront fees). Small businesses will take advantage of these offers. I'm not sure if the trend of credit line conversions to term loans will end soon.
If businesses get access to credit lines back, we may see much higher spending on sales and marketing oriented events.
Joe Dunbar
Dunbar Associates
P.O. Box 579
Fairfax, VA 22038-0579
800-949-3295
http://www.joedunbar.com
jdunbar401@aol.com
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