State of the Economy

August 1, 2008

And speaking of money, well, the economy hasn’t changed over the weekend. Gas prices have fallen to $3.37, which is good, although I remember when we thought $1.80 was outrageous. Oil is up to $125 per barrel, but Joe says he expects it to get back down to $70/barrel. I doubt that’ll happen anytime soon.

The Dow peaked at just above 14,000 last October; it’s down to about 11,500 now.

The prosperity couldn’t last. The prosperity of the 1980s and 1990s, that is. Have we learned nothing from history? Sooner or later everything goes by the wayside. Even WalMart will one day be an experience we’ll tell our grandchildren about. Joe talks about going to TG&Y as a child, and shows me buildings and stores now that “used to be a TG&Y.”

TG&Y, Otasco, Western Auto, the mom & pop dimestores (such as Lay’s in downtown Dalton, or Gene’s Variety in Tunnel Hill), are nothing but childhood memories now, to my generation. Even Kmart and Sears are practically nonexistent anymore. WalMart has edged them out of the discount/variety/department store market. What will edge WalMart out?

I think even shopping malls will eventually go by the wayside. Remember when malls put an end to the downtown shopping experience as we knew it? A new mall opened in my hometown in 1981, and it was THE place to be on Friday and Saturday nights. It was THE place to shop. Downtown, where my mom bought all our school clothes and church dresses when we were growing up, became nearly a ghost town.

Shopping malls are already crumbling, at least in OKC. Crossroads Mall on the southside, and Heritage Mall in Midwest City, have long since lost the large “anchor” department stores, and smaller stores are disappearing one by one. Kohl’s and places like it are edging them out. Kohl’s has constant sales and discounts and cash-back coupons… but they are making money. Their stock has grown from under $10 per share in 1995 to 50 in 2005, peaking at nearly 80 at the market’s height. A large reason is probably because they don’t have the mall overhead eating up their profits. Kohl’s are standalone stores.

In fact, that’s what I’m seeing more and more of in this new century -- strip malls and standalone stores. Old Navy, Cato’s, Shoe Carnival, Starbucks, Panera Bread, Staples….. non-“mall” stores & restaurants are going up everywhere. As the economy declines, people won’t have so much disposable income to keep shopping at the more-expensive malls.

Still, good accountants and finance people will always be in demand. Somebody’s got to manage the money!

What’s going on with tech stocks? Within the past year or so I predicted that tech stocks were the way to go. Technology is a driving force in our culture right now, and it will only grow. Microsoft (MSFT), Dell Computer (DELL), Apple (AAPL), and Best Buy (BBY) are performing similarly, bubbling up and down. The NASDAQ is at 2,280 right now.

Apple is at 157 today. If you’d invested in Apple just a few years ago, you’d be wealthy now. July 2007, a year ago it was 132.30; July 2006 55.40; July 2005 36.50, and July 2004 15.54. That’s a 900% increase in just 4 years! The value has shot up with the iPod and all the other techie gadgets the company has been producing. Too bad we can’t hop in the Delorean with Doc Brown and go back a few years and invest our life’s savings. By now we could be retired and living on a beach somewhere.

Employment is on shaky ground. I read that 51,000 jobs have been eliminated (nationally) this past month, and over 400,000 have been sliced since the beginning of the year. The unemployment rate is 5.7% and some economists expect it to reach 6.5% in another year. At a time like this, if you’ve got a good job, HOLD ON TO IT.

But on the other hand, this could be the start of some revolutionary change. I think that the job eliminations could make way for people to branch out, get creative, and try entrepreneurialship (is that even a word?). The end of one thing is always the start of another. Remember what Rhett Butler said in Gone With The Wind? There is money to be made in both the building up and the tearing down of a civilization. And the world as we know it is spiraling downward. Times are a-changing.

A couple articles I read recently say essentially the same thing. Robert Kiyosaki wrote on Yahoo! Finance that the masses got optimistic with the economy, until recently when real estate exploded all over the place, oil prices skyrocketed, FNMA & FHLMC started going under…. add to that the already-existing issues of Social Security and Healthcare. Now the masses are pessimistic, and NOW is the time to invest.

Perhaps there is money to be made in this tornadic economy. It takes research and some vision, to be sure. There’s no magic potion.

Remind me to read this again in 10, 20, or 30 years. It’s like a story unfolding and I can’t wait to see how it all turns out.