How do you get ahead? Try being an investor rather than a low-wage worker. That's a fact of life as American as Thanksgiving pumpkin pie and rammed home by this holiday edition of the weekly roll of market winners and losers.
Those frantically shopping on Black Friday aren't simply shrewd consumers out for the best deal. There's a hint of desperation—and, unfortunately, sometimes mayhem—in the one day of the year that the weakened purchasing power of average people gets a boost. The struggles of the typical worker (let alone the unemployed) aren't captured in the seemingly unstoppable bull market. And the housing market rebound hasn't necessarily benefited rank-and-file, often underwater, homeowners.
Here are this week's biggest market winners and losers as seen through the eyes of CNBC's Executive Edge, and no surprise for the official start of holiday shopping season, the retail industry looms large.
We still call the day after Thanksgiving "Black Friday," and retailers still count on the Thanksgiving-to-Christmas weeks being their biggest-grossing period, but it's just not what it used to be. In fact, red might be the dominant color—for sales tags fixed to more merchandise earlier than ever.
Ever since the Great Recession began six years ago, retailers have been forced to offer better and better deals to lure shoppers, which eats into profits. Wal-Mart, Target, Kohl's and more than two dozen other chains have recently lowered their fourth-quarter profit outlooks. One prevalent marketing ploy: Promise to match competitors' prices. The economy's modest improvements just haven't been enough to boost consumer confidence.
Roughly 15,000 shoppers lined up at Macy's for deals. Wal-Mart reported its best Black Friday sales ever, and other retailers said early indications were for strong sales, as violence crept into the hunt for deals.
"Stores know that they are well into a fight."
—Ken Perkins, president of the research firm RetailMetrics
To avoid Black Friday fisticuffs, a shopper can head online for deals, but the Web trend hasn't helped all companies selling low-cost goods. In fact, as retailers bask in the brick-and-mortar hysteria, makers of impulse items have been hit hard by online shopping.
In the U.K., about 13 percent of people buy most or all of their groceries online. But their spending accounts for only 5 percent of grocery sales. Analysts believe that's because online shoppers are less likely to stray from their lists.
At highest risk are companies that sell items in checkout lanes: candymakers such as Mondelez International, Mars and Nestlé, and magazine publishers like Time Warner and Hearst. Firms that sell impulse items are experimenting with ads that pop up when online shoppers check out, but many people just click on past.
"I always just press 'next, next, next, next' without even reading them, deliberately, because I don't want to be tempted."
—Elizabeth Clark, a teacher in Liverpool, England, on why she ignores ads for impulse items at online checkout
As noted, deep discounts on Black Friday leads to photo-worthy scenes, such as 15,000 people lining up at Macy's. And that ultimately means strong volume—if lower-margin sales—for retailers among cut-throat competition for consumer dollars.
When you see a half-off item at a holiday sale, you might assume it's a loss leader. In fact, the store may make a tidy profit even on deep, deep discounts, because markups on merchandise like clothing can be huge—often 70 to 80 percent. A $300 dress may cost the retailer only $60. So a 50 percent discount still provides a $90 profit.
"Retailers adhere to specific formulas set six to nine months in advance, and each discount is closely mapped out to lure consumers into the stores during Black Friday weekend and beyond."
—CNBC's Stephanie Landsman
Not to be too much of a downer during holiday season, but Americans thrilled with the price of a TV at Wal-Mart aren't really all that thrilled about the way things are going in general. A new Conference Board survey shows that consumer confidence fell in November. What's bugging people? The survey suggests that job anxiety is high.
Another survey, by the Washington Post and the Miller Center, shows that 60 percent of workers worry about losing their job, the highest level since the 1970s. A record one in three workers say they worry "a lot" about losing their job, and that number jumps to 54 percent for those earning $35,000 or less. Among lower-income people, 85 percent fear their family won't earn enough to meet expenses. That's 25 points higher than in the 1971 survey.
But forget all that—the markets are on fire! And based on corporate earnings projections, stocks still have plenty of room to rise, according to Wharton finance professor Jeremy Siegel. Now around 16,000—a record he predicted way back in January—the Dow could go to 18,000, though Siegel says it's impossible to predict how soon. Earnings are up 10 to 12 percent this year, and are predicted to rise around 8 percent next year.
Historically, great years like 2013 tend to be followed by pretty good years.
