Is 2008 a crisis year? [Archive]

Mr_Wizard

20th June 2008, 09:57

I was doing some work in a clients office yesterday afternoon and have to admit to eavesdropping in in a really worrying conversation, one that may answer the puzzle as to why the recently released retail sales figures were unexpectedly high.

Of the 4 people having the conversation 3 of them are behind with their mortgage because they were using that money to prop up the rising cost of food/fuel/etc. I wonder how much more of that is going on, have we reached a kind of 'I just don't care anymore' point and people who can't borrow any more money are simply diverting funds.

For all of the wrong reasons I can remember the last house price crash and rising interest rates and I happen to think we're close to the edge of a major problem. I've been hearing this tale of 'booming economy' from our wonderous government but nobody sees to mention the one and a half trillion pounds of borrowing it's built on or the fact they've sold off the family silver.

I can't help but think there's a sting in the tail somewhere along the line.

quikshop

20th June 2008, 10:14

I'd be sceptical of any official figures, everyone is playing an angle including the report authors and it could be designed to 'justify' the Bank of England increasing interest rates to help combat inflation - or to put it in more simple terms, to take more money out of everyone's pocket to stiffle spending to control inflation ;)

WillWynne

20th June 2008, 16:36

Until this week we've seen no probs. But this week has been pretty grim in terms of trading. I guess it doesn't help when you've got a major football championship, good weather and all the news sites and programmes filled with woe, such as the governor of the bank of England issuing bleak warnings...

streetslocal

20th June 2008, 20:55

I believe the crisis is getting worse.

I also believe the fuel crisis is going to be Gordon Browns coal crisis equivlent.

I believe under Gordon Brown we are going to fall into a major melt down one of which he has helped to create.

Fuel for example the more it goes up the more he makes in tax??

Why can he not reduce tax on fuel as an emergency measure?

This should help with that.

In regards to the housing market this is a international thing but i think again this could be reduced.

dataferret

20th June 2008, 21:22

It is not all bad news. According to the Aztec calender the world is not due to end for another 4 years (Dec 31st 2012) so you can take comfort in the thought things could always be worse :)

An Oasis

20th June 2008, 21:30

I also believe the fuel crisis is going to be Gordon Browns coal crisis equivlent.

I blogged about the hidden scam behind the fuel er crisis... not so much a crisis more certain ferkers making dosh from hyping the market.

http://www.realoasis.net/?p=624

Cornish Steve

20th June 2008, 21:40

It's quite amazing. The official economic numbers for unemployment, inflation, and interest rates are good - historically, much better than we've seen in the past. A majority of people are stating that business has been unaffected, although there will always be weekly lulls. Yet, so many people write that we shouldn't believe hard data and that "they believe" things are bad. It's depressing to see just how much impact the media has on our opinions.

Like Henry Ford once said, "whether you believe you can or you can't, you're right". If everyone tries hard enough to believe things are falling apart, they will. On the other hand, if we see through all the whining by the media, we can rebuild consumer confidence and see a much improving economy. As someone suggested in another thread, if we really want to know what hard times are, return to the days of Edward Heath, the three-day week, strikes across the country, rampant unemployment and inflation, and interest rates off the scale. But we survived.

Matt1959

20th June 2008, 21:52

Of the 4 people having the conversation 3 of them are behind with their mortgage because they were using that money to prop up the rising cost of food/fuel/etc. I wonder how much more of that is going on, have we reached a kind of 'I just don't care anymore' point and people who can't borrow any more money are simply diverting funds.

This is where the problem is. If it ain't affecting you, you won't know about it. Theres a swath of people who can't make ends meet as costs push up and up and up and yes, I think it's a timebomb. Its all right for us business types, we can put our prices up a bit, work a bit harder, be a bit cleverer but for ordinary 9 to 5 PAYE, I think its nightmarish times....

sysops

20th June 2008, 22:00

hughlss

20th June 2008, 23:41

Nancy117,
I'm not surprised that you've noticed business from the UK is slowing. I import from China, and, up until recently ordered full containers at a time. From as long ago as just before last Christmas, business started to slow and now it's very quiet with turnover about 60% down on last year.
I import machines and accessories from about 6 different manufacturers and trading companies - my latest order from Nanjing is only about half a container and would normally be about a half pre-sold - I've sold none!
This year I will break-even only.

Hugh
btw, to make matters worse, all my pro-forma invoices are coming in with a 15% or more price increase, with more on the way!
I believe America is also struggling, Europe will be next when the economic crisis spreads there.

Cornish Steve

21st June 2008, 02:32

I believe America is also struggling, Europe will be next when the economic crisis spreads there.
The downturn in the US appears to be over. The stimulus package spurred the economy. A little more time is needed to get through the housing problems in some regions, but it looks like it growth time again. The doom and gloom in the media is because they want their candidate elected. The economic numbers tell a different story, and things are looking up.

hughlss

21st June 2008, 08:30

I'm quite surprised at your reply as I believe there's much worse to come in America before the economy improves. Ditto the whole world.

Just 2 extracts from a report this week:
"The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks," reported Ambrose Evans-Pritchard".

and,
"For now, the situation is worst in the States. That's no surprise, given that they are further into their slump than anyone else. The US default rate on high-yield debt hit 1.89% in May, up from 1.64% in April, and the highest in more than two years.
It's going to get a lot worse. The rate is expected to surge to 4.7% within a year. And there's a 20% chance that it could shoot up to 8.5%, said S&P. That would see "corporate casualties piling up faster than in many years, as economic conditions deteriorate and volatility in the financial markets stays high."

IMO, things will get a lot, lot worse, both in America and the UK - in fact - worldwide. Europe will be the next casualty - Spain has already experienced a collapse in its housing market and prices across the board are rising.
Asia is also suffering the problem of inflation - China especially so.
I know the media are not to be trusted, but when the banks start to say it's bad - then..................it's bad.

Hugh

leemason

21st June 2008, 09:12

It is not all bad news. According to the Aztec calender the world is not due to end for another 4 years (Dec 31st 2012) so you can take comfort in the thought things could always be worse :)

So we've just got time to pay for the Olympics befor the end...

On a serious note I feel that this could be worse than the late 80's / early 90's. The major banks are still yet to admit the overall cost of the sub-prime mortgage problems. Anything that affects the banking industry as badly as this will almost certaining have a very bad affect on all other economic activity.

We have the possible prospect of the economy slipping into a stagflation (stagnation + inflation) situation with:

Rising inflation
Rising interest rates
Rising business costs (inc. transport, raw materials, etc)
Rising wages and industrial unrest (because of rises in domestic prices inc. food, fuel [motor and household], etc)
Rising Government debt (which is already hitting Labour's own debt limits)
Rising Tax (inc. council taxes which will continue to rise above inflation)

all combined with a stagnant or shrinking economy.

PeterCarruthers

21st June 2008, 09:28

I don't know about other areas, but Ringwood has seen two estate agents close in the past 2 months and a couple are up for sale - but with few buyers in sight it seems.

It's not a UK problem - it's global. My SA client base has dropped by 20% since the beginning of the year - that's 250 small businesses who have closed their doors in 6 months.

That's my reality, not the press adding their spin.

Since closing my own business in 1992, and losing everything in the process, I have focused on ensuring that I always have at least one "Plan B" - and that keeps me aware of what's happening around me. It's not a question of being positive (I have always been), it's a question of making a realistic assessment of what's happening.

I don't believe that just working harder, or just staying positive, is the answer. I think there is a fundamental shift happening, and it makes sense to assess what that means in each of our businesses and plan accordingly.

