Commerce Goes Off The Cliff
October 24th may mark the day that the modern economic and financial crisis peaks. It is so vicious this morning that all futures trading had to be stopped as electronic firewalls were breached. Listening to the talking head experts they are still proclaiming a turnaround but you have to begin to wonder how much of this is more of these experts covering positions.
One commenter on the longest running business network is being blatantly honest. He continues to comment this morning that in the last thirty days most of his sources show demand falling off incredibly. We talk to our suppliers and customers on a daily basis and all of our suppliers are telling us it has gotten very slow very quickly. Some items will still continue to sell, promotional pens for one should continue to do very well as the price point befits the market. Digital photo frames and other products will still have a market on the business side. From the consumer standpoint stores like Costco should continue to do well or at least better than average.
There is still talk of a jaw dropping rally. It is difficult to believe anything is sustained with the world economy heading rapidly into a deep recession if not depression. How many times in equity market history have we seen a substantial recovery during an economic downturn? Are experts giving out this information just to soothe themselves or to facilitate the liquidation of their positions? Each time they tell the public the bottom is near we have a day like today where it really appears a total collapse is about to occur.
Another topic being left on the back burner is the situation in the credit markets. It is finally spilling from Wall Street to Main Street. The tightening of credit between institutions is now resulting in the reduction or elimination of credit lines on the consumer side. This can trigger a tsunami of rate increases and credit score decreases as credit card companies chase the balance down. If you are unfamiliar with that term it literally means you owe $2,000 on a $5,000 limit that your bank reduces to $2,100. You pay it down $200 and they reduce your limit $200 always keeping you close to your limit which hammers your score. This in turn is seen by your other creditors as unseemly and they may raise rates or lower limits only furthering the cascade. Any talk of a rebound needs to be weighed against the fact that billions of dollars in consumer spending is being eliminated on a weekly basis. To those on Wall Street or on the TV giving us advice that are comfortable in their multi hundred thousand a year jobs there is no basic understanding of what is really happening. The effects are catastrophic which is why oil demand fell 4.6% again despite sharp drops in oil and gas. People are losing the ability to finance the economy incredibly rapidly and nobody seems to be paying much attention. The engine that powered this entire economy the last decade was credit. At first institutions stopped lending to one another which still had little effect in real terms on Wall Street. Starting about a month ago the first few consumer lenders began more aggressively cutting limits. It has now spread to most all lenders and is accelerating as they curtail lines prior to the busy holiday season.
We all hope for a recovery later in the day today to the markets, if it ends up down 500+ points the psychological effects will probably continue to hammer the markets lower next week. If that happens the initial stages of the holiday buying season will be a disaster and that will seal the fate of the world economy. There is really nothing left for the Government to do as they have exhausted all of their potential interventions in what history may view as plugging the leaks in the financial ship with chewing gum.
Hope Is Springing Eternal
It’s probably not any solace to those that saw their retirement funds get clobbered last week but so far overseas markets are mixed and Dow futures are now up after being sharply negative earlier in the weekend. This may not hold throughout the day and let’s face it the last trading day saw a 1000 point swing on the Dow so chances are the volatility will continue.
On the economic side of things it was shocking today to see that gas has fallen almost 50 cents a gallon between my last two tanks. It’s unprecedented and just makes no sense given what everyone was saying just a few months ago about higher oil prices being here to stay. With demand so far down will consumers flock back to gas guzzlers at the highly discounted prices or have we learned our lesson?
The larger question this week will be whether or not we have a return to more normal economic activity or whether or not the new norm is what we’ve grown accustomed to in the past few weeks. One retailer indicated today their business is down 30% over year ago levels and more than 25% in the last two weeks. We haven’t seen a drop yet but most everyone else we talk to is reporting slow sales.
How Low Can It Go? We’ll Find Out This Week
The market crash of 2008 is upon us as the major markets tumbled almost 20% last week. While there is some debate of the definition for anyone with a 401(k) or other investment vehicle this was a hard crash. It could be about to get a lot worse.
There isn’t any good news coming from the major market players and the Government has done about all they can to improve the situation. A meeting this weekend of G7 countries isn’t expected to result in anything earth shattering but instead guarantees that all bank deposits will be insured. It’s a total mess and I think anyone not on vacation for the last two weeks has seen the immediate impact in business activity. We talk to vendors and even friendly competitors on a daily basis and business went off a cliff after the first bailout attempt failed. Anyone and everyone we talk to from the local restaurants, gyms and contractors report whatever business was going on slowed substantially the last week of September. Worse many report tightening credit lines which will only continue to stagger our weak economy.
