Opposite Day!

I spent the better part of last week listening to everyone on television and the newspapers telling me "we have reached the bottom!"

Since I was juggling so much over the past 10 days or so, I had no opportunity to ensure that the people that dwell in reality remain firmly grounded in the facts.

It seems that whenever the Dow Jones goes up, and it went up plenty last week, the bobble heads all start talking the "everything is alright" crap!

The reality is, as Nassim Taleb so brilliantly points out in The Black Swan, the stock market is not a snapshot of American economic health. Besides, I don't know very many "common" people that are still in the market these days, beyond your (required) 401k, I mean.

Here are a few of the Headlines you may have missed while collective noise from the Wall Street cheerleaders overwhelmed you:

1. Retailer Gottschalks is starting it's liquidation.
   
2. Ritz Camera starts liquidation on this Saturday.
   
3. General Growth Properties, the nations largest shopping center developer, is nearing bankruptcy.
   
4. Bankruptcy filings are up across the country by anywhere from 27% to some 86%, year over year, during MARCH!
   
5. 10% of the nation is NOW ON FOOD STAMPS! That's over 32 million people, and there is evidence of another 6-7 million being refused due to barely being above the poverty threshold.
   
6. Pier 1 announced it will close an additional 20 stores by the end of the month.
   
7. The City of Chicago is closing all it's mental health facilities due to budget shortfalls (Hey it worked for Reagan).
   
8. Blockbuster Video is near insolvency, with many (self included) seeing them fold before 2010.
   
9. Nevada based casino Bally's closed their Sports Book (operation for taking sports bets) last Tuesday, March 31, without warning...even to employees.
   

Now on a much more local note, Ethel's Chocolate is closing 5 of 6 "boutique's" BY THE END OF APRIL! With plans to close the last by the end of the year.

Lot's of bad news, I know, but it is only to ensure you keep your nose to the grindstone. The economy is literally just starting to reveal how far away we are from the bottom, not the bottom itself.

April began the "Period of Revelation", a three-month period of time, in which how badly scarred (or healthy) retailers are after a tough Holiday period and the worst 1st Quarter in roughly 40 years. Those that are in trouble will no longer be able to hide, as there is massive debt repayments due at the end of April and lots of capital needed for 4th Quarter purchases. Non-performers are not going to be able to secure loans and will summarily have to take a bow.

As earnings start rolling in at the end of the week, I will try to keep you abreast of the score.

Maybe I have had one too many "crabby-patties", but I think this is only the beginning.

I Am Legend

Before we start, I promised a very helpful young lady that I would let my readers know about Lord & Taylor's free shipping for online purchases of $99 and more (click HERE). Since free shipping is New Economy, I have now done so.

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I took a trip to a Chicago-area shopping mall last night with with a friend and, as you can imagine, I was moved enough to write about it. What you cannot imagine, is why?

We headed over to the Old Orchard Mall in Skokie, Illinois, just about 7 miles northwest of the Chicago city limits. This outdoor mall is a notoriously busy shopping destination (especially on warmer days), as it houses the most complete collection of stores, entertainment and dining options that serve Chicago's monied North Shore suburban communities, such as Lake Forest, Winnetka, Wilmette, Kenilworth and Glencoe, as well as the MASSIVE population center of Evanston, IL.

The 10-15 minute drive from Chicago's Rogers Park neighborhood and ample public transportation make Old Orchard's many luxury destinations (Tiffany, Nordstrom, Subway) a desirable option for many city residents as well.

So, taking what you now know (or knew, if you you are an area resident) about Old Orchard Shopping Center and it's surrounding communities into account, you can understand why the following observations were so stunning to me and my counterpart.

1. We arrived at 7:00 pm, on a cool Friday night and immediately found parking (less than 45 seconds after entering the parking lot). The spot, second from the door of THE FOOD COURT, had two additional spots right next to ours, with very few other cars driving around looks for openings.

2. The food court was virtually empty, with over 60% of those eating having ingested, or were in the process of ingesting, Subway. $5 foot long is sooooooo New Economy. As a matter of fact, from this point forward, $5 foot long is the official meal of the New Economy! If someone can top it, I am open to suggestions.

