Saturday, July 5, 2008
Observations from the Driver'sSeat
I like driving the family on a vacation. Maybe it's the togetherness of family. Maybe it's just getting out of town for a while. Maybe it's a total guy thing like holding on to the TV control and being in charge. This trip was going to be a bit different. I talked to my lovely wife about the state of the American economy, and made a number of observations:
1. On the trip down we saw a Smart Car in action. It was cruising down hill at 58 mph. If I didn't know any better I would hve confused it with a roller skate. Not only were cars whizzing by at 65-75 mph. I could only think of what would happen to the poor folks driving one of things if it ever got into an accident. safety v. efficiency...no question here... people will pay the extra for peace of mind!
2. I made it a point to count the number of RV's on the road. I came up with 46. This did not include trailers...just RV's. We spotted an RV on average of one per every twelve miles driven. Secondary suppliers of these things have to be drying up. Sure there will be a couple of die hards that drive these things...but my observations took plce on July Fourth weekend...the busiest travel weekend of the summer. Winnebago, Fleetwood, and Thor Industries may deserve additional attention here. And Thor apears to have additioanl ground to give.
3. If you think RV's were bad, then the boating industry is much worse. I saw approximately 23 boats in transit on the drive down to Tennessee. This suggests that the consumerhas become extremely savy and docked their boats at a local marine...or they have decided to leave the boat dry docked. Maybe companies like Sea Ray (HZO) for instance could be under considerable pressure here.
4. According to one worker at Dollywood (CKXE) located in Pigeon Forge, TN attendnce is down. As a rule of thumb if attendance ever breaks the a daily markset the previous year, the park will stay open later. The park opened in March. Thus far, there have been three days where the park needed extended hours...or every other day except those three that the park did not hit their numbers. My belief is that this trend hold true throughout the United States.
5. Tier three restaurants (fast food) appeared to do well. There was always a line at the cheaper placesto eat. However, it is also duly noted that tier two restaurants $40-50 per couple seemed dead.
6. On a stop at Max and Erma's in Washington Courthouse, OH I noted a conversation between fertilizer salesman who were preparing for a luncheon with farmers. They were pushing products that would enhance crop production by 20%. This suggests that there is still some play left in commodities. Secodnly, there was neer any talk about the sfety ofthe products that were being used on the crops...something which I have always held a deep suspicion. ADM ADM's chart suggests that some people can fail durg a time of prosperity.
7. CNN (a.k.a. Communist News Network) ran a story where they claimed that 32% of Americans polled said that their travel plans have been limited by the price of gas. This would make perfet sense because one toll both worker in Ohio claimed that 73,000 less cars came through his plaza compared to the same month in the previous year. I would assume this spells a bit of trouble for auto dealerships like AN and alsotire makers like CTB.
There should be no doubt that the economic slow down in the United States is not a simple problem of credit contraction. Fuel prices are also sending a shock wave through the population and influencing spending decisions that were once taken for granted. Although "experts" like Thomas Lee from JP Morgan are convinced that the consumer discretionary will rebound soon, I am not as optimistic. Aside from stimulus checks...it just seems like extra spending cash for many Americans has dried up. The more sobering tone of Henry Paulson said it all. Wall Street must come clean with its credit problems. Those problems were not created over night, and will not go away overnight. Secondly, the Fed should not and will not be given the flexibility or abuse its authority to bail out every bank on Wall Street. I am reminded that the Great Depression started as a small credit crisis which had a domino effect throughout the entire world. While some people are feeling a pinch now, it is definitely not a depression.
While some people are having a rough go of it now, most are only experiencing degree of financial discomfort. But Americans don't like pain...and wedefinitely don't like the word no. As long as credit is available consumers will use it. Some have already over-consumed...others by reason of necessity or irresponsibility will bring about additional credit woes. Remember, credit is the consumer's life-line. The Oracle of Omaha Warren Buffet seems to have a pulse on this one. "The recession that we are currently in will be longer and more pronounced than anticipated." Do not count on Wall Street pundits, analsyts, and other salesmen to look out for you best interests.
Pick an analyst or two and follow their selections or predictions over the course of a few months. Maybe you can find somebody who is better that Thomas Lee.
If you have a young child, consider taking them to Kit Kittenridge which is currently playing at the theaters. It takes place during the Great Depression and brings up a lot of great points for teaching kids about the real world.
Posted by at 7:13 PM