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Tuesday, July 08, 2008

Why Plumbers Matter

This article about the sorrows of Neiman Marcus, Saks and Nordstrom's points up the problem with ignoring plumbers and truck drivers. Last year I had to read a continuing flood of analysis that the top tier people were doing fine, and would carry the economy through the problems with the "subprime" class. The economic pundits told us over and over that these people were the big spenders who really mattered to the economy.

But as we were discussing over here last year, the Saks shoppers are a derivative of the plumbers and the truck drivers, so when the plumbers and truck drivers have to be cautious at WalMart and aren't buying new cars, things are going to get sorrowful further up the shopping chain relatively quickly.

They've gotten woeful now:
At the beginning of 2008, Niemira said he had expected luxury same-store sales to gain as much as 2 percent this year. That would have been below last year's 6.3 percent, yet still an increase. Instead, luxury sales have dropped 0.6 percent in the four months through May versus a 6.7 percent rise in the same 2007 period.

``The upper-end discretionary segment was once thought to be resistant to a softening,'' said David Abella, a portfolio manager at Rochdale Investment Management LLC in New York.
New York real estate is falling also - both commercial and residential. These people are shocked!
Neiman spokeswoman Ginger Reeder and Michael Boyd, a spokesman at Nordstrom, said executives were unavailable for comment.

``Even places like Saks that you don't think would need to have sales -- because people will come no matter what -- they are,'' said Amy Yglesias, a 19-year-old college student who bought jeans at a 60 percent discount at the Manhattan store. ``Everywhere is hurting.''
These types retract spending much more deeply and quickly, too.

Why it's trickle UP economics, that's what it is.
More like flood UP, but yes.

I'm sure retail consultants will be running around suggesting painting the walls a different color.

The funniest part is that these are the people who will panic and run for the exits. The financial world is hurting, and they are not used to adversity.
Spot on, MoM. The folk who came up through the school of hard knocks, stand steady in the crisis. Those who have only known sunshine run for the exits.

Of course, the folk who've been through hard times tend not to be as extravagant during the good times; that's part of it. They remember that situations can change quickly.
Can't presume the couture shopper isn't a graduate of the school of hard knocks. It ain't necessarily so.

I know it's gratifying to consider common sense evaporates as you leave the common folk. Far as I can see - in all the economic strata - it still takes all kinds.
Burnside - the young financier types have been handicapped by never experiencing a severe recession. This is pretty new and confusing to them.
MoM, I see the point clearly enough.

I'm trying to make the point that young people and tremendously wealthy people are not necessarily unprepared - that it depends on their background, which can either help or hurt. If they're not accustomed to their good fortune, if it's arrived relatively suddenly to someone who's not used to it at all, you very often see abuses.

I note also that the multi-generational billionaires can be tripped up by a kind of imaginary insularity. Well, arrogance really. We can't help noticing the arrogant ones, but there are the others as well.
How many multi-generation billionaires are there?

There are a lot of wealthy people. There are a lot of people who are relatively comfortable. How a person manages what he has, and for what ends, probably depends on the sense of purpose with which he conducts his life and the perspective he has on money, plus the skills he has at managing money.

To put it mildly, a lot of people who now have relatively more money than most of the population have it NOT because of what they inherited vs other people, or what they earned vs other people, but because they have skill at managing money. Most people have heard stories of lottery winners who blew it all.

Not having money and then ending up with a lot of it can be good or bad depending on the attitudes and skills that the individual brings to the table. A person who has learned to live and save on a very moderate income often will handle monetary success well.

One of the problems we have is that a LOT of people have gone to school, worked hard, gotten a lot of income, and yet don't know how to handle it. Unfortunately, many of them have leveraged themselves up to the hilt. It is not necessarily their fault. If you get handed credit cards when you are in college and never learn to save, it would not be surprising that the call of leverage would seem so sweet.

There is nothing ipso facto wrong or good, honorable or dishonorable, about having old money, or new money, or starting without much money. Money is a tool and only a tool. There is something fundamentally wrong about having money and just blowing it, because it's a waste of resources and an act that is disrespectful of others as well as yourself.
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