How Does Recession Affect Retail Stocks

Do you know the names Ralph Schneider and Frank McNamara?  If you don't, you're not alone.  In the 1950s these two men came up with the concept of a general purpose credit card.  Their idea blossomed into The Diners Club, the first independent credit card company in the world.

Before this novel concept, consumers received credit from individual stores.  This meant a different card for every store.  When people traveled, they needed to carry lots of cash because stores were wary of issuing credit to people they didn’t know.  Ralph and Frank solved these problems by consolidating credit down to a single card that could be used anywhere.  They singlehandedly started the credit card industry.

Diners Club was an immediate success.  Seeing opportunity, American Express quickly entered the market followed closely by Carte Blanche. These cards became a symbol of status and wealth in society.  As time passed, more and more retailers signed up to accept credit cards.  With greater acceptance, the number of consumers using credit cards exploded.

Fast forward a few years.

Today, credit cards are everywhere.  You’d be hard pressed to find something that you can't buy with credit cards.  Incentives even exist for cardholders to charge basics like food and gas.  As credit levels increase, even larger purchases like cars and boats are not unheard of.

Credit cards have moved us into a cashless society.  Think about how often you break out your card to pay for something.  I used mine several times this weekend, even for a $3.19 vegetable purchase. 

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• Semiconductors (Down 42%)

The semiconductor industry has been hit hard over the last month.  The industry has been lead downward by Micron Technology (MU) and MIPS Technology (MIPS).  The companies are off 27% and 24% respectively.

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