Worldwide Economic Meltdown?

[Shaun @ Tru6]

yes, at least from my very narrow perspective, and any product-oriented small business in the U.S. is in serious danger of not surviving 2009.

I am extremely glad that I moved t-shirt production to the U.S. and if all goes well, the day after Thanksgiving, I will have moved silk screen in-house, which will (hopefully) help with seasonal cash flow. I will finally be able to take our boy's artwork and move them to adults, and I'll be doing a lot of Porsche-oriented art.

But our pants, shorts and jackets are made in India. We have an excellent relationship with our broker/manufacturer there and have achieved terms 50% on ship, 50% Net30, no small feat.

Since planning our spring production of cargo shorts and over-dyed madras checks board shorts in early October, here's what has happened (at least in Indian garment factories):

1. all manufacturers are requiring 50% on start of a job, 50% on ship. this is probably two-fold: 1a. they need the cash, 1b. they are afraid businesses will be no-longer given the economic turmoil.

2. manufacturers have laid off 25% of their workforce and eliminated a second shift. See 1a.

3. manufacturers are re-prioritizing bigger orders over smaller. this is somewhat normal, but didn't expect it to happen to us given our relationships and that our spring order is "decent" and was placed early. Our January 25th ship date has been moved to February 25th and the madras checks fabric cannot be woven, meaning, at this time, I won't be able to ship 50% of our shorts, and the other 50% will ship after our stores' cancel dates. That's company-killing.

there is so much to extrapolate from this, but the writing is on the wall for anyone having a product made overseas. We will survive, but with the company only 2 years old, I've got to be extremely creative and lucky to ride this year out. And I think we will use all of 2009 as a sales year for launching The Great Adventures of Joey & Rex book series with a Jan/10 ship date followed by a second quarter '10 investment period. So while we will survive, any kind of growth is pushed off for over a year, and I still have to figure out how to get our shorts shipped on January 25th.

I predict a substantial collapse of small business in this country, more than anyone is thinking of right now.

[azasadny]

I predict that nobody will escape unscathed from this. We will all have to adapt, be flexible and creative to survive and prosper. Challenging times, indeed!

[HardDrive]

OK, I am going to ask a REALLY naive question:

Is clothing production possible in the US?

[nostatic]

Shaun has covered the clothing production in previous threads.

Since we are in a global economy, and the US consumption drove much of that, we're headed for a global recession/depression. Things are too interconnected now, and with the advent of the network, after-hours trading and 24 hour news cycles, the ride will be very chaotic and bumpy.

I think all businesses will be hammered. The only thing that might advance is "very small business" (ie individuals) who sell things through any number of aggregation sites (cafepress, etc). The problem is that no one is going to get anywhere near rich other than those who are in the middle. Co-ops might be another way around it, both local and digital.

Facebook and other social networking sites might help in becoming true entrepreneurial meeting/breeding grounds, and I'd look for some sort of commerce/production/etc to come out of those places. Just a hunch.

[Shaun @ Tru6]

Originally Posted by nostatic

Facebook and other social networking sites might help in becoming true entrepreneurial meeting/breeding grounds, and I'd look for some sort of commerce/production/etc to come out of those places. Just a hunch.

would you like to expand on those thoughts?







HD: as Todd said, I've covered this ad nauseam. Anything very high end like $300 jeans can, T-shirts as well, but only due to the margin on cheap material (cotton jersey) against volume. Bringing silk screen in-house ought to get me down to a fully loaded overseas price, even on low volume, given my time/sweatshop equity position in the company.

Anything mid-priced and complex like pants and jackets, that ship sailed to China, India, Vietnam, etc. long ago.

To help get through this, I've also been developing some cost-effective, in-house techniques as well. This shirt is my best example.

[MRM]

I have access to some economic data that is not well known. If anything, Shaun is too optomistic. 2009 will be a bad, bad year.

The dynamics are that there is world-wide excess capacity for manufacturing everything. The world economy is slowing for various reasons, reducing demand as supply increases. Comodoty prices are decreasing because of reduced demand. Unemployment is rising world-wide because of excess capacity and reduced demand. Prices are falling because of reduced demand, reducing profits and causing unemployment.

This isn't 1929, but it's worse than 1974 or 1976. If you have money, save it. Do not buy gold. Hoard cash like a bear going into hibernation. People with cash will survive the coming years.

[turbocarrera]

Why wouldn't you buy gold? Schiff is crazy bullish on Au. The last peak in gold (early 80's)inflates to about a $2400/oz today - though I know it's hard to get an accurate valuation with Fed printing presses that can go pedal to the metal at any given moment.

In the interest of full disclosure, my family is in the fire-assay/atomic-spectrometry biz - gold is the bread and butter. While the last 7 years have been great - it is going absolutely ballistic since the meltdown.

