The Economy
- This topic has 80 replies, 31 voices, and was last updated Mar 21, 2009 at 4:13 pm by
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Hey guys –
I am starting to get a bit depressed about the economy. For a long time I was wondering when the actual pain would start (I never really doubted that it would). Today I saw this notice:
http://www.midcurrent.com/news/2008/12/rl-winston-lays-off-production.html
This is probably the tip of the iceberg. I know people across the industry are worried; ad budgets have been severely curtailed, which leads to pain in the magazine sector. Fly shops are struggling (except those that are also gun stores – gun stores are doing very well right now). People’s discretionary income probably hasn’t really dried up any more than where it was last summer, but perception is everything. Even in highly insulated industries, it makes you look around.
My firm has a bankruptcy lawyer. He has been doing more business over the last year and a half than the rest of the firm put together. I know this much: if the ship doesn’t right soon (and it doesn’t look likely), the fly fishing industry is going to get a lot smaller.
Zach
Yeah…I think the next 12 to 18 months are going to be tough sledding. IMO the financials are going to be very slow in recovering which will ultimately cause the whole thing to lag. I would agree with you Zach that at some point this has to have a direct impact on the fly fishing industry. But I continue to be reminded that there is a pretty hefty sized demographic of fly fisherman that “do very well” and will probably continue to travel and buy gear…at least to a certain degree.
Tying this in to some other conversations that have occured here recently…particularly in regards to the magazine sector. As Zach and Phil have pointed out, many of the fly fishing magazines are, for the most part, directed and targeted to the beginner fly fisherman. If this is in fact the case, people who may have had an incling 6 months ago to take up the sport may push that off until the economy recovers, which could in turn impact sales of many related products.
Regardless, the news on Winston certainly may be an early indicator.
At the end of the day a saying rings in my mind.
With the economic pain being felt by many, the fly fishing industry will surely feel the pain. In the past couple of years there has been numerous concerns expressed about the industry being to big for it customer base. These two issues combined points to hard times ahead for some/many. Winston’s management staff appears to have seen the writing on the wall and implemented cost containment programs before the firm was hurt. This is a plus for Winston even though it will hurt some employees.
Zach, I am expecting a long list of rants on this one so here it is . . .
Back by popular demand
The Nihilists
We getting tight too… I have to cut down on hunting lions, the bullets are costing too much…
LOL
Yip, it is getting tight…
Ah, the nihilists.
Mike, it’s always been hard for me to even hear a South African accent in my head, but when you write “Yip,” like that, it comes through loud and clear. 🙂
Stuff bad down there too? I’m interested in whether our overseas friends are on the same point on the curve that we are.
Zach
On the band width, I am finding that your PC’s are taking longer than normal to dowload and the site is loading a little slower. Could just be my international traffic is throttled???
On the economy, I think it hurting everywhere, our fuel prices are out of control, which just spins on to everything else, we have a slightly higher interest rate than I would like, but what is really hurting is our exchange rate… to best explain…
I could buy a Sage Z-Axis for just on $600(R6300 x 8.5 to the $), but now it is closer to $850(R7400 x 10.5 to the $), that’s from the last shipment to this one. 6 weeks. If that make sense. now convert that to everything we import, TV’s, DVD players, Cameras and then the Fridges and other stuff, also manufacturing needs equipment which they import, and then material for other stuff, rubber, cottons, nylons and others.End result, we are feeling it quite hard.
Lastly, you can hear my “freakish accent” by listening to a pod cast or two… I know you’re a busy man, but I would love your feedback… or just Skype me…
Brett’s is the best…
http://www.theflyfisher.co.za/content/view/102/81/You would love Arno Matthee, the milk man… in fact is any one wants to hear about Milk Fish, this is the guy who decoded them…
http://www.theflyfisher.co.za/content/view/104/81/On the band width, I am finding that your PC’s are taking longer than normal to dowload and the site is loading a little slower. Could just be my international traffic is throttled???
On the economy, I think it hurting everywhere, our fuel prices are out of control, which just spins on to everything else, we have a slightly higher interest rate than I would like, but what is really hurting is our exchange rate… to best explain…
I could buy a Sage Z-Axis for just on $600(R6300 x 8.5 to the $), but now it is closer to $850(R7400 x 10.5 to the $), that’s from the last shipment to this one. 6 weeks. If that make sense. now convert that to everything we import, TV’s, DVD players, Cameras and then the Fridges and other stuff, also manufacturing needs equipment which they import, and then material for other stuff, rubber, cottons, nylons and others.End result, we are feeling it quite hard.
