Monday, January 05, 2009

Not so happy new year.

Bloomberg.com
Global Corporate Profits to Drop in ’09; More Bankruptcies Loom
By Katie Hoffmann and Joseph Galante

Jan. 5 (Bloomberg) -- Corporate earnings will continue to slump into the first half of 2009 amid the first simultaneous recessions in the U.S., Japan and Europe since World War II...

...Companies are battling falling consumer demand and dwindling cash flows after banks tightened lending to cope with billions of dollars of real-estate losses. The U.S. Federal Reserve has cut interest rates to as low as zero percent, while governments worldwide have taken stakes in banks and companies to prevent a collapse of the global financial system.

“We hit the peak in earnings in 2007, and in 2009 we’re going to see continued deterioration,” said Diane Garnick, who helps oversee $500 billion as an investment strategist at Invesco Ltd. in New York. Analysts’ earnings estimates are “still way too optimistic.”

...Earnings at U.S. retailers will fall 20 percent this year, according to analysts’ estimates. The International Council of Shopping Centers in New York predicts 73,000 U.S. stores may shut in the first half of 2009 after what may have been the worst holiday-shopping season in 40 years. That’s after about 148,000 stores closed last year, the most since the 2001 recession, according to the trade group.

“You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains -- either multi- regionally or nationally -- go out,” said Burt Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York...

...“No one will be immune from this downturn. It’s time to see who’s losing least, not who’s winning more,” he said...

...“This quarter and the first quarter ‘09 are just going to be really ugly quarters,’’ said Frederic Dickson, who helps manage about $19 billion at D.A. Davidson & Co. in Lake Oswego, Oregon. ‘‘It’s just going to take a long time to get confidence restored.’’


Interestingly, I happened to be in the car recently when Bill O'Reilly's talk show came on, and one of the things he said was that he was "spreading around his spending dollars" to "the local mom and pop shops" wherever possible. So in his own round-a-bout way, Bill is endorsing relocalization, too. The problem, of course, is that in many communities, there are no longer any mom and pop shops doing the things they used to do before wally-wort and other giant transnational chains came to town. And this is certainly an ugly climate to try and re-establish long lost industries, but that is exactly what we're going to have to do to turn the economy around - support living wage local and regional businesses instead of giving our money to the Robber Barons who have whittled our wages down to the point where we can no longer qualify to buy an average home or car.

This is the hardest part for people to understand - we have to pay more for the things we buy in order to support a living wage economy. Getting our stuff for cheaper and cheaper not only doesn't help us in the long run, it's actually shooting ourselves in the foot. We have to acknowledge that all the costs that these corporations have externalized are being dumped on our shoulders ANYWAY. You don't save a single dime by buying cheap junk - in fact, you end up paying MORE in taxes and interest and fees trying to play catch-up on society's problems than you would have if you had just payed the correct higher price for the item up front. An ounce of prevention is ALWAYS worth a pound of cure. And that pound of cure is getting more and more expensive every day - making that refusal to pay the ounce of prevention more and more stupid economically.

If those companies hire people to work for slave wages, we have to make up the difference somewhere. If they don't pay benefits, we pay it in the form of more welfare. If they don't pay living wages, we pay it in the form of higher fees and interest payments. If their lack of living wages to their employees causes the local and state governments to not have enough in taxes, we pay the shortfall with higher taxes or reduced services. If they refuse to operate a clean and safe business, we pay the costs of accidents and pollution.

We pay everything they externalize - nothing is without cost. Either you pay the costs upfront in the price of your product which is produced in first world countries by companies that follow the laws that we, as a Judeo-Christian society, have decided are moral and ethical employment laws, or you will pay it through the backdoor of higher taxes, higher interest, and higher fees. And the back door way costs both you and society far, far more than just paying a fair price for something up front. That's reality. It's time we started acting like adults and stop trying to get something-for-nothing. In reality, you pay for it all, one way or another.

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