3. No lines at any of the theaters (with the highly anticipated "I Love You Man", a new Nicholas Cage film and the first starring role for Julia Robert's in 4 years all opening last night), a virtually empty Barnes & Noble (less than 15 people inside), not one restaurant had a wait time for tables and much fewer than 1oo people encountered in the entire mall during our 2-hour trip.

4. Macy's was having one of those head-scratching sales where you cannot believe they are "giving away" the stuff for such low prices. For example: Table(S) of Ike Behar, Ted Baker and Ralph Lauren neckties, which all retail in the neighborhood of $125, were all $8.99!, racks upon racks of clearance at 75-80% off everywhere and 11 racks of men's shoes at 65% off. Yet, not a soul was shopping. 

Perhaps you think I am saying not many people were shopping the sale? I am not saying such a thing. I am saying exactly what I witnessed: NOT A SOUL WAS SHOPPING!

I talked to 3 sales people, who separately verified that "nobody is buying anything these days" and, based on the generally immaculate presentation of the sale tables and clearance fixtures, evidence suggests they were telling the truth.

Wandering past the women's areas of the store on our way out, we noticed no less than eight double-sided, 10-foot long clearance fixtures with $4.99 signs atop them. These fixtures were stuffed to the gills with merchandise. As I told my friend last night, perhaps that was the most telling sight of the evening: If QUALITY $4.99 dresses, blazers, jeans, sweaters, shirts and skirts do not get people into your store, what will? 

I truly believe America's shopping habit (sic, pricing threshold) may have changed for the foreseeable future, by which I mean the next 5-10 years, or so.

If you price a suit at LESS THAN a $5 foot long and nobody budges, you are experiencing the New Economy from a front row seat. 

To close out the Macy's story, they are in TROUBLE. Way over inventory, no customers and unable to find a pricing strategy that agrees with their customer's idea of fair value = retail molotov cocktail!

6. No Teens at the mall. I say this with great trepidation: If teens are opting out of spending time at the shopping mall (I counted 5 total last night) most, if not all, major shopping centers will be in bankruptcy by mid-June/early July. There will be no recovering from this development. It will take minimally 5-7 years to climb back from such a blow.

7. Every mall store had posted closing hours of 9pm, however, as we walked by stores at 8:15, we saw many a light out, with doors locked. By 8:35 most stores, save the large department stores, were locked and vacated. 

I am not saying this was the wrong idea (in fact it was exactly the right idea). What I am saying is, for this to be the general practice of the entire mall, my notes regarding the lack of shoppers during this trip is not out of the norm, and has had to be the case for quite some time. 

Lights out at 8:30 on the first day of spring at a major shopping center is not normal. As a matter of fact, it's unheard of!

So as we made our way through the mall, back to our car, I could not help identifying with Will Smith's character in the movie "I Am Legend", wondering if "anyone is out there?"

In the movie, after he has had the question answered in the affirmative, the larger question consumes him as the screen goes black and the titles begin to roll....."Can we (humankind) come back from this?" 

In short, I don't know?

Now that's how you let the beat build.

The "New" Economy

People, we are in a New Economy.

An economy that requires: a higher level of awareness, to be more connected to others than ever before, a new level of discipline and a new commitment to decisiveness than ever before. 

The only thing at stake is survival.

There are those that are resisting it, some that doubt it's existence, and a few more that are drawing a line in the sand, preparing for a battle they have already lost. 

But the facts are irrefutable, and everywhere. So start functioning as a participant in this New Economy or prepare for new levels of misery, not yet experienced.

There are 5 basic tenets to the New Economy:

Magnetism - Does the service or goods you are looking to purchase, or provide, seem like a natural fit? A no-brainer? For example: Stores that offer 10% off today's purchase for opening a store credit card are Old Economy. Stores such as Walmart, looking for new ways to grow their customer base, are broadening the areas they choose to compete in. The retailers has announced plans for new "smaller, neighborhood" stores that sure sounds like 7/11 and White Hen had better watch their bacon in the coming months (Read the article HERE). Providing fresh produce and "higher-end" products at significant savings just makes sense. I am, and you are too, attracted to that idea. They are, as stated before, the smartest peeps in the business!

Sacrifice - Can you do without? If not, your brain and the small satiety center deep inside of it are living La Vida Loca in the Old Economy. If you have not looked at reducing costs for your business in places other than lay-offs, you lack the imagination for operating successfully in the new economy. Companies such a Kamakura are using the video conferencing services of Vidyo to reduce travel expenses and lost man-hours that would be spent getting to and from meetings with their top clients (read more HERE).