Lastly, you can hear my “freakish accent” by listening to a pod cast or two… I know you’re a busy man, but I would love your feedback… or just Skype me…
Brett’s is the best…
http://www.theflyfisher.co.za/content/view/102/81/You would love Arno Matthee, the milk man… in fact is any one wants to hear about Milk Fish, this is the guy who decoded them…
http://www.theflyfisher.co.za/content/view/104/81/Hey Mike, My parents are originally from Durban…
we still hassle mum by getting her to say ‘ you cawnt pawk your caw here’….my kids fall about laughing.My father was actually born in a little town called Karabib between Swakopmund and Windhoek , he spoke afrikaans until they moved to Durban when he was 9, the same year he ever wore shoes for the first time…. not many trout in Karabib, thats why he always took us camping by a stream here when we were growing up…he always called anywhere with a stream ‘Paradise’…Thanks Dad 😉
The Economy ….Here in Oz they keep telling us that we are somewhat better off than elsewhere due to the tighter banking regulations…..
But Housing approvals are at a 9 year low, Job vacancies are at a 5 year low with unemployment on the rise to a predicted 7% by the end of next year. House prices have dropped about 10%.
Our Dollar has fallen from $US0.98 to 0.65 in 4 months.
Thank God that it was @ 98c when I was there in July …phew….BUT interest rates have fallen 2.25% in 6 weeks , Petrol prices have dropped by 30% , the Govt. is giving every family $1000.00 per child for Christmas ( lucky I have 6 :D) and EVERYTHING is on sale…….Including airfares to New Zealand
Stuff bad down there too? I’m interested in whether our overseas friends are on the same point on the curve that we are.
Zach
We’re just getting started here in Australia with unemployment rising and retail sales are hitting the skids, though I think it’s going to get a lot worse.
(Australia normally follows the US economically )Our new PM KRudd (Kevin Rudd) tells us we’re going to just get winged by the world wide slump because we’re selling so much coal and iron to china at such high prices, but with China slowing the mines here have just started lay-offs and commodities prices are coming down as well.
The economy here has been on a major resources boom for many years, with huge money being paid to workers and big tax revenue generated.
This week the PM is handing out 10 Billion dollars to pensioners and lower income families and telling them to spend it to help save the economy.
They claim it will create 75,000 jobs.www.dsaphoto.com
A picture is thousand words that takes less than a second while a thousand words is a picture that takes a month.
Hi
I’m not that sure the economy is any worse than it has ever been. Sure there have been and will be a lot of
My heart sure goes out to everyone in the fly fishing industry. I think maybe we have a few too many companies and products out there but there are just so many wonderful products and people in the industry. I hate to think of anyone losing their job or any company going under (like Teton recently did).
On a personal note – I’m in the healthcare field. Even in that normally recession proof industry we are feeling it. My health care system has a freeze on new hiring and a freeze on all travel and new capital expenditures. I recently lost 2 employees and was not allowed to replace them.
Interesting to hear from you guys overseas.
Greg
with the economy going south maybe price correcton might begin. the price on high end fishing has gone out of site , life time warrantys may drop,
what is a bit newer is that folks have been allowed/encouraged to become more leveraged/suscepitible than ever before therefore the downside is all that more ominous.
Simply said, people spent and spent well for 2 decades. Hence why for the most part there hasnt been a serious downturn in 2 decades. Think about that. Alot of young people who are just getting started in life or recently just got started by moving out/graduating/whatever have never experienced anythin like this before. Really for anyone 30 and under they were just newborns the last time around in the early 80s.
Hard part is knowing that anyone who does lose their jobs, will likely be out of work for a looong time. I dont see this turning around anytime soon. Being in the financial industry, theres been alot of layoffs over the last month..I wouldn’t be surprised if theres more yet.
Credit crunch isn’t showing any signs of easing and I’m frontline. You can’t get squat done. Its everythingwe can do to keep our credit lines (those we have left) and we’re in good shape financially, very good shape…
collateral: institution are nervous about that to ( Credit risk) so even if I have room to borrow a couple hundred million the collateral is such that it makes the trade unprofitable. So instead of doing a farily safe vanilla trade, where both parties make a few bps and money flows so people and institutions can fincance things…………
Nothings done.
Royal Bank of Canada had to issue treasury shares this week (secondary offering) in order to raise money insteead of issuing debt (par for the coarse). Which also has will dilute book value for existing shareholders by a sidgeon…….
Until that starts easing and money starts flowing and people start extending some credit, there simply wont be enough buying power or capital expenditures ( like upgrading manufactoring plants, building oil refineries, infrastructure, and on and on and on) to kickstart things.
Tried to buy a few tens of millions in US Ts today. I was qouted a yield of – 20 bps….Meaning Id have paid a 20 basis point premium for what that would be worth face value a month down the road. In other words Im better off sitting on my money and not earning anything, rather than buying Fed bills (and hence supplying money )
When the crap hit the fan back in Sept I had to close what we call books that accounted for billions in business. I went from having a rather large book, to not doing anything as we try to whether the storm. I can count on 1 hand the number of new trades/deals/structures we’ve put on since Sept.ABCP and Subprime. It was the start.
We saw it coming last summer, fairly heavy buyer of abcp but we were smart and didnt get stung at all. We waited almost a year for the other hammer to fall. its just fallen alot harder than any of us expected 🙂default, after default, after defalt, writedown after writedown after write down and still no word of credit card defaults………….yet
Captial Markets.
