A FOOL AND HIS MONEY ARE SOON PARTED- UPDATED WITH NAMES

Copyright Vladimir Kagan 2010

We attended a fascinating round table discussion at the Coudert Institute entitled “Economics and the Global Community in 2010”. 

As I have no money…this didn't apply to me…. I nearly didn't go! 

Wow, would I have been sorry. It was informative and insightful. Everyone at the seminar oozed money and sucked it all up. I took copious notes so that I could share tit-bits with you. The credentials of the presenters were impeccable; all frequent guests on CNBC's Squawk Box, Fox Business News and Bloomberg: Robert Wiedemer PhD, was snowed-in in Washington, DC and spoke to us by phone. He is the co-author of two books, America's Bubble Economy that predicted the financial crisis as early as 2007. His second book Aftershock, which had just been published, had everyone present scared to death. (I bought a copy to understand what got them all up in arms.) As everyone in the room referred to him as Bob, (we felt we had known him for years), he discussed his ideas on “National Security and the Security of our Economic System”. Heady stuff. From my notes, I can tell you that the Debt to Income ratio is 6 to 1. Income to the government from taxes is 2.1 trillion; our debt today is 12 trillion and predicted to go to 25 trillion. Want more? Risk of inflation is the most serious enemy of the economy. Borrowing is better than printing money, which sparks inflation and weakens the dollar. Inflation will creep in by 2011 - 2012! Advise to the wealthy participants of this select group: Reduce your Equity Portfolio. Gold, for the time being, is a safe bet….until the bubble bursts. Be scared but not paralyzed!

Bob's gloomy report was followed by an interesting analysis of our energy crisis by Bernard Picchi, CFA. Bernie briefed us on how we are and will remain a fossil fueled economy for years to come. Transportation is the tail that wags the dog. Alternative energy is good and well but only a tiny percentage of our total consumption. Cars (and trucks) are still the major consumers of fossil fuels. The only long-term solution will be battery driven cars, but for the time being, the industry is wracked with problems like 40 miles to the next recharge (which needs an overnight charge). Rapid recharge (about 4 minutes), still off in the distance, will consume as much electricity as 6,000 television sets in an hour. The day of reckoning when we will run out of crude oil is off in “never-never land”. In the same way as water finds its own level, oil prices will control production, drilling innovations and new locations. He predicts gas at $10 per gallon. An interesting statistic was that 80% of oil production is underwritten by governments worldwide.

What this country does have is lots of coal and natural gas. Those are the investment opportunities. No new coal driven electricity plants have been built or are on the drawing boards. The industry is waiting for gasification and new innovations. An interesting tit-bit was that two-thirds of all electricity generation is lost in transmission…(how's that for a trivia nugget?) Natural gas has a big future…and our abundance of coal and natural gas make it an ideal export product. Recommended reading: Twilight In The Desert.

Next came two heavyweights in retailing. Gilbert Harrison, the founder and CEO of Financo Inc. and Sidney Forbes the owner of the Palm Beach Gardens Mall, one of the most successful in the country. While other Malls are down 35% in occupancy, his is 7%. Not surprising, he told us of the woes of Luxury retailing. (This is not exactly news to us in the luxury furniture world). City Place in West Palm Beach is facing a crisis of vacancies, Worth Avenue; the ultimate haven of the Palm Beach rich is bleeding and seeing store closures. Exceptions to the rule: Louis Vuiton…who cleverly never has a sale…When a product has run its course…they shred it…preserving the integrity of their brand. 

Gil and Sidney, together, dissected retailing in today's market. Departments Stores are way down 60% to 70%…a mammoth of the past. Factory Outlets are a small growing sector of the market. (But don't expect to find marked down prime store products…they stock them with downgraded merchandise). Mass-merchandisers like Target, Costco and Wal-Mart, have stolen the markets. 

Savvy retailers are surviving by cutting inventory, consolidating stores and downsizing and clever merchandising. Sid could not have enough praise for the right store manager, giving us examples after examples of declining and even fatal bankruptcies of stores with poor management. E Commerce is another culprit cutting into conventional retailing. We were enlightened with outstanding success stories in retailing: Abercrombie has enjoyed amazing success with skillful merchandising going from 35 million to 70 million in the last 12 months. When asked to what it was attributed, the answer was sex, sex and more sex. Apple Stores are a phenomenal success with stores open 24 hours per day. For erudite New Yorkers, here is a trivia question: How much do you think Apple sells at night between 12 midnight and 5 PM in their 5th Avenue and 59 Street store…located in the basement of the building!? …..(The answer is 70 million a year!)

Q & A's brought interesting questions and responses, but my darling wife Erica asked the most salient one: “Where does all this merchandise come from?” And the answer was predictable: Asia! 

…..Was this ever an afternoon well spent? You bet!!!

Photos from Last Month's Event:

 GLOBAL HOTSPOTS - CRISES FACING THE OBAMA ADMINISTRATION

 

Michael Fawcett, Rita Hauser, Dale Coudert, Hedy Fawcett

 

Carole and Confrey Phillips, Erica Wilson, Herman Pirchner, Dale Coudert, Linda Mortimer

 

Confrey Phillips, Sir Thomas Moore, Robert Reilly

 

Steven Rose, Farah Walters, Stephen Walters

 

Edwina, Gus Hauser, Frederick Alger, Gail Alger

 

Stephanie Murphy, Gerard Lupo

Vladi Kagan, Erica Kagan, Sherman Starr, Elie Kraut

  
 Herman Pirchner, Dale Coudert, Robert Reilly, Ilan Berman, Stephen Yates, Joseph Dryer
 
 
  
 

Comments

[Henry Babcock]

Very informative. Thank you for the report.

Although, I'm having a bit of a problem with the stats from the Apple store at 59th & 5th: If you break it down, they're selling almost $39,000 an hour...?

I know New Yorkers are a nocturnal bunch, but that's ALOT of merchandise. :-)

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wow yes, a few years ago I read America's Bubble Economy , and it gives me a wake up call.
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