Sunday, December 14, 2008

We all live in a Ponzi scheme.

What does it tell you when a Ponzi scheme can seem like a regular hedge fund?

What does it tell you when 50 Billion dollars can go down a rat hole and no one notices?

How is it different, in other words, than a thousand other mutual and hedge funds in terms of transparency? If we ask such high returns that a Ponzi scheme is needed to get there, and if other funds are getting those same kinds of returns, shouldn't we ask if something is still out of wack? Such as short-term thinking, looting by bonus, and financial gimmicks?

If you define a Ponzi scheme loosely as taking current revenues to pay off past creditors, we're all in a Ponzi scheme.

If you give yourself huge bonuses, hand out large dividends, and neglect to reinvest in your infrastructure and employees, you are indulging in a Ponzi Scheme.

I've maintained for years that most big box chains were all about building the next big box and the next, while ignoring whether the boxes you built five, ten, or twenty years ago were maintaining their sales, or indeed ever really did pay for themselves.

Stimulus Plans?

See here. I could order a ton of new product for my store, and my sales would be boosted. Just put it on the credit card. I need to get revenues up today, and I can always pay it back tomorrow.

Uh, uh. No ways. Been there, done that. It's easy, easy, easy to borrow the money and see that spike in sales, and it's damn near impossible to pay it back. The only way it could even conceivably be possible is on the backs of yet another bubble.

I couldn't understand how I could have a viable business -- and, after all, almost every other business that was around in Downtown Bend 29 years ago is gone with the wind -- paying my modest bills, driving a modest car and living in a modest house, doing a bit of shopping here and there when I need to, going on short vacations.

And everyone's living in a huge house, driving huge cars, and going on long vacations. My suspicion is that a whole bunch of those guys were borrowing off the short term of their businesses, or building up debt.

So the chickens have come home to roost. And what's the answer? Bail them out.

No, not the guys who lived within their means, but those poor, poor CEO's who couldn't possibly have seen what was coming. (Yeah, right.)

Who's benefiting from this collapse? Walmart. Of all places, Walmart. Because they have the cheap stuff.

Here's what I was hoping would happen. We'd all wake up and realize we've been on a spending binge, that we really didn't need to spend so much money, that we didn't really need all that crap. Cut back, live simply, take care of each other.

Instead, the message seems to be: O.K. I can't afford all the expensive doodads and knicknacks I used to get -- but I can still get lots of inexpensive crap from Walmart!



RDC said...


Be careful what you wish for. Keep in mind that non-essential stuff includes most of the products you carry.

Duncan McGeary said...

People always say that to me.

Books to me aren't a luxury. Nor is most of the world of imagination. It's relatively cheap what I sell, but long lasting.

I see the latest high tech toy as a luxury, the latest model SUV, etc. etc.

One man's necessity is another man's luxury.

But I suspect the most money is wasted on little things-- buying two brands of toothpaste instead of one, buying another pair of shoes you really didn't need, a knick knack here a knick knack there, everywhere a knick knack.

blackdog said...

Duncan sells cheap entertainment and escapism, and there will be a big demand for those commodities during the Great Smirky Depression, just as there were during the last one. Shopping has become a major form of recreation for Americans, and buying stuff just for the fun of buying stuff is a recreation many or most will no longer be able to pursue. Nor will they be able to afford expensive vacations or hobbies. They'll be staying home, reading books, playing games, watching rented DVDs.

BilboBend said...

Like the article in this weeks SORE on games of course it could be biased by the game-guy.

I always figured that post 911, like all software, that parents would finally quit spending $50 on these stupid games, but they haven't.

The fact is that these kids play these games for months, and thus the entertainment value is huge. Like Mr Game says in the Source (SORE in BENDESE), people spent real money in the great depression on entertainment. It very well appears that electronic gadget 'games' could be the anti-recession niche of post 2008 depression, I'll say this they have done quite well post 911.

I agree with you Dunc, but I was wrong about electronic gadget-games.

I do think that the kinds of books your wife carrys, e.g. used classics are anti-recession. I'm agree with RDC ( which is very abby-normal ).

People will always spend money on their children. I was raised by depression parents, and heard story's of how their parents went to bed without food so they could feed the children. It's not rational, but it could very well be that post 2008, people keep buying game-fodder for those electronic gadgets.

It's something to think about Dunc. I did just fine during the 1980-1986 OREGON recession, and I'll tell you a little secret how I did it. I went around and found out WHO was making money, and I copied them to the LETTER. If you sit in isolation, and do things your way you'll go down, e.g. NOT SURVIVE.

In any economy there is always people making money, find out who they are and imitate them. If it means trading used games for comic books, and thus building an inventory of both, so bet it, as it increases the traffic at your store.