What's so bad about lower prices?

Ordinary deflation cycles typically work like this: Productivity increases resulting in surplus in inventory. As competition for that inventory climbs, prices fall. As prices fall, lower profit margins rev up the engine of ingenuity allowing for better products and better market response.

This is not an ordinary deflation cycle. In fact, most signs currently point to a sense of INflation as economic recovery gradually takes over. But whatever the future holds, for the moment, prices on everyday items like milk and gas all the way up the ladder to luxury items like boats and mansions are not quite sure what to do. You can practically name your price for today's SUVs while oil prices show no sign of coming back down nor spiking again any time soon.

We do all remember $4/ gallon gasoline. And while the price of crude oil has stabilized for now, no one is sure what to do about cars. Same thing applies with the consumer products industry, while the prices in stores may seem like they have stabilized at a rather uncomfortable profit margin for the retailer, few takers are out there yet for the products, thus the inventory level does not fall and profit margins stay low thereby not producing income and keeping more and more people away from the engine of ingenuity.

For us in the consumer discretionary market, it is a rough time to say the least. No one really needs what you have in your shop or warehouse, and in this economy they can't want it badly enough to buy it when things like jobs are hard to come by. So for the buyer this should be a great time, but alas, we are all sharing in the pain.