No matter how bad it gets, it is just a season. next month/year will be better (or worse). The business environment is like the weather - constantly shifting.

deniser

21st June 2008, 10:45

My opinion is that the whole of the UK economy is based on the hypothetical value of the property market, not on solid foundations. It is like a giant house of cards and is about to come crashing down.

For as long as people have equity in their houses, they can keep borrowing or cashing it in by downsizing. Whilst property prices were rising, you can keep doing that and then spend the money - which most of the UK economy is dependent on. As soon as that equity is wiped out or banks are no longer willing to lend at low rates, all that stops automatically.

Property prices have gone up to a level that is no longer sustainable. First time buyers and buy to let landlords can no longer enter the market at the bottom level because they have reached that ceiling where the figures no longer stack up which has a knock on effect on the higher value homes.

So now we have construction companies with lots of unbuilt units which they can't sell leading to them shelving plans for any further development. This has massively devalued their share prices (having a serious effect on pension funds etc who own those shares) and has a direct effect on everyone associated with construction from tradesmen to etstae agents and mortgage brokers to furniture retailers and many more.

And anyone owning a second hand flat or starter home can't sell either meaning that there is no-one to start off the property selling chain. So those who wanted to retire and cash in the money from their house can't and are now stuck in a house without the income they were expecting, those who are in the habit of borrowing more when they need the money can't and those who lose their jobs are completely stuck. Add negative equity into the equation and things are pretty dire.

I think this is going to much worse than the later 80s/early 90s which I remember vividly. The commercial property market will follow and then the whole economy will collapse. As there is a housing slump roughly every 15 years, this one has been overdue and has been entirely expected and predicted. Anyone who has been caught out and borrowed more than they can afford only have themselves (plus the banks) to blame.

The greed of the banks has fuelled this reckless borrowing spree. No-one should ever be lent more than 3 times their income and the margins on buy to let should have been much greater. They could have kept the current situation under control had they not lent people so much money with income multiples up to to 6.

So I think 2008 is only the beginning of the crisis which could last for years.

Cornish Steve

21st June 2008, 14:17

I'm quite surprised at your reply as I believe there's much worse to come in America before the economy improves. Ditto the whole world.
Not at all. America has not experienced a recession, just a downturn. The economic numbers are pretty good: inflation, interest rates, and unemployment remain close to historic lows. The problems are very regional. For example, while house prices plummeted in Miami (where they had previously soared out of control), prices actually went up in Charlotte. Here in Atlanta, I've not heard any announcements on the radio about companies laying people off. Years ago, when we were in a recession, you'd hear that type of thing all the time. As I mentioned, the media want their candidate elected, so they'll keep portraying the economy in a mess until the end of the year.

IMO, things will get a lot, lot worse, both in America and the UK
Of course, your opinion is as valid as anyone else's, but I don't see how it fits the facts. One thing that could trigger problems in the US is if the party in control of the Senate keeps blocking oil drilling in the US. The country has enough oil reserves to be self-sufficient for several decades, but the idiots in power have blocked drilling for 25 years. Thankfully, more and more people are demanding that the government bring an end to this stupid policy. Right now, oil prices are high in part because a lot of people are speculating that the US won't start drilling. If it does, oil prices will go into a steep decline - and that would boost economies all around the world.

sirearl

21st June 2008, 15:52

Faith28

21st June 2008, 15:54

Quite right Steve ask your self what has in reality changed in the last six months ,nothing but peoples confidence,shaken by media frenzy as usuall.

But the world keeps turning and people go to work same as ever.

so is our whole economy based on confidence rather than what we do.?

Earl

That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.

Cornish Steve

21st June 2008, 16:22

so is our whole economy based on confidence rather than what we do.?
That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.The economy thrives on consumer confidence. How many people have posted to these forums asking whether they should start a business in the current climate? Others won't spend money because they are worried about the next few months. Both decisions hurt the economy. If I remember correctly, two-thirds of the economy is based on consumer spending. If the media convince everyone not to spend, two-thirds of the economy is affected. It's reckless and irresponsible of the press and our leaders to spout nonsense about the economic sky falling down.

Dogwalker

21st June 2008, 16:44

Driving to the office today, the readio was full of doom and gloom.

That's the trouble isn't it? The more the media push these kind of stories, the more people panic and stop spending.

leemason

22nd June 2008, 08:30

That's what I thought...confidence and fear. Our economy seems to be based on these two emotional yo-yos.

The main reason why this is the case is that the City and the way that it works as designed around short term considerations, mainly fear. Because of the way that City institutions are constituted they are very much prone to panic easily under these sorts of economic conditions.

It's not just sentiment though. The credit crunch in the banking sector is very real and has meant that many investment chickens are coming home to roost. Previously the banks and other investment institutions have gone on quite happily conning everyone else (think about pensions, split investment trusts, etc) but now they've gone too far and it's rebounded on them big time!

MartCactus

22nd June 2008, 12:59

That's the trouble isn't it? The more the media push these kind of stories, the more people panic and stop spending.

I don't think one can blame the media. A couple of years ago they were busily churning out property programmes and glossy magazines showcasing housing "porn". They merely hype up what is happening... when its booming they jump on the bangwagon, and when its crashing they report that too.

Our recent boom and that in America was built on borrowed money, secured on houses. That borrowed money was largely used to bid up the price of houses, and so the cycle continued... house prices rose, people could then borrow more money against them, and so they rose higher.

This process has now inevitably gone into reverse. It will go on some time... its an avalanche, and it has little to do with media reporting.

Governments were in part to blame for not raising interest rates to pop the housing bubble sooner - they preferred to explain it as not a speculative bubble but a reflection on the booming economy our govts had delivered. So they ignored it and let it get out of control.

But house buyers were also to blame, along with the banks. The house buyers were prepared to borrow silly money to buy houses that used to be half the price and believed prices would never crash - and the banks happily lent them the money and brought out reports by "experts" explaining why it wasn't a bubble and wouldn't crash.

And now its crashing.

When one examines the colossal amounts of money that are being destroyed as the bubble implodes, it won't be a surprise that other parts of the economy seize up. Its like the dotcom bust x100 (after all how many people borrowed several times their income to punt on dotcom shares?).

The secret to survive as a business is not to have debt, and to keep costs down, and flexible. Weather the coming storm and then when it clears in 2-3 years you'll find an expanding market with fewer competitors. If you have debt then the bank is calling the shots... they can decide to reduce their lending to you (eg force repayment of half) and pull the rug out from under you. Or they can increase the rates you pay to service the debt.

Cornish Steve

22nd June 2008, 13:34

Its like the dotcom bust x100 (after all how many people borrowed several times their income to punt on dotcom shares?).
A very small fraction of 1 percent, I'd say. In other words, most people were unaffected, despite the big news.

Blush

22nd June 2008, 23:13

Any business that can ride the current economic doom and gloom out will reap the rewards when we rise out of this.
House prices had to tumble, after all their prices were verging on ridiculous in some areas.
As for retail sales my main website is increasing every month, my dance website is only two months old so sales are increasing weekly and the shop which I only opened in April is doing realy well with sales increasing there on a weekly basis too.
Sometimes you have to look on the positive side and put all the doom and gloom to one side.

quikshop

24th June 2008, 17:05

Its ironic for a someone who contributes to a business thread to dismiss the importance of money, but thanks to the financial meltdown and having rising costs, we:

drive less and walk more
watch less tv
eat better, far fewer takeaways

On a business level we:

relocated our office, cheaper rent
organise our week better to minimise costs
changed telecoms supplier

We have less going out per month now than we did 6 months ago :D

/bursts into Monty Python song...

