Spending is in Americans' DNA

We're frugal, but we're not poor. Restaurants and good fast food have strong appeal for consumers now, making those stocks solid buys.

By Jim Cramer Apr 5, 2013 9:15AM

thestreet logoImage: Couple ordering meal in restaurant © NULL/CorbisI'm getting blown away by the big move in restaurants this week as major research firms up their ratings and say it's time to get into the group.

 

I'm flabbergasted because if consumers are really hurting, if the payroll tax hike mattered, if the delayed tax refunds mattered, and if higher gasoline prices mattered, these upgrades surely don't show it.

 

On Wednesday, Raymond James said, after a hiatus, that it's time to buy Panera (PNRA). Thursday, Goldman said Panera and Brinker (EAT) -- think Chili's -- should be bought because increasingly optimistic consumers are spending, particularly those in the high-income bracket. The same Goldman research also says Starbucks (SBUX) is more popular than ever and has a better more-likely-to-recommend ratio than any other restaurant chain. 

 

From what you read in the newspapers and on the Internet and what you hear on TV, these recommendations make no sense. How is it possible that we could have any confidence at all, given all of the negative news?

 

How can people be willing to spend $6 a throw at Panera for a signature panini or that Asian sesame chicken salad, or shell out 10 smackers for a dinner at Chili's or $5 on a triple venti cappuccino with skim, wet?

 

How come they're not staying home? Isn't that what you do when things are tougher? How come they're not trading down to McDonald's (MCD), which, by the way, has made some solid, more nutritional changes to its menu of late?

 

Simple. It's because we're a richer country than people realize, particularly when our houses and our stock portfolios go up in value.

Most people spend way too much time obsessing about sending a few dollars more to the taxman. And for the rich people, a return to the old tax rates of the 1990s was supposed to be catastrophic.

 

In reality, 98% of the people didn't have their income taxes raised. Many of the remaining 2% have seen an rise in their chief asset, their home, which might actually make up for the increased taxes. Everyone, of course, feels better even knowing what his tax rate is, something the fiscal cliff resolution finally gave us.

 

I agree with all of Goldman's research except the takedown of Domino's (DPZ) to buy from conviction buy and the dissing of Chipotle (CMG) as no longer as cool as it used to be.

 

We spoke to Domino's CEO Patrick Doyle. That company is more of an international company than ever, and business sounds quite strong. That's why the name didn't come off the actual buy list. Chipotle? I wonder if "Food with Integrity" ever goes out of style, and that's what's cool about the Mexican chain.

 

More important, I think these upgrades are going to look very smart a few months from now because raw costs for everything from gasoline to grains are coming down right now, and all of these companies are incredibly good at productivity and cost control.

 

This group has been a real underperformer of late. Right now the market wants to embrace those stocks that have underperformed, as opposed to many of the first-quarter winners, which are getting hammered. I think they have once again become go-to places when we get foreign-related sell-offs because these are domestic security growth companies, and that's the stock antidote to the Japanese, European and Chinese central bank irrationality that's playing out now.


And remember: We aren't a poor nation, and we aren't a frugal nation. We remain a nation of spenders. Going out to dinner has always been in our DNA, especially when we're feeling good about ourselves. And that's what happens when our stocks are up and our houses are no longer going down in value.

 

cramer


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 


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57Comments
Apr 5, 2013 10:25AM
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Food costs continue to go up.  Many restaurant chains have absorbed many of these cost increases.  How much more can they absorb?

Restaurant traffic is definitely there - lots of places are crowded on the weekends.  But if you listen to the insiders, they'll tell you sales of the real moneymakers are down - drinks, appetizers and desserts.  Wanna save $12 when you take a family of 4 out to Applebees?  Have them all order water - save $2.50/person plus tip.

Apr 5, 2013 9:53AM
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A trillion USD a year in guberment debt spending each year.  Lets see $1,000,000,000,000 divided by 330,000,000  Hmmm.  So our faithfull leadership is overspending $3,035 USD for every man, woman, and child in these good old United States.  Well lets' go eat, I'll just put it on your credit card, and maybe we can forget about this train wreck happening down the street.
Apr 5, 2013 11:17AM
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It is not surprising.  The average American doesn't have a clue about how to manage their finances intelligently.  Too often they are like little kids at the candy counter spending all they have.  What will happen when retirement comes along and they have no savings?  The last five years should have taught American's something about money management.  Apparently, the lessons were wasted.  We are still approaching $17 trillion in national debt, we have a very unbalanced budget, a weak economy, significant unemployment and under employment, global economic issues, and a future that is very fragile at best.  Those who continue to be intoxicated by a small degree of temporary success are going to wake up one day with a horrible hangover.
Apr 5, 2013 10:21AM
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we have a giant quagmire of a mess happening. 