CNBC’s host Jim Cramer has some interesting thoughts on where he sees the market potentially going next week. He has taken some serious criticism for his blunt comments about the market while many others continue to announce the “bottom” only to have it smashed through later that day. What I cannot understand in listening to the experts is how they think the market will bounce back solidly when we are heading into a global recession if not depression? If you read Cramer’s article you’ll see he makes that very point, our economy stinks and is getting worse fast. He seems undecided on whether this is more like 1929 or 1957 and I applaud his honesty in not trying to tell us he has it all figured out like so many other experts on TV that may well be covering their own positions. Futures are sharply lower already for Monday and barring a last minute rabbit out of the hat by the G7 it could be a very ugly Monday.
There isn’t much any of us can do about it. We’re working harder days and longer hours to grow the business and there’s really no choice. What has many people worried is the constricting credit lines heading into the holiday season which will stifle retail sales which trickles back through the entire economy including the promotional products industry. It’s a scary time but all any of us can do is focus on what we can control which is our individual budgets and sales. Unlike earlier contractions the industry itself seems weaker already with the telltale signs that some vendors may be feeling the financial pinch. In 2001 and in the early 90s the organizations were strong enough to mostly weather the storm, I am not sure that is going to be the case this time and when this is all said and done the industry may end up looking very different. Some are already expecting major consolidation like we’ve seen in the banking industry. Times, they are a changing as the saying goes.
The Fall And Shrugging Off The Bad Economy
The stock market is down, Congress just passed an almost trillion dollar bailout and jobs are being lost across every sector. Like all downturns all that one can do is plow ahead and try to make the best of it. In that light we have released a bundle of new promotional products including several new recycled promotional items including the Leeds Eco 100% Recycled Owl Laptop Sleeve which sports an eco friendly vibe.
With the economy in mind we are offering products that fit the budgets of many of our customers while maintaining our committment to the environment. The Leeds Recycled Cardboard Tuck Journal is inexpensive, recycled and has a built in pen loop that is perfect for the freshly released Leeds EcoSafe Click pen which is made from recycled and biodegradable parts. This is a new item for us and we like the ability to have it inserted into many of our portfolio and journal offerings. The pen has a nice solid feel and is available in several colors making it a great choice and a high value ad specialty. With your budget in mind the Leeds Eco 100% Recycled Lunch Tote is made of 100% post consumer recycled materials and is collapsible. This is key as it makes it easy to store or ship allowing you to purchase larger quantities without having to worry about storage. All three of these items are reasonably priced, green – earth friendly, and readily available for the busy holiday season.
In the drinkware department we have added the Aladdin Ecycle Travel Mug which is made of FDA approved materials which is particularly important given the recent headlines. Like all Aladdin products it is made of the highest quality materials and standards that surpass that of many other less expensive items. We have had great success offering the Aladdin items and have had nothing but positive feedback from our customers to date. The brand recognition is priceless and increases the intrinsic value markedly.
Before I forget, the Case Logic Neoprene Laptop Sleeve has also been made available on the site. Like the other laptop sleeves it offers support and cushioning for your high end laptop but unlike many others this one will hold a 17″ laptop. We highly recommend the larger size when in doubt as the smaller laptop will fit easily and as of now there are few if any laptops over 17″.
We have been away from updating this blog as we prepared for the busy fall season. Despite the depressing headlines business in our region continues to be strong. There is no doubt the recent credit crisis is impacting business, this is obvious from the diminished wait times when calling many of our manufacturers. Business is slow and we are undoubtely heading towards or are already in a serious recession. The promotional products industry will not be immune and the severe contraction in the financial industry will impact many of our fellow distributors. This is an unfortunate part of this particular business cycle but one that will be overcome as we head towards 2010. For the time being we are noting many companies are holding off on new purchases and we are noticing higher turnover on the customer and vendor end. Hopefully the Congressional Bailout will have the desired effects and begin to ease the credit markets over the coming weeks. Otherwise the dire projections of holiday season business may come true and that will not be good for anyone.
We’ll be updating the blog much more frequently as we continue to update our product offering.