Rico121

24th June 2008, 17:24

I work for an internet company and I have noticed a steady decline in sales this year, think its hit us particularly as I work for an electronics store. I can't say which one as I may get in trouble, but there is definetly a decline, to be honest though I thought maybe it was because the media is full of doom and gloom so therefore the consumer has thought they better slow down on the spending front. Personally I have kept up my frivilous ways and am spending just as much and haven't noticed any impact on my life. :|

Cornish Steve

24th June 2008, 17:41

On a business level we:

relocated our office, cheaper rent
organise our week better to minimise costs
changed telecoms supplier

We have less going out per month now than we did 6 months ago
Spot on. This is exactly what businesses should do. Likewise, I recently took advantage of some of the zero percent credit offers that started arriving; a couple even had no balance transfer fee, so I now have another interest-free loan for 18 months. Now is the time to take advantage of lower rents and so on to reduce costs for the long-term.

Great post!

Kwackers

27th June 2008, 21:00

The reality is that it's just a minor blip in an upward trend.

I don't know about other areas, but Ringwood has seen two estate agents close in the past 2 months and a couple are up for sale - but with few buyers in sight it seems.

It's not a UK problem - it's global. My SA client base has dropped by 20% since the beginning of the year - that's 250 small businesses who have closed their doors in 6 months.

That's my reality, not the press adding their spin.

Since closing my own business in 1992, and losing everything in the process, I have focused on ensuring that I always have at least one "Plan B" - and that keeps me aware of what's happening around me. It's not a question of being positive (I have always been), it's a question of making a realistic assessment of what's happening.

I don't believe that just working harder, or just staying positive, is the answer. I think there is a fundamental shift happening, and it makes sense to assess what that means in each of our businesses and plan accordingly.

No matter how bad it gets, it is just a season. next month/year will be better (or worse). The business environment is like the weather - constantly shifting.

serendipitybusiness

27th June 2008, 22:59

Retailers are being cautious as we are heading into a recession in the US and the UK on the back of the lending crisis. I would start looking for more clients aggressively now if I was you to weather the storm as you will find this will happen a lot.

fairestcape

27th June 2008, 23:19

Of all the posters on this thread so far, quikshop has the best grasp of the realities.

Most banks are functionally bankrupt - a secret being fiercely wrapped up by the BOE and European Central Bank, as well as Gordon Brown and his monkey, Mr Darling. If the general public was aware of the real scale of the losses the banks are undergoing, there would be political mayhem.

This state of bankruptcy in the financial sectors is the key driver of sky-rocketing commodity, food and oil prices - (not demand from China and India as is often claimed. This is a political smokescreen.)

Gordon Brown is largely to blame for the financial mess the UK is in. (He likes to think otherwise and is desperate to tell everyone so). He rode the back of a booming economy for 10 years - literally raping it along the way. The fact that the economy survived Brown pillaging over the last decade is testament to the then confidence in the business sector - a confidence not brought about by politics, but by business activity, entrepreneurship, leadership and innovation.

If you think 2008 is going to be gloomy, just wait for 2009 and 2010. They will be far, far more gloomy!

serendipitybusiness

27th June 2008, 23:30

Just to add business ae also havingproblems getting finance on the back of this as well so their ability to place large orders will be hindered by potential cash flow problems.

Digger1

29th June 2008, 23:43

For the past 10-15 years the global economy has experienced beneign business conditions - low inflation, low interest rates, strong growth, etc. This has been due to a number of factors including cheaper products out of China(deflation), globalisation and baby boomers in the west being in the prime earning years.

As part of the business cycle we are now starting to experience the opposite effects.

Enjoy the ride!

cmoney

29th June 2008, 23:47

Where does the figure 3% inflation come from? Fuel, food and Utilities have gone up a hell of a lot more than 3%. 2008 is a hard year and I can see a winter of discontent coming.

Cornish Steve

29th June 2008, 23:50

The doom and gloom has reached epidemic proportions, customer confidence is about as low as it gets, and everyone is talking about a recession/depression/end of the world scenario. If history is anything to go by, that means we've reached the end of the current downturn.

This weekend, I put my money where my mouth is. After last week's stock market drop, I've transferred my retirement money into the most aggressive mutual funds available. I'm prepared to ride out the storm for a few months should I have guessed the timing wrongly; for the long-term, I feel reasonably confident that things will go up from here.

cjd

30th June 2008, 00:14

This weekend, I put my money where my mouth is. After last week's stock market drop, I've transferred my retirement money into the most aggressive mutual funds available. I'm prepared to ride out the storm for a few months should I have guessed the timing wrongly; for the long-term, I feel reasonably confident that things will go up from here.

Oh dear. I'm looking at 2-5 years of economic downturn and financial uncertainty - it's a brave move to go against a market and global sentiment.

I really hope your god listens.

Digger1

30th June 2008, 00:45

Oh dear. I'm looking at 2-5 years of economic downturn and financial uncertainty - it's a brave move to go against a market and global sentiment.

I really hope your god listens.

I agree - the tide is going out and business conditions are contracting = lower profits for many businesses.

deniser

30th June 2008, 08:08

I am now feeling the effect of the credit crunch in different ways. Last week we were contacted by one of our long standing suppliers in Denmark saying that they no longer trusted their UK accounts because of the economic conditions in the UK and they wouldn't supply us unless we paid for our goods in advance!

This is unheard of in our business where 30-90 day payment terms are the norm. They have ignored the fact that we have always paid them on time, because of general concerns about the UK economy. I am quite shocked by this (incidentally we have never had cashflow difficulties and always pay our bills on time so should have a impeccable credit history so that shouldn't account for this).

Things like this are going to make trading conditions worse.

Cornish Steve

30th June 2008, 12:56

quikshop

30th June 2008, 13:00

Is the Danish supplier adopting this policy for British firms only? If so, it doesn't say a lot about our country's reputation, does it? Given how bureaucratic is the EU, I would have thought this was contravening some rule or other.

It will soon be illegal to make any decisions about your own business without first getting it signed off and approved in triplicate by the Emperor of Europe and his minions :D

I suspect your Danish supplier has been stung by some others they supply to so and are adopting a far more conservative approach to their clients.

If its a pre-emptive action then it might be worth questioning how much they value your business, or are there other suppliers you could use?

cjd

2nd July 2008, 08:29

Lots of crap financial news today -

Taylor Wimpey and Barrat in trouble - lost between 80-90% of their share value. Taylor Wimpey failed to raise £500m re-financing and now looks unlikley to survive - 900 redundancies and FD gets the boot.

Starbucks anounces 12,000 job losses as it closes 600 stores

Marks & Spencer like-for-like sales down 5%

Batten down the hatches and keep hold of your cash - expect job losses to increase.

deniser

2nd July 2008, 08:32

deniser

2nd July 2008, 08:33

It will soon be illegal to make any decisions about your own business without first getting it signed off and approved in triplicate by the Emperor of Europe and his minions :D

I suspect your Danish supplier has been stung by some others they supply to so and are adopting a far more conservative approach to their clients.

If its a pre-emptive action then it might be worth questioning how much they value your business, or are there other suppliers you could use?

Yes I have gone back to them to tell them that I will have to sever a very good business relationship unless they reconsider. I am still waiting for a reply......

deniser

2nd July 2008, 08:39

Cornish Steve

2nd July 2008, 13:12

There are some success stories too notably ASOS whose sales are up 90%
It depends what we're looking out for.

In the US, all I heard yesterday is how Ford and GM are in dire straits and how the price of oil continues to rise. There has been hardly a mention that the economy's growth is beginning to pick up and that the sale of new homes actually increased. Both were small numbers, and one month does not make a trend, but surely that's good news.

cjd

2nd July 2008, 14:30

It's long term patterns that matter, of course. This is US GDP.

http://www.economywatch.com/world_economy/usa/real-gdp1.JPG

We haven't begun to hit bottom yet I'm afraid and when we do it will be 6 months before we know and 2-5 years before we'll be back anywhere where we where.

