Will Frugality Remain?

Alexander Wissel, Editor in Chief, Investment U

We’ve heard how over the past few months Americans have closed their wallets and started saving more. The national savings rate has climbed for the first time in decades.

This newfound zeal for saving money has been a boon for many companies that help consumers save or cut back. Companies like Netflix (Nasdaq: NFLX), Rewards Network (Nasdaq: DINE) and Wal-Mart Stores (NYSE: WMT) have thrived on cost conscious consumers.

The question is how long can this last?

The latest reports from Gallup have noted a trend for consumers spending less. But are the cost cutbacks voluntary or forced. Consumers cutting back to be frugal is quite different from bargain shopping because you have to.

Time will tell if this newfound frugality will remain. But if history shows us anything from the dot.com blowup and mortgage fueled resurgence, our return to careless spending is right around the corner.

Regardless of when it ends, the longer this mindset lasts the better it will be for Dollar Tree (Nasdaq: DLTR) Big Lots (NYSE: BIG) and Family Dollar (NYSE: FDO).

Symbols mentioned in this article: NFLX, DINE, WMT, DLTR, BIG and FDO.

• NFLX: The Netflix Index
• Retailers look to Cyber-Shoppers
• Blockbuster (NYSE: BBI) – Another Nail In The Coffin

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