 

poorly educated kids, "no child left behind" testing up the ying yang instead of old fashion traditonal education. 

 

kids who have parents who grew up baby sat with the video now baby sit their kids with video games. 

 

people who still think making $15 or $20 an hour is a "good paying" job. 

 

the stage is set for some wild future for usa! 

 

i'm still making sure MY butt is covered

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Hmmm

 

Credit card balances are rising again and the only reason they fell over the past couple of years was not people paying them off but going bankrupt and the banks having to write off the bankruptcy card balances.

 

At almost $15,000 of credit card debt per person that is a lot of $5.01 on a triple venti cappuccino with skim, wet?

 

Pretty much nothing has changed and the US consumer is still living off credit.

 

This is not going to end well at all folks.

 

Expect by the end of this year half the world's trade being done in yuan and by end of next year 100 percent of the world's trade done in yuan and the total collapse of the dollar.

 

Get ready to ask your illegal immigration friends how to live on no income at all.

 

FEMA should look into soup lines once again before this coming economic crisis makes it impossible for them to respond.

Apr 5, 2013 9:27AM
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it's not rocket science to notice the attendance in restaurants has gone back up the past few years.  people like to go out to eat.  prudent people watch it, not eating out every single day.  many only a few times a month at best. 

 

but to turn this into a "BUY" opportunity seems late.  or at best a call for BUY when others know something hidden in the background that should mean SELL. 

 

 

Apr 5, 2013 10:36AM
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Hi Retog;  My choice is I will eat less today if it means I will have something to eat next week.  But what do I know?
Apr 5, 2013 10:13AM
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Well you did a good job of working on the myth about any housing recovery yesterday Jim.  Now we can go ahead and let the folks know there will be no jobs recovery as well.  You know how folks thirst for the truth Jim.  Just show you are for real and step out of the Wall Street Circle for a bit.  I know Maria B. will probably ask for your you know "whats" but at least you will gain some credibility with the readers.  We could have a minor revolution when folks really figure out what has been done to them.  We do have a good percentage of Public School Educated folks though who will believe our electerds would never do what they have done to them.  Pity now when we remember how great America was when Liberals actually cared about each other and didn't just vote for crap for themselves.  JMHO
Apr 5, 2013 11:39AM
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Slow job gains cast shadow on economic outlook ?  What shadow who are they kidding must be themselves not us ! There is no recovery under the current system just a impending collapse ! The middle class is in serious financial trouble no money no spending ! Where they go this country goes ! Welcome to the Second American Depression !
Apr 5, 2013 12:00PM
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Sorry Bobo but I don't eat Bernanke Bologna like you.
Apr 5, 2013 10:44AM
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The rise in product for the restaurants, is what has had me perplexed,

Beef, pork,chicken,fish even bread products...

So I figure one of two things...Lower grades of meat are being used or smaller portions ?

 

For a couple to go out and get 3 entrees for $20 bucks is a fair deal, not including bevs?

Lunch at tops $7, should be enough at many places...

Much above those prices, would just be because of a higher cost of living Regionally.

But by the time you throw in a beverage or so, plus tip...You are at $25 and $10, respectively.

Eating out several times a week, gets damn expensive; And you would need a reason to do so.

