Retailers have every reason for concern following a recent report from the UN.
RETAILERS across the Western world have their fingers crossed that they’ve seen the worst of the great shopping slump of 2011, but they might have a fresh trend to worry about if they consider a recent British study of buying habits.
‘Compulsive consumerism’ has been named as a cause of problems across British society, from poor education results to last month’s London riots.
Compiled by Unicef, the United Nations agency charged with monitoring the welfare of children, the report found that many British parents ‘pointlessly amassed’ consumer goods rather than spend time with their children.
So far, that document has largely attracted attention in social welfare circles, and featured in a push by the British government to draw-up more ‘family friendly’ policies.
From a business perspective, however, there is a time bomb ticking in an official UN document that condemns the purchase of goods and services as being ‘compulsive consumerism’ with few redeeming features.
In other words, Unicef is saying that acquiring ‘stuff’ is not the best way to bring up children, and might even be bad for them and the wider society.
Think about that. One of the world’s most powerful organisations has just fired a shot across the bow of the entire retail sector with a study that essentially says stop buying so much, and re-allocate resources to parts of your life that do not involve consumption.
Confined to Britain at this stage the Unicef report will eventually find its way into other Western countries with well-developed retail sectors, where high levels of consuming goods and services is more than a habit, it is a way of life – such as Australia.
A social-led cutback in retail spending is probably the last thing shopkeepers need today, given their battles with the rise of the internet, tighter family budgets, new government taxes, and a dramatic switch from Australia being a nation that borrows to spend into a nation saving 11 cents of every dollar earned.
The telling paragraph in the Unicef report was: “Parents in Britain almost seemed to be locked into a system of consumption which they knew was pointless but they found hard to resist”.
That was followed by a call to ban all advertising aimed at children under 12, and a policy to encourage parents to work fewer hours and spend more time with their children.
No prize for joining all those dots to reach the conclusion that, while the authors at Unicef undoubtedly have their hearts in the right place, their recommendations are a dagger aimed at the heart of an already stressed retail sector.
It will be interesting to see whether the social welfare lobby in Australia picks up the report and makes similar suggestions for Australian parents.
If that happens then the keenly awaited recovery in retail spending might just have been stretched out a bit further.
Fear and greed
WITH the stock market doing a good impersonation of a yo-yo, up 10 per cent one week, down 11 per cent the next, it was only a matter of time before investment advisers recognised that a back-to-basics approach was the best way to handle the challenges of the next few years.
Central to this trip back in time is recognition that what you see on the stock market is classic fear and greed, which dictates the movement of the capital value of a company but not its underlying role as a generator of wealth and dividend generator.
That point came through in a recent analysis by Goldman Sachs, which found that dividend payments by ASX-listed companies for the year ended June 30 had surprised on the upside, running 2.3 per cent above analyst forecasts and 10.5 per cent higher than last year.
Given that share prices as measured by the All Ordinaries index are down about 10 per cent over the past 12 months, the 10.5 per cent higher dividend rate contains a powerful message – buy shares for their underlying earnings and capital management (dividends and share buy-backs) not in the hope of a quick capital gain on the market.
Right now, according to Goldman, there is a large number of companies offering dividend yields of at least 7.5 per cent, which is better than bank interest and a comfortable rate of appreciation at a time of extreme stock-price volatility. Examples of an attractive dividend yield include the big banks and insurance companies.
A dark side to this rediscovery of the power of dividends and buybacks can be found in the US, where a similar picture is emerging of zero jobs growth while profits grow – a situation caused by sharply lower costs from the mass sacking of workers.
A SUGGESTION going around that gold bugs may find unpleasant is that the failing states of southern Europe might be forced to call on their gold reserves to help retire unsustainable levels of debt.
Selling all, or part, of the gold held by the National Bank of Greece would not make too much of a dent in that country’s borrowings, but it could be part of the price demanded by countries lending more money to Greece, especially Germany.
According to the latest World Gold Council figures, Greece has the 31st biggest stash of gold among countries that report their reserves, with 111.5 tonnes of the stuff, equivalent to 79 per cent of the Greek government’s entire reserves.
Italy, interestingly, has the fourth biggest gold stash with 2,451.8t, roughly equal to one year’s output from the world’s goldmines. Portugal has the 14th biggest holding with 382.5t. Spain is 19th with 281.6t and France is fifth with 2,435.4 tonnes.
If any of those countries start selling gold to service debts, watch out for a dramatic fall in the price of gold.
Tough as steel?
CHINA’S problems with corruption took a nasty turn last week with reports of rampant ‘steel thinning’. What that means is that metal processing factories, facing high steel costs (thanks to Australia getting a high iron ore price) are illegally ‘stretching’ steel reinforcement rods into thinner products, selling the surplus steel on the side.
The obvious problem is that the reinforcing rods have a job to do, strengthening concrete structures such as bridges and high-rise buildings, with weaker reinforcing sowing the seeds of future potential disasters.
‘‘It is dangerous to be sincere, unless you are also stupid.’’
George Bernard Shaw