Cornish Steve

2nd July 2008, 14:48

Yet, despite all the doom and gloom we hear, the US economy continues to grow and is beginning to pick up. There is no recession, just a downturn. As I understand it, the same is true of the British economy - it continues to grow. The most likely reason why the economy might contract is because of awful consumer confidence, for which we can largely blame high-profile commentators and the media.

quikshop

2nd July 2008, 15:58

There is no recession, just a downturn.

Excellent, if reality doesn't work for you then a complete and utter denial of the facts will see us all through :D

Sorry Steve but I think you're reading too much into Government stated figures if you think that your country is not already well into a recession.

You can't possibly believe that a contracting housing market coupled with slowing consumer activity, a contracting manufacturing sector and constracting service industry = growth.

I think you've been listening to the Republicans a bit too much :p

cjd

2nd July 2008, 16:16

Excellent, if reality doesn't work for you then a complete and utter denial of the facts will see us all through :D

http://media.economist.com/images/20080607/D2308FN2.jpg

Cornish Steve

2nd July 2008, 16:40

Excellent, if reality doesn't work for you then a complete and utter denial of the facts will see us all through :D

Sorry Steve but I think you're reading too much into Government stated figures if you think that your country is not already well into a recession.
Let's just stick to the facts. As we've discussed before, a recession is defined as two consecutive quarters of negative growth. We have yet to experience even one quarter of negative growth, so there's no recession. Sure, certain sectors are struggling, but that's always the case. The economy as a whole, though, continues to grow. Indeed, the amount of growth is beginning to climb again if the most recent month's numbers can be believed. Any questions? :)

I have no political agenda. I can't vote in any country (a travesty, by the way, that our wonderful government disenfranchises citizens who live overseas). I don't watch TV. I have my own views - and can be much too opinionated.

But there's no opinion about recession. We are not in one and we're at least 6 months from knowing whether one is starting.

cjd

2nd July 2008, 16:58

But there's no opinion about recession. We are not in one and we're at least 6 months from knowing whether one is starting.

You'd better hope we never get into a real recession - a few years of slowing growth is bad enough.

Here's some ******** about how companies survived during the last recession.

Both the winners and losers of the last recession shopped for bargain assets, reduced costs and delayed or eliminated some spending. But while these are important and prudent tactics during a recession, these actions did not spell the difference between good and poor performance.

What does appear to be a driver is openness to innovative perspectives on existing knowledge, tools and relationships. Our research and analysis shows that winning companies took some actions not taken by others. These decisive actions strengthened a company’s strategic position. These high performing organizations:

Set priorities based on detailed knowledge of how the company creates value. Companies did not just cut costs—they cut the right costs. They diverted resources to activities that actually created value. How did these companies make the right calls?

Unlike most executives, the leaders and everyone else in their companies knew explicitly how their companies made money.² (http://javascript<b></b>:try{AnchorBookmark('#two');}catch(Err){};) They knew how their products and services stacked up against those of the competition, why customers preferred doing business with them and exactly what they had to do to turn a profit. This kind of knowledge at all levels meant that recommendations and decisions about budgets were made with a clear understanding about the potential impact.
Leveraged unique information systems. The high performing companies invested in information systems, such as computer-based modeling, designed to give them the ability to manage and gain insight about their key value drivers. More importantly, they used the output. The poorly performing companies did not have the same responsive systems.
Collaborated with customers to improve value propositions. The winners of the last recession reached out to customers to better understand their challenges. Gathering this information allowed the companies to create new products and services that were uniquely suited to the pressures customers were facing during the downturn.
Priced for profitability. Winners worked themselves into an advantaged cost position during good times, and then used their pricing flexibility to pick up market share in a downturn.

However, in the downturn, winning companies walked away from bad business and losers did not. The companies that performed poorly accepted unprofitable sales in an attempt to hold onto market share.

http://www.accenture.com/pic/common/black.gif

The Accenture research shows that savvy executives changed their companies' competitive position and created value by managing the last recession effectively. Their actions gained market share, forged new customer relations, strengthened product and service positions, and helped build a platform for profitable growth into the expansion that followed.
In fact, we found that companies with the highest return on invested capital for the three-year period following the recession tended to maintain their lead despite other factors in the market. This correlation shows that companies that pull away from the competition during a downturn have lasting advantages, not just a fragile edge (see Figure 1 (http://www.accenture.com/NR/rdonlyres/7D19440B-8368-4530-A362-ADBBAE0EA33B/0/pov_do_right_lg.jpg)).
Companies that are not well positioned in the current uncertain economy can still turn the downturn to their advantage by receiving unvarnished answers to vital questions. Executives have a chance to learn what is important to customers, what is essential for delivering value and what actually distinguishes their company from the competition.
Companies can, of course, ask these questions at any time, but the pressure of a difficult economic environment puts a much finer point on the responses. Organizations that seek and apply these answers may well be in a better position to take advantage of the next inflection point

http://www.accenture.com/Global/Research_and_Insights/Outlook/By_Alphabet/WhatRight.htm

quikshop

2nd July 2008, 17:00

Let's just stick to the facts.

And therein lies the problem. Everyone is playing an angle, those that publish official figures included. Why do you think the official rate of inflation in the UK (as an example) is around 3% when the actual rate is closer to double that?

If you believe in the absolute truth of official economic figures then you should believe there is no recession. I suggest that the reality is quite different.

Cornish Steve

2nd July 2008, 17:04

And therein lies the problem. Everyone is playing an angle, those that publish official figures included. Why do you think the official rate of inflation in the UK (as an example) is around 3% when the actual rate is closer to double that?

If you believe in the absolute truth of official economic figures then you should believe there is no recession. I suggest that the reality is quite different.
I take your point, Dave, but which set of numbers is the most credible? Generally, it's numbers from credible bodies, often linked to the government but not officially part of or answerable to the government. This is why most successful countries, for example, ensure the independence of their national banks.

The numbers I quote come from such sources. Of course, we can question them, but I believe they are the most credible.

telemax

2nd July 2008, 17:19

I'm with Steve on this one, yes the inflation figures are undereported but in reality they are a large basket of goods, with a few items rising very rapidly, unfortunately these few items are the most important things to us ie staple foods and fuel.

However the system of measuring inflation served us perfectly well for the last 15 years, in fairness to the government it's only very recently this system of measuring inflation has lost accuracy, due to commodity rises that no one could have predicted.

However the economic growth figures are much harder to "********", I am old enough to remember the last downturn (early 90's), they were certainly telling the truth about the economy then, I'm sure if the economy actually contracts we will all get to know about it in the same way

Cornish Steve

2nd July 2008, 17:40

Actually, the UK economy continues to grow: 2.3% annual growth based on the most recent data. As you can see, things were worse about three years ago.

http://www.statistics.gov.uk/images/charts/192.gif

quikshop

2nd July 2008, 18:35

As you can see, things were worse about three years ago.

You have very little understanding of economics if you genuinely believe that the UK economy is better off now than 3 years ago.

For the last 7 years 'growth' has been artificially inflated by a boom in land and property prices, increasing equity and therefore disposable income thus driving the economy forward.

The same has happened on your side of the water and quoting official growth figures is paramount to stating UK inflation at 3%... its meaningless and simply one very selective measure of one part of the economy, not the economy as a whole.

The last thing the Governments on either side of the water want is to drive all confidence out of the financial system, and so selective figures are published.

You can either be a realist and take necessary actions to manage how the realities of the economy affect you and your business, or produce selective data and rely whatever you can derive out of that.

Cornish Steve

2nd July 2008, 20:47

You have very little understanding of economics if you genuinely believe that the UK economy is better off now than 3 years ago.