Apr 5, 2013 12:41PM
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I will be fair to Obama.  I don't think he is doing anything different than Romney would have.  I remember how wonderfully charming and positive Obama was until he was elected.  He was then "informed" of the world wide game plan he had been voted into and then the misfortunate of being a starry eyed naive kid went away. He now is backpedaling and lieing his teeth out in order to not disturb the advancing New World Order. Remember please America is seen as the great economic predator in the world and the American middle class has been voted down by the rest of the world.  I suspect somewhere someone has suggested that if the US does not comply something could seriously go wrong.  Why else would Merkel throw the entire fortune of the German people away on the PIGS to the south. Just like the wires hanging out of Obamas suit there are several folks behind the curtain as well.  The busting up of the American domination in the World continues.  There will be no Jobs recovery, there will be no Housing recovery.  We are in some ways the Sadam Hussein of the world.   Economic predators. arrogant, uncaring, and Imperialistic.   The white Europeans as well. You should bank on it.
Apr 5, 2013 12:42PM
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Today's job news and market reaction sums it all up; the only thing that matters is jobs.  The debt, stocks and everything else will look a ton better if we can get real employment back to North America.  
I was thinking perhaps all countries with the same basic standard of living should sign a free trade deal, basically the EU, Britain, Canada, Japan, Australia and the USA.  Since we all enjoy the same standard of living (more or less) there won't be the wage discrepancies which cause outsourcing.  This would allow each country to play to it's strengths and I think create some growth.  Not the sole solution by any means but a start?
Apr 5, 2013 12:19PM
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Cramer, it is simply a live for today attitude because the outlook for tomorrow is dismal.  Obama's failed policy structure is weaving it's way into our economic life like pancreatic cancer.   
Apr 5, 2013 10:24AM
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Everytime I get ready or think about investing in the eatery business, I pull back and have second thoughts....It's been fickle the last few years, ups and downs for too many reasons, and then dealing with what has been labeled "the Great Recession."

 

Mickey D's has actually faired pretty through all of it....I guess because of people downgrading??

Yum's was doing fine ,then they have food problems in China..

Starbucks, outside of penetrating of every corner in America...It's troubling with all the competition.

I guess I'm just too skeptical...And have missed part of the boat ride, because of it.

Apr 5, 2013 11:09AM
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I'd rather grow it and know it than buy anything GMO. We all have to these days, no scientific evidence yet on what its doing to us. Same old story... if you a cigarette maker, your Boardroom needs to have that second-hand smoke spewing in 24/7/365. If you taint our food genetically, be sure its 100% of all you ever eat. Tired of being the recipient... time to dish it out and see if the Lords of Lame Living can take it (psychopaths).
Apr 5, 2013 2:44PM
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According to an Article, done by a Research Economist for the Associated Press...

Most indicators are BACK to pre-Recession numbers or the Fall of 2007...

I'm not going to beat this to death, because I end up "spinning my wheels".

There's just too much doom& gloom in some circles...And I refuse to let it bring me down.

 

Most of the indicators of the Economy are within 1-2%, some even less to previous levels.

Exceptions: Are the "Job Numbers and Housing" they are lagging, but coming back a little better.

There is "no arguement" on that front, and no need to try and explain it off to Obama or anyone else for that matter...We went through a "Great Recession" we all "know that to be a fact."

It does not to be "repeated on a daily basis" it's a given....IMO

The DEBT and some of the other deficits, we shall have to deal with on a long term basis..

That is a given also....No arguement here....What's the use.???

We are un-winding from a deep recession...

And it will take plenty of time....No one could do it much faster, then what's being done..NO ONE. 

Apr 5, 2013 2:14PM
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Ahhhh....Getting back to the restaurant vein....We made arrangements to go out/up to our small Golf Club and have dinner with some old friends, that use to own a Bar, and we traveled with them to Horse races, and Gamblings boats on the Mississippi....We usually got a group together and took someone's motor home....It was a lot of fun in the "good old days."

Now I know I'm not going to have ham salad sandwichs tonight...

And probably will have a strip steak or a top sirloin, cooked on the grill, with a salad bar.

Yes we do have choices occassionally....I consider us fortunate.

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Restaurants and food companys are ahead of all this. They charge the same, but the portions are smaller, it's their nature to make it through this mess. My Zaxby's salad was obviously much smaller than it used to be. Even the container it came in is smaller, I guess to make it look like more salad. It's too expensive anyway. I'm carrying a little cooler 3 times a week, and hitting Mcd's on Weds. for 69 cent cheeseburgers. We don't eat out as a family anymore, but yet have large Sunday meals that fill us up, yet is a fraction of Outback or Carrabbas.
Apr 5, 2013 11:02AM
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We stock a huge freezer all year long and keep an ample pantry, getting low right now on pantry items.

And like I say, we make pretty much anything, except Oriental type meals.

 

Not much on rice, nor some of the different methods of prep.

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