If you were or are 1 to 10 years away from retirement and you’ve just watched the bottom of your nestegg dissapear. You spending in the next year? Probably not at all until you recoop some of the maket valuation and can start thinking about retirement again in 3 to 5 years.Persoanlly I hope this is about the bottom and from here things go sideways for the next 8 to 12 months although deep down I tihnk its goin to get a little worse yet…
I may be speaking out of line here, and someone defiantly correct me if I am wrong. Is it just me or have we all gone from having a little, to having everything we could possibly think of and pushing payments on mortgages, credit cars, ectect?
I don’t think it’s out of line at all. Will said much the same and they’re fair and pertinent comments. However, if not for the solid growth and booming economies over the last 25 years (powered by spending at all levels) would we have the same quality of life today? Im no economist but I don’t think so.
A couple years ag we shook at our heads at all the people buying Hummers …But the reality is/was people were buying/leasing Lexus, , Audis, Beamers, huge homes, over priced condos…going for bottle service at restaruants (400 a pop) and travel vacations on and on.
When I grew up our parents drove their vehicles into the ground and then bought used ones. Over the last 12 to 15 years people drove their cars for 3 to 5 years and then bought new spiffy ones, whatever the price point they happened to be in. Wave your hand if in the last 5 years you’ve replaced a perfectly serviceable CRT television or monitor for an LCD or Plasma.
/waveBalance is key.
Coporations, industry expanding, municpal and govt pending. It *all* gets financed and it all leads to jobs and growth. Take Scoot rods for example..I’ll go out on a limb and guess that their recent expansion ( to meet demand and ease repair lags) was…you guessed it..Financed in some shape or form.
Problem is “financing” is hard to come by these days because a number of very prominant institutions went belly up. Other instituions who had exposure to those institions took hits (big hits), and those that didnt started sweating about the their “credit risk”. Ripple and Domino effects..Everyone and I mean everyone is scrutinising risk in particular Credit Risk ( the risk that the party in question is going to default)
this is greatly oversimplified. Poeople who lend monies and securities to “us” are scaling back in some cases cuting off. We in turn are doing the same to others. So my sources are drying up, and I in turn am doing he same to others
ie: I have a counterparty willing to lend me $500 million (cash/securties), lets say I want to collateralise that with senior debt from Bank ABC…. Is it good enough “credit” for them…If Bank ABC has problems 3 months down the road…Say it can’t renew financing for 20 billion in maturing bank paper or goes tits up…thats collateral is worth…….. . Or maybe Im not allowed to buy ABCs debt anymore because we arent comfortable with their risk profile.
That forces ABC to seek financing elsewhere or it cost more to finance their operations. They have to pay higher interest to borrow, or offer more attractive rates if they are issuing debt to entice buyers to buy. Keep in mind, they finance
i want a gun to start hunting birds
but i think the money i spend on the gun, bullets, gear, and gas to go find birds will be more expensive than if i just went to the store and bought chickenour lifestyle is of wants not needs. no one need to fly fish
(i can argue against this from my soul)people want to fly fish, they don’t need to. it is a benefit to life that we could live with out (again, i could argue against this)
Zach,
I don’t know if you remember, but a while back I wrote you about my opinion that the country was in a period of decline, and that I was old enough that I would probably be dead by the crash, but you and my son, being the same age, would face hard times. I’m not directly an economist, but my bachelors and masters degrees were in economics, so at least I have some background. Here is my reasoning.
1. The U. S. no longer has the major industrial base that was built up during World War II, and the remaining industrial sectors are heavily regulated compared to emerging countries and face high labor costs. This is true of the major European countries also.
2. We have exploited (in the economic sense) our major natural resources, which fueled most of the long term growth in this country. There is no place else to expand and the uses of much of our remaining resources are protected by environmental concerns.
3. Our business model favors short term gains over long term goals, therefore, the tendency is to take the money now rather than reinvesting in new technology and change.
4. At the risk of appearing to be an old fuddy duddy, the current generation was raised in a long period of prosperity and the parents, being a product of the 1960’s, failed to instill the dicipline necessary to face long term struggles.
5. We have mortgaged your future through a massive national debt. I say we (my generation) have mortgaged your (the current generation) future. If I was in my 20’s or 30’s, I would really be pissed. And what is worse, we are doing it again by financing a bailout (with your future), so that we won’t have to face the pain before we check out.
6. We are heavily invested in the stock market through 401k’s and retirement accounts. Even without the current downturn, we were due to start cashing out. This would drive down the capital markets and move the economy further to a service sector economy, a nation of shopkeepers, as they used to say about England. As an interesting side note, you will recall the effort at privatizing Social Security and moving that money to the stock market. Interestingly enough, that would bolstered the market a little longer, to make sure we all made it to the end.
7. The war against radical islam. That’s just starting, so I don’t know where it is going.
So, first of all, sorry about mucking it all up; second, thank God I have a good supply of fly rods and flies; and third, to quote Douglas Adams, “So long and thanks for all the fish”.
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