For the last 7 years 'growth' has been artificially inflated by a boom in land and property prices, increasing equity and therefore disposable income thus driving the economy forward....You can either be a realist and take necessary actions to manage how the realities of the economy affect you and your business, or produce selective data and rely whatever you can derive out of that.
I fail to understand your logic. You dismiss official and accepted and reasonably independent numbers as meaningless. You imply that the economists and professionals who produce these numbers have little understanding of economics. You claim that things are actually much worse, but you base this claim on how people "feel" about the situation - which is largely influenced by what we read in the media.

Unless you can produce objective data to support your claims, I can only conclude that you have an axe to grind. Economics is like science: It's based on cold, hard facts. All that's open to us is the interpretation of those facts. You appear to want to ignore them, and I don't understand why.

quikshop

2nd July 2008, 21:00

No, I am trying to make the point that these cold hard facts that you refer to are simply a perspective of a particular measure, they are not definitive and those that produce the figures, whether it be a financial institution or Government agency all have a vested interest in portraying the figures in a certain light.

I am definitely not saying that those who produce the figures do not know what they are doing, quite the opposite.

Thats it, its based on my experience of the UK financial markets and those of my friends who work in the City. Its also based on what I see in front of me, grossly misleading economic indicators such as the rate of inflation, jobless claimants (which is very different to the number of people out of work), banks reclassifying debt in order to avoid owning up to the real impact of the sub-prime losses, etc.

And don't get me started on food and oil prices, that's completely at the bequest of the US Government and we could be here all night ranting about that... well I'd be ranting anyway :D

Cornish Steve

2nd July 2008, 21:17

these cold hard facts that you refer to are simply a perspective of a particular measure, they are not definitive and those that produce the figures, whether it be a financial institution or Government agency all have a vested interest in portraying the figures in a certain light.
You're stealing my reputation from me. :) I'm the one who is forever suspicious of government, believes that government is the cause rather than the cure of most ills, and will challenge the establishment view.

On this occasion, though, I do believe that we have to put opinions aside and rely on the data. The measures we use today are accepted not only by government but by universities, accounting bodies, and many more professional bodies. No measure is perfect, but what we have is pretty good. There's not much room for government manipulation. Indeed, in this aspect of life, the government has little option but to accept bad news when it's published. Thank goodness for the independence of central banks and the like.

We have to ask ourselves why there is a substantial difference between the actual data (which still indicates growth) and the incredible doom and gloom in the media. In part, it's because bad news sells. Within the big picture, there will always be aspects of the economy that are not good. If it's not the decline of housing prices, it's inflation or interest rates or a widening balance of payments or a declining currency or declining exports or rising inflation. Right now, about the only bad areas in the economy are housing and energy - so guess what we hear about! Nothing, of course, about low inflation or reduced balance of payments or low unemployment and so on. ;)

In the US, there's another reason. The media want their candidate elected in November, so it makes sense for them to focus on bad news. As someone once said, "it's the economy, stupid". In other words, if you can convince everyone that the economic situation is dire, the ruling party will be voted out.

So, yes, I do challenge what I see and hear - and particularly all the opinions and the commentary. The one thing you can't argue with, though, are the numbers - and the economy continues to grow.

Matt1959

2nd July 2008, 21:33

I don't know how we got on the definition of a recession as the thread title is - is 2008 a crisis year. The answer to that for many private individuals and companies is YES! Not as much to do with media hype as is made out I think....

Moneyman

2nd July 2008, 22:07

you dont have to be an economist to see something aint right out there and i would back the likes of M & S directors against our dear leader any day. Low unemployment? Easy "miracle" the government simply hired them. So government is not actually producing more but hiring more. This is inflation. They have done everything possible to boost inflation (chucking money about while borrowing more) and selling off the assets such as hospitals and renting new ones and calling that investment (?)but Luckily we have had cheaper and cheaper goods from overseas and cheaper labour which hid it all. But that seems to be stopping.

The thing that destroyed the soviet state was inflation. although prices never went up it took more and more resources both human and natural to produce goods as there was no benefit in efficiency.

The figures are all a bit dodgy because you get this "ooh i can borrow cash because i am allowed to under my own fiscal responsibility rule" and "it will be OK over the cycle (P.S. I get to choose the cycle)" Oh and i did change the way inflation was calculated so that we are different from every other country.
We are not in a recession yet but just chatting with other businesses and you can see that things are getting very tight. The electrical wholesalers down the road have seen 4 of their 16 clients go under in the last 6 weeks. that might be a bit extreme. If people aint buying houses they dont buy sofas, insurance, tablelamps, etc. and it all trickles down. I have been here before. call it what you like, things are not good and might get worse. hope for the best but prepare for the worst. Personally I dont think we are heading off a cliff but when the figures from companies are poor then i doubt the official figures if they are good.

Cornish Steve

2nd July 2008, 22:15

The thing that destroyed the soviet state was inflation. although prices never went up it took more and more resources both human and natural to produce goods as there was no benefit in efficiency.
This is a good analogy. What with all the benefits and entitlements and minimum wage and minimum holidays and regulations and red tape and taxes on taxes on taxes on everything, the British economy is like an obese person climbing up a down escalator: It gets increasingly difficult to move ahead. Productivity is essential to a strong economy, and these overheads simply reduce productivity. Communist systems relied on central planning by interfering bureaucrats - which defines the British government quite well. The answer, of course, is to slash taxes, abolish as many regulations and entitlements as possible, and let the free market work its magic. Small businesses will thrive. Since they generate a big majority of new jobs, the economy as a whole will break out of its chains and flourish. When that happens, you just can't keep a good country down. :)

cjd

2nd July 2008, 23:52

Actually, the UK economy continues to grow: 2.3% annual growth based on the most recent data. As you can see, things were worse about three years ago.

In the UK it was worse in 2005 - which is interesting as hardly anyone remembers that although at the time, many pundits were predicting house price falls.

The major difference though, was that the government was able to reduce interest rates repeatedly inorder to stimulate consumer spending and keep housing costs (mortgages repayments) affordable. At that time the UK government had some economic tools at its disposal because the problem looked domestic - house price inflation and consumer credit - rather than global.

For obvious reasons they are no longer able to do reduce interest rates - in fact they are forced to increase them in order to keep some sort of order in the banking sector.

On top of that the increase in energy prices has created inflation which, again, can't be countered by lowering interest rates.

It's beginning to look like the perfect storm and there is a very real danger of economic stagnation for a couple of years - at best. The economic concensus is moving towards a full blown recession; but it's still not anywhere near a certainty.

There is always a lag between a downturn and job losses as industry reajusts but we are beginning to see them - if we find unemployment rising sharply between now and Christmas - head for the bunkers.

cjd

3rd July 2008, 00:16

So, yes, I do challenge what I see and hear - and particularly all the opinions and the commentary. The one thing you can't argue with, though, are the numbers - and the economy continues to grow.

For some reason you always need to be on the wrong side of an argument - I suspect contrariness as a habit, obstinacy and a sprinkling of sheer masochism. :cool:

It is impossible for anyone looking objectively at the numbers - from any source - to find good economic news. I have no idea why you find comfort in saying that the economy is still in growth - all that matters is relative growth. Growth is falling.

In practise there will be sod all difference to anyone here whether growth is 0.3% for 2 consecutive quarters ( positive growth but devastating downturn) or -0.3% for 2 quarters (technical recession and devastating downturn).

You can bet against sentiment but you need to be able to afford the loss.

Personally I'd sleep easier planning for the worst and if it doesn't happen feeling happy about it.

