The Economy in 2009

A new President will be taking office in January. President Elect Obama faces economic troubles not see since FDR took office. His first task will be to create jobs. And create them fast. We need a"New Deal" for the 21st century. If jobs are not created in short order, then the high unemployment that President Bush will be leaving him with (my guess is 8-9% when January's numbers are announced) will grow at a historic rate and is likely to leave this country and possibly the world economy in a depression.

People just don't seem to understand how bad the economy is. Look at it this way. For the past 5 years, if you eliminate the "perceived"gains in home real estate values, then the US population made no increase in earnings. But US spending was substantially up. How is that possible? It was through the invention of home equity loans and easy credit. How many of you know people who's lifestyles we refinanced through the rising equity in their homes. This phenomena created almost all the jobs in our economy over the past few years(auto workers, retail workers, home builders, etc) was all driven by this "Perceived" rise of housing values. The short term problem is that all this housing mania was a bubble that has now burst. Real estate prices are almost to the levels that they belong (historic averages, relative to rents, etc). That is the short term problem that $700 Billion is being pumped into the lenders to help fix. But let's talk about the long term problem.

What happens next year or the following year for that matter. Since the US economy was really only growing with increased real estate values what happens when we don't have that option. How are people going to buy things? Think again to your friends that bought everything on home equity loans how are they going to pay for vacations this year?

Realize, I am not just talking about people making $30k year or $50k year I know people making $1MM year that were still using their home equity to furnish their lifestyle. This problem spans the entire US economy and has very long term effects on the US economy. It is very likely that Obama is dealing with this problem in the 2012 election.

So what does this mean for you, me and the company. First we better get use to slow economic growth. The age of fast growth and affluence is gone for now. Second, we better make sure that we are seen as an affordable alternative to high priced brands. Third, think before you spend whether it is for personal expenditures or for the company. We need to see if there is a less expensive option. Watch your budget.Its going to be a long difficult four years and everyone needs to plan accordingly. We can weather this storm together, but it will take smart decision making and careful attention to the bottom line.

Thanks for Making it Happen!
Nick