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Still Living In A Material World

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Changes in consumer habits only temporary.

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There's been a lot of twaddle lately about how the downbeat economy will force long-term changes in consumer habits.

Don't believe it.

People are smart, and they do adjust to current conditions. But -- much like a poll of the presidential race -- such adjustments are just a snapshot of where things stand now, and aren't predictive of the future.

We're not going to become a nation of savers because we're foregoing frou-frou bottled water and swilling the stuff from the tap. No one is going to give up air conditioning for a log cabin and, barring Armageddon, we won't be subsisting on peanut butter and pickle sandwiches.

The housing downturn has eroded the personal wealth of many families. Those who bought a second house or a vacation condo intending to flip it for a quick profit got pounded. Many of those who continue to make their mortgage payments on time no longer feel well off - or even secure. But this isn't 1933, when President Roosevelt said in his first inaugural address, "The only thing we have to fear is fear itself."

In a recent news story, The Associated Press takes as evidence of change everlasting the fact that 78% of nearly 50,000 respondents to an email survey are combining shopping trips, a routine recommendation everyone makes to save money at the pump.

But what's an AP trend story without an anecdote?

"I shop cautiously," said Edna Scott, an 88-year-old resident from Berkeley Heights, New Jersey. "I would say that is a hangover [from the Depression]."

Ignore the fact that an email survey isn't a representative sample, and it's therefore impossible to generalize from it. And ignore the fact that a retiree on a fixed income living in the wilds of New Jersey might not be an ideal bellwether for the future spending habits of wage earners in their prime.

The evidence of long-term change in consumer preferences gets even shakier.

Some see doomsday in the demise of General Motors' (GM) Hummer. The automaker discontinued production of the Hummer H1 in 2006, long before the current run-up in gasoline prices, and ended production of two smaller versions this year. The Hummer has always been a goofball product for those who can afford a $140,000 novelty item and don't fret about that monthly bill from Exxon-Mobil (XOM), Chevron (CVX) or Conoco (COP) for a vehicle that gets 10 miles per gallon. Hummer sales peaked in 2006, with 71,524 of the monster trucks sold.

Does anyone seriously argue the demise of the civilian version of a military vehicle indicates a tectonic shift in spending habits? Does anyone seriously think this will decapitate sales of all luxury vehicles that get so-so mileage?

The Hummer's dead, but interest in full-size cars will rebound - many people don't feel safe in compacts. Don't necessarily look for the return of the land ark, but don't bet on two-seaters with wafer-thin fenders and wind-up engines, either.

Many consumers are eager to cough up big bucks for the initial price of an item to save a little on operating costs. Hybrid cars are suddenly hot items, but they aren't new. Toyota (TM) announced plans to develop a low-emissions car in 1992, introduced the Prius hybrid in Japan in 1997 and in the United States in 2000. Ford (F), Honda (HMC) and others now offer hybrids.

Much green technology is expensive. For many, the payoff is in the warm-fuzzies - never mind the years it takes to recoup the initial cost for solar panels or double-paned windows in a temperate climate. Congress has perfected this feel-good/ lose-money economy with its ethanol mandate.

Consumers are now cutting back in uncertain times - surprise! Smart retailers like Wal-Mart (WMT) benefit, but does it make sense to drive across town to beat Safeway's (SWY) or Kroger's (KR) prices on household items? You can bet consumers, reverting to form, will take convenience over price when the economy rebounds. Not that the habit has completely vanished: Many still pay a premium for pre-made hamburger patties or pre-tossed salads at the supermarket.

In any case, the current sour economy isn't the end of Whole Foods Market (WFMI); second-quarter sales increased 27.6% over the same period a year ago.

A survey of 3,500 consumers conducted by Nielsen in May found 66% of fine-dining patrons say they're going out less than they did a year ago. Stop the presses (if you'll pardon the expression): Fewer lace tablecloths and no more china, crystal and chateaubriand, eh? Fancy restaurants - golly, there's a leading indicator of the precipice ahead.

Meanwhile, back on planet earth, comparable U.S. store sales for McDonald's (MCD) were up 3.4% in the second quarter - and you can bet most people climbed in a car and drove to the Golden Arches.

Much has been made of increased interest in bicycling to work. Keep in mind that it's summer. A good dose of winter will cure that newfound passion.

Pollyanna now dresses in sackcloth and ashes and wallows in bad news. What we're seeing in today's endless stories about a diminished future is the flip side of the upbeat comments that preceded the 1929 stock market crash, or even the general optimism that prevailed before Black Monday, the 1987 market plunge of about 22.6%.

"There will be no interruption of our permanent prosperity," Myron E. Forbes, president of Pierce Arrow automobiles, said in January 1928.

We know how that worked out. But why believe that smaller portions, a move to generic brands and increased price-awareness about everything from shirts to crackers are here to stay? This just in: Brand X wins and thousands of advertising copy writers land on soup lines.

One final note to headline writers: From now on and forever, abuse of the phrase "paradigm shift" is banned by local ordinance.
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