Cornish Steve

3rd July 2008, 00:29

For some reason you always need to be on the wrong side of an argument - I suspect contrariness as a habit, obstinacy and a sprinkling of sheer masochism.
I can't help it if everyone believes the earth is round, can I? ;)

For sure, a lot could be done to improve the economy - especially cutting taxes and abolishing oppressive regulations. I'm not saying for a moment that everything is hunkydory; however, I find all the doom and gloom out of order. We're talking ourselves into trouble. If only more people believed in our individual power to make a difference; we'd boost consumer confidence, start thriving new companies, and stop this slide into general depression. It's just not in my nature to always believe the worst will happen.

Moneyman

3rd July 2008, 01:32

The question is not a personal one. When you see a depressing future you should try to see how to make money out of it not pretend it isnt happening. I am predicting a very good year for some of my businesses but there is no way i will spend on overheads at the moment as comercial rents will go down and i will get a better deal in 6 months

Cornish Steve

3rd July 2008, 01:49

I am predicting a very good year for some of my businesses but there is no way i will spend on overheads at the moment as comercial rents will go down and i will get a better deal in 6 months
And that's good business sense.

I have no argument with being conservative or taking advantage of lower rents, lower interest rates, etc. Far from it. I've been converting our loans to zero percent credit cards at every opportunity. You have to be hard-nosed and take appropriate action based on the state of the economy.

Despite all that, there's no excuse for so many people in the public eye declaring that we're in the worst situation since the Great Depression. Utter nonsense. And this loose talk really does have the potential to become a self-fulfilling prophecy because of the impact on consumer confidence.

Moneyman

3rd July 2008, 07:38

On the other hand we got into this mess by having all that "everything is going great" rubbish that was being put around for the last few years.

Brown should have been saying "everything is OK but i am running up huge debts and sooner or later it is going to go pop, you had better save for the rainy day because i sure haven't"

cjd

3rd July 2008, 08:44

Communist systems relied on central planning by interfering bureaucrats - which defines the British government quite well.

Total and utter cobblers. The UK economy is a plural, liberal capitalist system and is one of the most successful economies in the world. The state own almost no industry - in what way is that communism????

The answer, of course, is to slash taxes, abolish as many regulations and entitlements as possible, and let the free market work its magic. Small businesses will thrive. Since they generate a big majority of new jobs, the economy as a whole will break out of its chains and flourish. When that happens, you just can't keep a good country down. :)

Also utter ********. Slashing taxes would lower government spending which would hasten the downturn and cause unemployment. A government's first response to an economic downturn is to try to spend its way out of it - which can work and did last time.

'Letting the market work' is how the current credit crunch occurred - we need better not less regulation. If there had been efficient regulation in place to stop the banks 'letting the market work' the crunch could not have happened.

You'll find over the next few months, new financial regulations being put in by your right wing government - it's purpose will be to moderate the excesses of an open market in an attempt to prevent these boom and bust cycles.

Moneyman

3rd July 2008, 09:20

Close. When downturns loom governments should:
1) borrow a bit of cash and spend it
2) lower taxes so we all have a few more quid in our pocket.

Unfortunately this government has been doing the borrowing during good times and has hiked taxes left right and center so there is nowhere for it to go. Typical case of not putting money aside for a rainy day. They also flogged the gold at $250 (now 1000) and sold things like Quinetiq at a fraction of its value.

After a couple of good years on the stock market, pension funds were loaded with cash. so instead of saying "oh fine, bit unnecessary but that should cover things in bad times and even out" they put taxes on the funds making them not particularly good investments. instead people went out and bought houses to rent and we get a stupid boom. Up goes the house prices and everyone feels rich and go spending like a loony. this is the point where you should tax a bit to build up a decent balance sheet or invest in infrastructure to cut future running costs. But instead they lowered capital expenditure by selling things off and upped running costs by renting. The hospitals, schools etc were built with borrowed money but this was hidden from the government figures because, technically the companies that did the building PFI borrowed the money even though the repayments were built into the future running costs. It looks good and you can bab on about fiscal security etc but in the background you have simply taken out a big mortgage and now it has to be paid back and there is no cash in the kitty. He's been rumbled.

quikshop

3rd July 2008, 12:24

You're stealing my reputation from me. :) I'm the one who is forever suspicious of government, believes that government is the cause rather than the cure of most ills, and will challenge the establishment view.

Yes I am going for the July Paranoia Awards, or I would if everyone would stop following me :D

Right now, about the only bad areas in the economy are housing and energy

Have you not been shopping lately?

I think you'll find that retail is mostly crashing and burning, whispers of General Motors going bankrupt, the UKs leading car retailer posting awful figures yesterday, Marks and Sparks shedding Directors like confetti as their higher end market vanishes in favour of discount outlets.

They say that the stock market looks approximately 6 months ahead of the game, so the shocking fall and official bear markets we are now in are a reflection of where they see the economy as a whole heading, not a reflection of how it is now.

Don't get me wrong, I am an optimist and as long as my business and those businesses I support survive and continue to grow then I've got a smile on my face, but there is no doubt in my mind we are, have been and will continue to be in a recession (or prolonged downturn as the officials will have us believe) until next Spring.

Cornish Steve

3rd July 2008, 13:04

It a bit short-sighted to claim that government can raise money by raising taxes. When you raise taxes, you put the squeeze on people and especially on businesses. People buy less, companies struggle and make less profit, and so tax revenue falls.

If, on the other hand, you slash taxes, you put money in people's pockets. They buy more, which means companies can grow, which means higher tax revenue for the government. Just as valuable, fewer taxes means much less bureaucratic overhead, which means greater productivity, which means a healthier economy, which means more wealth for individuals.

Cornish Steve

3rd July 2008, 13:07

Total and utter cobblers. The UK economy is a plural, liberal capitalist system and is one of the most successful economies in the world. The state own almost no industry - in what way is that communism????
We're talking about financials, not other aspects of government. Yes, our country remains open and free politically. From a financial perspective, though, the amount stolen in taxes and the extent of regulation is symptomatic of an interfering and overbearing government. So, the analogy that Moneyman made is a fairly good analogy. In that type of situation, the overhead costs of government make it difficult to sustain strong growth. There's too much flab for healthy businesses to pay for (i.e., the tax revenue needed to pay for it all is much too high).

In the long-term, this is actually the biggest threat to our economy. We need meaningful and sustained cuts in government spending.

Jon123

3rd July 2008, 13:30

2008 shouldn't be a year of crisis it should be a year of change. Gordon brown has clearly spent all the money in his pot from the good times and there is now no way he can offer tax reductions to put some cash in to the economy. So if the change can't come from the goverment it should have to come from the inviduals and company's. There are many ways to cut the costs to make your company or personal circumstances better.

If you have saved from the good times now/soon will be the time to invest this in items that will reduce you future costs i.e lpg vehicles/ lpg conversion kits - diesel - £1.33 lpg £0.51 your fuel bill is likely to be halved and your road tax will go down.

renewable energy solar power, wind power for offices, homes, warehouses. Company's that sell these items could be having huge sales if they are experiencing downturns, bargains could be had.

Forming small co-ops - If your looking for a warehouse look for a few other people looking for a warehouse and all chip in with the rent/bills you will pay less rents and business rates.

small co-ops for food and energy are all over the place and they experience greatly reduced costs compared to average Joe.

Swapping services/products with other companies can be a great way to reduce your spending. after all this is how alot of people used to live 100's of years ago.

Ebay, why pay high street prices for items that come from the same factory when you can buy it on ebay for 75% less.

There are plenty of ways to reduce costs that shouldn't affect your day to day lives, walk more, wait for the best deals for monthly phone contracts/broadband/sky etc..

We clearly cannot carry on as we are going as it will only fuel debt and inflation but by seeking more direct roots to the services and products we need cutting out the layers of middle men money can be saved but also changing our habits and attitudes towards the fossil fuels and paying to much for over inflated goods and services.

