Friday, December 19, 2008

We Are Barely Surviving...

I just read a good article on how the recession/depression that we keep hearing about is effecting our fellow countrymen (and women). I was shocked as to a few things:

1)We are looking at a holiday season in which consumer spending will be down (year over year) for the first time in around 40 years. I was pretty shocked at this, especially with how bad journalists make the S&L crisis and the dot com bubble sound.

2)Finlay Fine Jewelry, which I had at one point (right before they made a retarded acquisition) thought was a value play, is now probably not going to be able to make payroll. Which is interesting... Bailey, Banks, and Biddle is a really nice store that sells incredibly nice, yet overpriced jewelry... While I have not read anything on them in the past year, I am guessing that a bankruptcy would do them a ton of good. I am willing to bet that they are carrying a crap ton of gold on their balance sheet at prices of yesteryear, which in the event of liquidation, would bring in a bunch of cash flow.

3)There is a guy that is "cutting back" spending to $2,000 on presents, from last year's $3,000... I am shocked that people actually spend this much on others for the holidays. I suppose it is apparent that I either come from a cheap family, one that doesn't really love each other, or we are one that does not buy gifts for too many people. I would be shocked if anyone in my family typically spends more than a grand on presents (and that is probably a high figure, which is only applicable to the members with kids). I guess that this is in good relation to the paradox of thrift. While being smart for my family to be frugal during the holidays, it would cause the economy to crumple if everyone would be like us... The very people being frugal would be out of work quite quickly.

Regardless, this is a very interesting time to live in... quite frankly, I am happy to be a value investor in this environment. While I have no idea or regard for what the markets will be doing in the short run, I have a hard time believing that earnings and cash flow have been so inflated by the leverage of the housing bubble that it would justify companies trading at levels that are close to cash less debt. After all, with the T-Bill bubble that is occurring as I type, it shows that there is a ton of money that is waiting to be deployed in the next bubble, and the bubble after that.

My bet is on alternative energy-though, I would never invest in an industry that relies on government regulation and cronyism to stay profitable.


David Adams said...

I think we haven't begun to see the blood in the streets we are going to see. The Obama trillion dollar city and state bailout will destroy some cities and states. More states like California and New York will try to survive with massive tax increases. Taxpayers will respond by fleeing to more affordable venues. I wouldn't be a bit surprised to see real chaos hit some big cities and the media coverage will cause real panic.

Jeff said...

That is a bit on the rough side... Obviously, let's hope it doesn't happen.