Yes, nothing beats a face-to-face with your client, but we are in the age of survival; survive first and then become special. Pressing the flesh is not expendable in every line of work, but this company had to guts to take a gamble. Your employees will appreciate your NOT thinking of them when it came time for expense reductions. And the added perk being, employees get more time at home with their families. Win Win = New Economy.

Forward Thinking - Those that are solely focused on solving their, or their client's, CURRENT problem or problems are not operating in the New Economy. I hate to bring it up, but the best example of this type of thinking is the Chris Brown/Rihanna situation playing itself out daily on the front pages of every news source around the world. And make no mistake, this has everything to do with finance.

To every normal thinking person, Chris Brown has committed and unthinkably horrible act (or series of acts, depending on the source) by physically abusing a woman. And not just any woman, though this type of offense does not have degrees to me - all offenders are equal, but one of the most popular and well-liked women in the world, the pop star Rihanna. This to me, and I would think 90% of the population, is wholly unforgivable. However, his handlers, record company and others are "standing by him", because they cannot afford to drop a young, multi-platinum singer with the star appeal of a Chris Brown, then watch him go to the record company across the street and crank out more hits (no pun intended). 

Old Economy thinking! He did that in the Old Economy. He has no future in the New Economy. It's obvious by how much it makes my stomach turn when I hear his name. Remember, the first law of the New Economy is Magnetism, and magnets attract and repel. Everyone that attempts to refurbish his brand, which is most certainly the goal, will be the worst off for it, Including Rihanna! They are looking at solving their current problem without the benefit of seeing the negative tsunami that surely awaits. Apologists have no role in the New Economy as I see it. Click HERE before you tell me I am wrong about this.

Innovation - This is the true benchmark for exiting the mess of the Old Economy. New Products, New Services, New Science, New Educational Methods, New Moral Standards, New Methods of Communication, New and Binding Commitments to Ourselves and Our Communities. 

The way forward is not going to come from Madison Avenue creating a better slogan to sell more of the same crap. Advertising is literally at an all-time low as far as effectiveness is concerned. What will pull us out of this morass (Old Economy) and propel us to new, unseen heights as a country and individually is our ability to formulate, preen and find application for, new ideas!

What do James Hoge, William Potts and Garret Morgan Have in common? They all found ways to improve upon Lester Wire's invention, the traffic light. Each of them, some more than others, found ways to make a great thing better, and in doing so made the world a safer place to live. Considering the vast number of improvements to the traffic signal, you would think it needed no further improvement after figuring out the, "Red, Yellow, Green" system. However, the 1990's saw the implementation of Dynamic Control, which allowed for signals to change based on traffic, or lack there-of. A simple improvement, but one that added the brilliance of efficiency to the safety mechanisms of prior models. This "improvement" came along over 50 years after everyone thought the traffic signal was a perfect instrument. 

This is the New Economy thought process, EVERYTHING CAN BE IMPROVED! And INNOVATORS COME IN ALL SHAPES, SIZES AND COLORS!

It is time we identify, nurture, develop, support and celebrate those among us that bring the spirit of innovation to the fore. They, and they alone, are the leaders of tomorrow in the New Economy. Listen to lectures from some of today's innovators HERE.

Balance - For every thing your are given, you will need to give back in full. If you have a mentor, become a mentor. If you go to school, be a tutor. If you are a fashion designer, make yourself available to new designers. If you are receiving any benefits from any organization, volunteer your time to that, or another organization. If you buy a new article of clothing, take an article of clothing to Salvation Army or Goodwill Industries. If the city you live in picks up garbage regularly, pick up the stray litter  at your feet when you are waiting for the light to change. 

The New Economy does not require you paying "rock bottom" for things, but instead settling for fair value, to you and the merchant. That way you can be sure there is a relationship in place for future exchange.

The age of "not my problem" is Old Economy. the New Economy is "How Can I Help?" 

A good place to start is HERE.

President Barack Obama borrowed the famous line, "We are the one's we have been waiting for", but the New Economy's slogan is "What were you waiting for in the first place!"

The New Economy is all about forward momentum, so keep the words of the brilliant Emperor/ Philosopher Marcus Aurelius in mind throughout the day:

"Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present."