Cornish Steve

3rd July 2008, 13:32

2008 shouldn't be a year of crisis it should be a year of change. Gordon brown has clearly spent all the money in his pot from the good times and there is now no way he can offer tax reductions to put some cash in to the economy.
Actually, that's exactly what he should do. Cutting taxes would strengthen the economy, allow companies to thrive, which means he'll end up with more tax revenue.

Jon123

3rd July 2008, 13:44

Actually, that's exactly what he should do. Cutting taxes would strengthen the economy, allow companies to thrive, which means he'll end up with more tax revenue.

Cutting the taxes would free up more cash, more cash would then be spent sending inflation towards the sky, to curb that inflation BOE puts up rates even higher and we find ourselves in the same position.

Cutting taxes is not the answer. The answer is too many things are overvalued and that they have to come down in price the only way this can happen is if there is not enough cash for these items to be in huge demand, and we have to change our spending habits and what we spend our money on.

Cornish Steve

3rd July 2008, 15:26

Cutting the taxes would free up more cash, more cash would then be spent sending inflation towards the sky, to curb that inflation BOE puts up rates even higher...
We can't take measures to help grow the economy in case it overheats. Now that's a cautious approach for you. :rolleyes:

The government can grow the economy by putting money in people's pockets. That can be done by lowering interest rates - which you say is not possible right now. So, another way is to cut taxes (which has the added benefit of encouraging cuts in government spending). If the economy grows too fast and inflation becomes a problem, the Bank of England could raise interest rates, but what's wrong with that? It's an effective throttle mechanism. This is how officials have run successful economies for years.

What you don't do is stifle people's willingness or ability to spend - whether by raising taxes (throttling when we're struggling to breathe) or saying things that undermine confidence.

telemax

3rd July 2008, 16:11

I'm with Jon123 on this.

I was in the UK 2 weeks ago, I've now started actually driving at the speed limits, I used to speed around all over the place, and I got there maybe only 10 minutes earlier, if that. Driving at the motorway limit I used about 25% less fuel than I used to.

However I noticed all those company Vectras and Mondeos still burning rubber at 100 mph, these guys are really costing their companies big money. Imagine if you have 20 sales reps out there all thrashing it, stick a tracker in their car about 50p per day cost, set it to overspeed warning, give it a week, and watch the fuel bills come down by hundreds a week for that many cars. I'm sure some of the reps wouldn't like it but then again it isn't their monry they are wasting.

Thats an example of the way companies can adapt to rising prices

cjd

3rd July 2008, 17:26

The European Central Bank has today raised its interest rates in an attempt to reduce inflation. They admit that this will further slow down growth but they feel inflation is a bigger risk.

Good old Alistair Darling has also just announced that UK credit will be tightened further - bad news for house prices which will now fall further and faster.

And so it goes.

telemax

3rd July 2008, 17:34

But then again the sooner houseprices fall back to affordable and sustainable levels the better in the long term

quikshop

3rd July 2008, 17:43

But then again the sooner houseprices fall back to affordable and sustainable levels the better in the long term

Agreed, but the trouble is its always overdone. The booms inflate prices to silly levels and the sell-offs and price drops will be exactly the same, overdone.

glencooley.com

3rd July 2008, 17:56

This is a good thread. Mind if I join?

Firstly its impossible to generalise this as although an "overall" picture can be painted it is very insular. Google, Tesco, GlenCooley.com arent seeing a difference in the economy apart from slightly higher living costs and having to pull my house off the market.

The issues isnt really recession but scaremongering and propaganda. The issue is liquidity and lifestlye changes. What this means is that some companies will suffer because they are lifestyle based or work on such tight margins that small shifts in liquidity (cash over the counter) means that they are squeezed. My local BMW dealer is doing well apparently and so is my local pub. But I see other companies struggling because they arent innovating or building sustainability. They are just competing in agressive or saturated market places like recruitment or retail.

See other things are also masking some of these numbers, for example the cost of war on 2 fronts for the the US and UK is pulling money out of the economy.

A shake up is always for the better as it stops complacency for a while at least until the next time round.

Cornish Steve

3rd July 2008, 18:02

its impossible to generalise this as although an "overall" picture can be painted it is very insular. Google, Tesco, GlenCooley.com arent seeing a difference in the economy apart from slightly higher living costs and having to pull my house off the market.
In a downturn, staples and luxury goods tend to be affected minimally. Everyone has to buy food, etc., and the rich can always afford luxuries. It's the other markets that take the brunt of it. So, I'm not surprised to learn that Tesco and BMW continue to do just fine.

The issues isnt really recession but scaremongering and propaganda.
OK - after writing that, you are most welcome to join the discussion. :) Scaremongering and propaganda are what exaggerate the problems we have and could mean the downturn becomes a recession. This is why we need people to start appreciating where the economy is doing well, realise the world isn't going to end, and continue to spend money.

cjd

3rd July 2008, 18:25

So, I'm not surprised to learn that Tesco and BMW continue to do just fine.

I agree with what you are saying but your examples are a bit off and the real situation demonstrates your point.

Tesco is struggling too - they have just had to introduce new cheap lines inorder to compete directly with the real cheap food brands of Aldi and Lidl (I don't use these places, obviously :-).

Tesco and Asda are to cut the cost of thousands of everyday groceries in a move that threatens to start an all-out supermarket price war.

Tesco, the country’s biggest retailer, will reduce the price of 3,000 items by up to 50 per cent from Monday in an attempt to win back customers struggling to cope with record petrol prices and energy bills.

Asda has promised to sell ten staple items, including bread, eggs and butter, for only 50p from today as part of a campaign that it claims will win over thousands of shoppers from rivals.

Supermarkets are having to reduce prices despite soaring costs because cash-strapped families are cutting back on their weekly shopping to afford higher electricity and gas charges, motoring expenses and mortgages.

http://business.timesonline.co.uk/tol/business/money/consumer_affairs/article4222239.ece

And as we heard earlier M&S Food is in freefall.

telemax

3rd July 2008, 22:09

glencooley.com

3rd July 2008, 22:34

I agree with what you are saying but your examples are a bit off and the real situation demonstrates your point.

Tesco is struggling too - they have just had to introduce new cheap lines inorder to compete directly with the real cheap food brands of Aldi and Lidl (I don't use these places, obviously :-).

http://business.timesonline.co.uk/tol/business/money/consumer_affairs/article4222239.ece

And as we heard earlier M&S Food is in freefall.
Tesco is not in free fall. Nor is it suffering.

They plan to open another 50+ shops and are making billions in profit. I think a case of relativity is needed here.

BMW are making money along side porsche, ferrari and bugatti.......so quite frankly.......because money isnt on the street doesnt mean its not there.

Aldi and morrisons are no threat to tesco.......why because they are multinational and also everywhere. A squeeze on veg prices wont hit the bottom line but mean the toilet paper makers in india will get hit.

You will see a decline in luxury and shopping bills but not profitability nor in the capital wealth that has accumulated over the last 10 years (new money) there are a whole raft of silly misconceptions over this that are adding to the panic............grrrrr

cjd

3rd July 2008, 22:46

Tesco is not in free fall. Nor is it suffering.

I did not say that Tesco is in free fall; I said M&S is and it is hard to argue otherwise:

http://ichart.europe.yahoo.com/c/1y/m/mks.l

Tesco are doing the right things and going down market in order to keep sales that they would have otherwise lost - but it will hit their margins.

They've spent the last few years introducing high margin, value add lines - 'Tesco Finest'. It must break their hearts to go back to competing on price.

They'll do ok - they'll squeeze their suppliers - but it's not a good sign.

