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alstry (35.09)

You CAN'T force people to spend!!!!! $600 is NOT enough!

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June 19, 2008 – Comments (4)

What if you owned a business and wasn't sure you were going to have any customers tomorrow?  What if you were an employee and wondered whether your turn was next on the chopping block?  What if you saw your assets, your perceived wealth,... crashing in value?  If you own a home, or shopping center, or office building, or bonds....or even stocks over the past year....your assets are likely falling in value....and materially.  Coupled with your assets falling in value, what if everything you spend money on was going up in price? 

You think you would cut back spending?

Auto sales tanking in June.  Fewer booking airline tickets.  Fewer shipping goods.  FedEX is even affected.  How are June's retail sales?  Restaurants are begging for customers.  The problem is the problem is getting worse....income is going down and debt is going up!!!  How do we stop this downward spiral?

WHAT IF EVERYONE CUT BACK SPENDING AT THE SAME TIME?????

More evidence of a dramatic June slowing??????

From the LA Times:

“With gasoline prices racing to new highs weekly, it’s crunch time for many gyms. Consumers looking to tighten their belts are giving up on tightening their buns in gyms, yoga classes and personal training sessions. Instead, they’re exercising the old-fashioned way: sweating for free at the beach, parks or on the street.”

“‘I know it’s next to nothing, but when you’re a starving artist, every little bit counts,’ said Ashley Brooke Moore, an aspiring dancer and actress in her 20s who canceled her $36-a-month membership at Bally’s about eight months ago. She then signed up for yoga classes, but when that got too expensive, she quit those and started going to free yoga classes at Runyon Canyon Park.”

“Money is tight because the catering company she moonlights for hasn’t been doing many jobs recently. ‘Everything’s a little bit slower, and gas prices are ridiculous,’ she said.”

http://www.latimes.com/business/la-fi-pennywise18-2008jun18,1,7401046.story

Remember as spending slows.  Revenues slow.  Income slows.  Taxes Slow.  State officials are commenting that they have never seen anything like this before. 

And tonight, AMBAC and MBIA downgraded?  You think they were downgraded because their paper is strong?  Trillions in counterparty obligations to be cut in value?  If banks' balance sheets weren't bad enough from defaulting debts.

How many straws can the camel take?

Now that we know about the problem, aside from a good bloody mary, what can we do about it?

 

4 Comments – Post Your Own

#1) On June 19, 2008 at 9:38 PM, joeykid13 wrote:

A good bloody Mary, Made with Mr. & Mrs. T's, extra horseradish, a dash of Lea & Perrins Worcesteshire, and of course, one can never get enough of that McElhinney & Co. Louisiana classic Tabasco.  Since we are shooting the works, lets do celery, extra large olives, and 3 large shrimp on a skewer as garnishes.  Take 3 of those and call me in the morning...LOL  Don't panic...focus on basics, and continue as if everything is OK.  It will become very evident when certain "luxuries", are no longer possible...so cut them when they must be cut and no sooner.  Everyone is in a completely different situation, so each necessary action is as individualized as every person.  If necessary, as your post mentioned...cut the gym membership, and exercise at home, or by doing manual labor outside.  Get rid of your cell phone.  It is a total waste of money and really not necessary...we did just fine for the last 100 years without it.  Cut your own hair, buy generic brands of products that don't matter, carpool to work, fix things instead of buying new ones, mow your own lawn, tend your own garden, make birthday cards, drink water from the tap instead of from a bottle, rent a movie instead of going to one (I think much of hollywood can afford the pay cut more than most)...or better yet watch a good movie on cable..and when cable is too much cancel it, and watch PBS...it will be time well spent, spend more time with your family doing things that don't cost anything, go to the beach or the lake, have a picnic, write letters instead of making expensive long distance calls, mend your old clothing.  Heck, you can save $100 by shredding an old pair of Levi's instead of shopping at Abercrombie...eat less food, if you have issues with weight...that is a total win-win...trade your gas guzzler in for an economy car, and trade in your $25 bottle of wine in for a $7 bottle.  Do all of these things, but only if, and when necessary, and not a moment sooner.  It is important to prepare mentally for what may or may not happen in the future...but you have to LIVE today.  No matter what happens, we will all survive...perhaps changed a little, maybe a lot...maybe even for the better...so...RELAX...Life is Good.    

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#2) On June 19, 2008 at 9:46 PM, Andyman (94.51) wrote:

Two good Bloody Marys.

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#3) On June 19, 2008 at 10:11 PM, hansthered0 (< 20) wrote:

I've stopped showering to save water....so i'm totally doing my part.

 

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#4) On June 19, 2008 at 10:40 PM, alstry (35.09) wrote:

I have to tell you this is the strangest problem I have ever tried to solve.

You really have so few people who see the issue.  Once they do, the light turns on and it starts to consume them.

I have run this issue by a number of executives, including former CEO's of publicly traded companies.  What is amazing is once the dots start being connected, they realize no one is immune or safe from the fallout...regardless of initial perceived financial condition.  After all most of our assets are a combination of Stocks, Bonds, and Real Estate dependent on counter party payments of one sort or another layered on differing amounts of debt.

In the end, as we each cut back, we are cutting back on another's income.  With enough cutting, few are making much.  You layer that on an unprecedented mound of debt and now the debt is defaulting.  That debt is the foundation of our banking and retirement system.  As the debt defaults, the financial system starts to collapse.

We have been witnessing its erosion for about the past year.  Much of it has been concealed by Fed injections and level three accounting.  But recently, the spector has come into view and the distress is becoming more and more visible as the problems compound.

Each implosion compounds on the previous, like adding straws to a camel's back.  At some point, the financial system simply cannot fulfill  its  counter party obligations and sequential defaults start triggering.

Nobody likes a good bloody like I do, I consider myself a certified bloodyologist.  However, no matter how many I drink, the problem persists....how do you fix a financial system where few have the resources to honor their counterparty obligation and practically the entire value of one's wealth is dependent upon another upholding their end of the bargain.

In God We Trust....but who will have the resources to meet their obligations when few have revenues.

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