Still, corporate America has been squeezing profits from a stone, given the lackluster economic growth, with no signs of dramatic change soon. The Federal Reserve of Philadelphia said this week that 42 forecasters in its survey predict growth at an annual rate of 1.8 percent this quarter, down from their previous estimate of 2.3 percent. For the first quarter of 2014, they are calling for 2.5 percent, down from 2.7 percent estimated earlier.
"It doesn't mean that we're going to get there right away or we're going to get there in a straight line. We've had a long time without even a 10 percent correction. ... [But] I don't think this bull market is over yet."
"We reiterate our belief that the great equity rotation, which we first discussed in August 2012, is unfolding, and there is no alternative to equities."
—Craig W. Johnson, technical market strategist at Piper Jaffray
Not all investors are poised to do well, though. Take the 60/40 investing rule (60 percent stocks and 40 percent bonds). It has been around for 60-odd years, and generations of investors have done just fine with it. It returned about 10 percent a year from 1990 through 2011.
But now one of the greatest investing minds of our time, Wealthfront chief investment officer and Princeton professor Burt Malkiel, author of "A Random Walk Down Wall Street," says a 40 percent bond allocation could be disastrous as rising yields drive down bond prices—the opposite of what happened during those good years for 60/40. Some bonds should be replaced with dividend-paying stocks, Malkiel says, and a 50-something investor should consider the following allocation: 5 percent cash, 27.5 percent dividend-payers and bonds (emerging markets and tax-exempt), 12.5 percent REITs and 55 percent stocks.
"The investor in bonds is, I think, very likely to get badly hurt by sticking with the 60/40."
All is not what it seems in the U.S. residential real estate rebound, either.
Home prices rose 13.3 percent in the 12 months ended in September, the biggest gain since 2006. But what's really behind that jump? The standard line says it's the warming economy and more reasonable lending standards.
But Nobel laureate and Yale economics professor Robert Shiller, co-founder of the Case-Shiller Home Price Index, credits investment money from private equity firms such as Blackstone. The problem is that once these pro investors conclude the easy money has been made, he said, they may pull out that prop from the market and kill the upward price momentum. Ordinary buyers remain cautious, he added.
"The word from [housing market investors] seems to be that they're long-term investors, but I suspect they're not. They've learned that there's short-run momentum in the housing market and they know how to play momentum."
Quick, what's the first thing that comes to mind with hedge funds? If you said they turn on a dime as conditions change, moving into hot assets and out of cold ones, you share a common view. But you'd be wrong.
According to a Goldman Sachs report, that flipping investments is the exception rather than the rule. On average, just 28 percent of a hedge fund's portfolio turns over in a given year. Even more surprising is that over a 12-year period, turnover averages just 35 percent.
Obviously, fund managers think their picks have legs. How's that working? Well, this year the average equity-focused hedge fund returned 10 percent through October. That sounds OK until you consider that the S&P 500 returned 26 percent.
"Less than 5 percent of hedge funds outperformed the [S&P 500] index, as many were hurt by their short positions and hedges." —CNBC's Lawrence Delevingne
Better to be in virtual currency than your average hedge fund, bond portfolio or U.S. homeowner.
Bitcoin, which got a better-than-expected reception from U.S. regulators, traded above $1,000 for the first time Wednesday, a gain of nearly 7,700 percent for the year, then shot over $1,200 on Friday morning—and it's just getting started. It is in heavy demand in China, which has shown no signs of restricting the currency.
It is not issued by a central bank but is computer-generated. While not yet in widespread use, bitcoin has enjoyed growing acceptance for retail transactions and can be readily converted into regular currency through numerous exchanges.
"If either [the U.S. or Chinese] government were going to ban the currency outright, they would have made the decision now rather than later, as it would really serve no purpose to delay beyond fueling speculation. So overly heavy-handed government regulation looks unlikely." —Zennon Kapron, managing director of KapronAsiam.
Companies desperate to satisfy consumers should heed the Naughty & Nice list compiled by Consumer Reports. While not a thumbs up or down on an entire company, the list presumably reflects what consumers like and don't like.
On the naughty list: Amazon, for raising by $10, to $35, the purchase required for free Super Saver shipping; BJ's Wholesale Club, for refusing returns on perishable items such as food and flowers; and Fry's Electronics, for refusing refunds on TVs 24 inches or larger.
On the nice list: Citibank, for not charging a late fee on its Citi Simplicity card; Consumer Cellular, for not tying customers to contracts and for offering a money-back, no-questions-asked guarantee; and Southwest Airlines, for not layering on fees for flight changes. —By Jeff Brown, Special to CNBC.com