Just heard too that the USA has announced its 6th successive month of increasing unemployment and is now at levels not seen since the early 90s. That is an even worse sign.

Gillie

3rd July 2008, 23:21

Tesco have put on hold a percentage of planned expansion ....

There are problems out there and acknowledging and making adjustments surely is the way to go? Debating this matter about is there or isn't there is merely a bun fight over stats!

Fact ... fuel, mortgages rates, food and energy are all increasing in price and some at a very silly rate, and house prices are falling and in some places drastically!

Fact ... there is only so much money the consumer has to spend, therefore the essentials will take precedence, and the luxury items will come a poor second.

Fact ... if you hide your head in the sand and big it up, you will go under!

As someone who is dealing with lenders, and businesses all day every day, I can see the downtrend, and as someone who has her head on her shoulders, I am now approaching clients with a wider variety and knowledge that will hopefully help them out, but being realistic, I know that a smaller percentage of them will get what they need.

This is not hype and scaremongering, merely me reacting to market conditions.

The Panda

3rd July 2008, 23:36

One nice bit of news I heard on the radio was that newspapers were now suffering with advertising revenue dropping. I bet they did not think of that when they went headline hunting with scaremonger headlines about a recession coming. They should have thought about that before they started panicking the public and bringing about a self made prophesy. The more they go on about it the more fuel they throw on the fire, the same with TV. If they all stopped harping on about how bad it is then maybe the public would stop hiding behind curtains and start spending again. There is no shortage of money, just people are not spending it thats all.

Matt1959

3rd July 2008, 23:45

. There is no shortage of money, just people are not spending it thats all.

Thats one hell of a generalistion;) how do you arrive at that?

The Panda

4th July 2008, 07:29

OK, maybe that is too general. There is no doubt things are going up and people are cutting back but it is the very worst off in the first place that drive the economy to the biggest extent because there are so many more of them compared to middle incomes. So when a slowdown does come along they are the first hit and they stop spending but I am still seeing middle income people having new double glazing fitted, building a new extension or having new carpets. So the money is out there, just not in the hands of the main spending stream.

Adamos

4th July 2008, 07:40

Personally I think that 2008 is a definitely crisis year! Question is where people spend the money? I want to know that and go for the market ;)

-------------------------------------------------------------------------
(http://www.AdultMugs.co.uk) (http://www.AdultMugs.co.uk)

Mattonella Tile Studio

4th July 2008, 10:18

Adamos

4th July 2008, 10:37

It's a great idea. ;) I will do it tomorrow, cause I do not have a time today. ;)

Jon123

4th July 2008, 10:49

[QUOTE=Cornish Steve;550442]We can't take measures to help grow the economy in case it overheats. Now that's a cautious approach for you. :rolleyes:

The economy is overheating and that’s why everyone is cutting back. House prices are at the most unaffordable price to earning ratio ever this will be corrected by the current economic climate which has to continue to correct.

Cutting taxes still isn't the answer all it will do is increase inflation which will cause longer term problems and surely that is a given?

What the government needs to do is supplement the item's that are increasing drastically .i.e the government fix's the price of bread, milk, poultry, fuel, energy and absorbs the increase instead of cutting taxes. By doing that it will curb extortionate inflation and help the millions of low earners. Get rid of the 1000's of wasters in councils who waste forest full of trees writing pointless letters with 100's of people paid to put the letters in the envelopes and then 100's more people examining there practise and reporting back to 100's of other people that overlook the people overlooking.

But because the government will not do this because it skint, we have to make the changes and the best way to do this is cut our costs and form co-ops to increase spending power and become more effecient with our own money.

Look at the mess bush is in, he gave out an obscene amount of billions to the US citizens and has it really done any good? Highest oil price ever yesterday, Weak dollar, Unemployment increasing, the list goes on. During a downturn people should reflect on there own habits and that too many people are living beyond there means and trying to compete with the Jones next door. Always wanting the newest cars, game consoles, bigger houses, boats etc..

Cornish Steve

4th July 2008, 12:31

What the government needs to do is supplement the item's that are increasing drastically .i.e the government fix's the price of bread, milk, poultry, fuel, energy and absorbs the increase instead of cutting taxes.
Centralised planning and overbearing government is that last thing we want - just look at history. Free the markets and the economy will grow.

Look at the mess bush is in, he gave out an obscene amount of billions to the US citizens and has it really done any good?
The incentive refunds worked a charm the last time around. The US economy was slowing, the government (president and congress working together) sent sizable tax refunds to everyone, people began to spend again, and the economy picked up. It's too early to know whether the same will happen this time, but the economy did grow a little more in the most recently reported quarter.

cjd

4th July 2008, 12:43

Centralised planning and overbearing government is that last thing we want - just look at history. Free the markets and the economy will grow.

There is no such thing as a free market and there never has been. Governments, Associations (unions and trade groups) and Individuals have always controlled trade.

The incentive refunds worked a charm the last time around. The US economy was slowing, the government (president and congress working together) sent sizable tax refunds to everyone, people began to spend again, and the economy picked up. It's too early to know whether the same will happen this time, but the economy did grow a little more in the most recently reported quarter.

And this is an example of centralised planning by government and intervention in the 'free' economy.

Cornish Steve

4th July 2008, 12:47

And this is an example of centralised planning by government and intervention in the 'free' economy.
It's an example of the government acting - temporarily, at least - to do undo its mistake in imposing high taxes. The moment the money hit people's pockets, they started to spend again. Better, and less costly, would have been to simply have a lower tax rate in the first place.

cjd

4th July 2008, 13:15

It's an example of the government acting - temporarily, at least ........

Correct, which is an example of the government intervening in a market in what you call a 'communist' centrally planned way.

The only difference is that you agreed with its actions this time.

Moneyman

4th July 2008, 13:50

It is funny how some people still think the money is "still out there". It isnt. At the moment most people havent needed any more because they have a job and things are looking fine from their point of view. but go out and try to borrow some and you will see things are not what they were. When sales are down it takes quite a while for this to filter out but the effects are cumulative. Look at bank borrowing statistics. Half last year. sooner or later it will get to your pocket.

Debtbuster

5th July 2008, 15:00

Money is tight and things are getting worse. Enquiries at our office have trebled in the past 6 months from people worried sick about their debts.

Mortgage brokers are ringing up to become agents for us as their work dries up.

The CAB has had a 70% increase in people looking for help with unsecured debts. The Council of Mortgage lenders estimate that 60,000 home will be repossessed this year, nearly the same as the 90's figure of 75,000.

But the debt collecting leeches are having a good time!

cjd

12th July 2008, 09:37

I see the US's centrally planned, communist government has just rescued the IndiMac Bank, after it collapsed. It was one of the US's largest mortgage lenders.

Even worse though, the country's two major housing loan comapnies Freddie Mac and Fannie Mae - are in dire trouble too - their share prices fell by almost 50% and it seems like one or both may go down. The problem with these two is that they hold almost 50% of all the mortgages in the US.

Expect things to get worse.

quikshop

12th July 2008, 10:32

The article is here (http://news.bbc.co.uk/1/hi/business/7503109.stm). This bank concentrated on self-certification mortgages, mostly from self-employed who did not or could not prove their income so it was high risk even when the economy was ok. This is the 5th US financial institution to fail since the credit crunch started.

In an act of desperation to prevent two major financial institutions from collapsing, the US Government said yesterday that it will do whatever it takes to keep Freddie Mac and Fannie Mae trading.

They have between them around 5 trillion dollars of loan notes, as cjd said, 50% of all US mortgages!

If some of the earlier posters still think the US economy is not in meltdown then I want whatever you guys are smoking :D

Unfortunately Britain is on the coast line and in the direct path of this approaching financial tsunami.