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alstry (35.70)

Alstrynomic Business Lesson 101

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February 03, 2009 – Comments (5)

Today the Auto Manufacuers reported sales numbers:

GM DOWN 49%

Ford DOWN 42%

Chrysler DOWN 56%

Toyota DOWN 34%

Porsche DOWN 37%

Mercedes DOWN 36%

These numbers are WORSE then DEPRESSION numbers.  These are sales numbers, NOT profit numbers.  The auto industry is a HUGE percentage of the entire economy and business is shutting down....FAST!!!!!!!!!!!!!!!!!!!!!  Remember, the above numbers are DOWN from an already weak prior year.

Whether you like it or not, the economy is shutting down.  Prices are crashing.  And jobs are being lost by the millions.  Is it time to code the patient???.....if not yet....you definitely want to know where the button is....but don't worry..........Yes....we will get through this....but the process will be painful.

But you don't have to believe Alstry...there are a bunch of TMF bloggers in clown hats telling you to relatively out perform the market.  But how do you outperform bankruptcy?

Not by trying to relatively outperform!!!!!!!!!!!!!!!!  Then how Alstry?  It is easy......just get out of the way of the oncoming train.

You want to have at least two years savings in CASH!!!!!!!  Three would be better and five would be comfortable so long as you are employable.  You want to have as little debt as possible and certainly not take on any additional unnecessary obligations.

If you don't have the above, don't worry...you now have a goal to set for yourself.

Alstrynomic Business Lesson 101

When a company is heading toward bankruptcy....get the hell out of the way!!!!!!!  Don't try to relatively outperform....build your reserves for a battle you can win.

5 Comments – Post Your Own

#1) On February 03, 2009 at 5:07 PM, jahbu (86.19) wrote:

Why dont the Government just give every family a check for 50 grand and be done with it.  Let people use it how they see fit.  Pay off debt, downpayment on a house, invest it, buy a car, whatever the heck they want.   We can pay it back over the next 30 years with a 50cent increase in gasoline tax.

Simple enough?

Jahbu

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#2) On February 03, 2009 at 5:17 PM, StKitt (31.57) wrote:

Jahbu for President!

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#3) On February 03, 2009 at 5:44 PM, jstegma (29.94) wrote:

$50k might be a bit much to ask, but how about $7500?  That's the amount of the stimulus package.  Read my blog post.

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#4) On February 03, 2009 at 5:49 PM, alstry (35.70) wrote:

When revenues are DOWN 40%....often 40% or more of the staff is cut.  It is an incredible decline in business for such an important industry.  Simply counting the loss of sales tax is an enormous impact on the States and local governments.

How many families do you think can survive on a 40% cut in revenues without going bankrupt???  Not many businesses either.

It doesn't matter if Ford was relatively less worse than GM or Chrysler.  Once you get over a 40% decline in sales, you are likely to go bankrupt sooner or  later...especially if you are leveraged and have high fixed costs.

In the above, even if you did relatively better than the other, when you are bankrupt, you are both relatively and absolutely dead from the shareholders perspective. 

Once enough people start losing their jobs....it becomes almost impossible to find anything close to replace the income a family needs not to go bankrupt....

Here is an example from CNN.....

CNN) -- Eric Bell worked his way into middle management during his nearly 10-year career at eFunds, a financial services company in the Phoenix, Arizona, area. He made about $100,000 a year, and his career was on the up. Times were good.

But it came to a crashing halt in May when his job was slashed after another company acquired eFunds. No big deal, he thought, a guy like me with an MBA can get a new job quickly.

Seven months later, the 41-year-old father of a 5-year-old boy has yet to find a full-time job. He now files for unemployment benefits every week online -- a check totaling $216.

"I never envisioned that my job search would take so long, and it's still ongoing," the Arizonan wrote to CNN's user-generated site, iReport.com. "The fall was very frustrating as companies put everything on hold with the economy falling apart."

I know Alstry doesn't have a Ivy League Degree like RonChapman Jr....nor does he know whether his IQ is in the top 5% like Everyday Investor says his is.......

But there are a few things Alstry does know really really well....first, a good bloody mary.....second, a good cigar......and third....an economy whose key industry's sales are declining 40% or more annually is in very critical condition.

If you want to relatively outperform death....you may want to contemplate resurrection.  If you want to win....may I suggest staying alive.

I think I still have my suit.......

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#5) On February 03, 2009 at 7:45 PM, DemonDoug (98.73) wrote:

a wise former blogger once posted about Lee Iacocca surviving the great depression by staying solvent by selling hot dogs in central park.

you gotta do what you gotta do.  I need to see the rest of that movie too.

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