What unknown data are you talking about?

[Zef]

Originally Posted by nostatic

Shaun has covered the clothing production in previous threads.

Since we are in a global economy, and the US consumption drove much of that, we're headed for a global recession/depression. Things are too interconnected now, and with the advent of the network, after-hours trading and 24 hour news cycles, the ride will be very chaotic and bumpy.

I think all businesses will be hammered. The only thing that might advance is "very small business" (ie individuals) who sell things through any number of aggregation sites (cafepress, etc). The problem is that no one is going to get anywhere near rich other than those who are in the middle. Co-ops might be another way around it, both local and digital.

Facebook and other social networking sites might help in becoming true entrepreneurial meeting/breeding grounds, and I'd look for some sort of commerce/production/etc to come out of those places. Just a hunch.

Not true anymore....China and E.U. are now the drivers....like you said...it's now a global economy.....

[MRM]

Double post.

[MRM]

Because we're in a deflationary cycle. Gold and comodoties are bad investments in the face of deflation. The 70s when we had inflation and stagnation is highly unusual in history. Usually stagnation brings deflation as prices are cut to meet reduced demand. Demand is falling on a world wide basis, sometimes creating a self fulfilling prophesy. As a result, prices are falling. This is the oposite of what happened in the 70s. I can't say exactly what data I get to see without breaking confidences, so you'll have to trust me a bit, but I can say that it's no secret that orders for goods of all types dropped in October like the faucet was turned off and it is worse than any CEO is saying publicly. Take what I say for what it's worth. With all the opinions bouncing around on this board someone will be right. Just consider that if we are entering a deflationary cycle, it will be bad and gold will fall with the price of everything else. Cash will be king. Each person should make their own judgment as to whether this is a dip in the economic cycle, a bad recession, or a deflationary spiral and they should plan accordingly.

[competentone]

Originally Posted by MRM

Because we're in a deflationary cycle. Gold and comodoties are bad investments in the face of deflation. The 70s when we had inflation and stagnation is highly unusual in history. Usually stagnation brings deflation as prices are cut to meet reduced demand. Demand is falling on a world wide basis, sometimes creating a self fulfilling prophesy. As a result, prices are falling. This is the oposite of what happened in the 70s. I can't say exactly what data I get to see without breaking confidences, so you'll have to trust me a bit, but I can say that it's no secret that orders for goods of all types dropped in October like the faucet was turned off and it is worse than any CEO is saying publicly. Take what I say for what it's worth. With all the opinions bouncing around on this board someone will be right. Just consider that if we are entering a deflationary cycle, it will be bad and gold will fall with the price of everything else. Cash will be king. Each person should make their own judgment as to whether this is a dip in the economic cycle, a bad recession, or a deflationary spiral and they should plan accordingly.

New money is being created by the world's central banks at an almost unimaginable pace while production is slowing and you think that is a recipe for deflation?!?

More dollars (or whatever fiat currency you choose) in an economy with shrinking production will create extreme inflation.

At this point in time, being in virtually anything other than cash is the prudent thing to do. Those holding cash will be seeing the "purchasing power" of their cash diminishing by leaps and bounds in the coming years (perhaps even in the coming months).

Get out of cash and into hard assets or investments tied to hard assets.

"Stuff" is safe; "paper" and IOUs are dangerous.

[RWebb]

I'm stocking up on peanut butter.

[tiwebber]

Reduce dept.

[afterburn 549]

Prepare for GIGANTIC inflation

[K. Roman]

buy the S&P.

[tabs]

They are creating Liquidity by running the printing presses overtime.

If no one has a job then no one will have money to buy anything. The prices will decline. Howver with the presses being on sooner or later the currency will be debased and the current debt levels will look small by comparison.

The fact that world population is increasing will ALWAYS put pressure for higher commodity prices as a certain level of demand for even basic goods will always be there.

With 300 M people in the USA there will always be quiet a large demand for new cars, as new households are being established and older cars drop out of service due to wearing out.

[tabs]

Inflation is quiet different then leverage.

[turbo6bar]

If inflation is definitely the path we'll be taking, why are commodities taking such a huge dive? Right now, the bailout bux going are down a hole. Eventually, someone will use a big vacuum to extract the cash so it may be spent on nice junk.

Also, as jobs are continually lost, across-the-board demand will see little or no growth. That's not good for the economic engine.

I still smell deflation. In fact, I'm debating selling a rental property to get access to the cash. I think there will be better investing opportunities ahead, and holding cash will be better than holding an income-producing house. IOW, I feel future inflationary effects will be canceled or trumped by today's deflation.

[tiwebber]

Originally Posted by turbo6bar

I think there will be better investing opportunities ahead, and holding cash will be better than holding an income-producing house.

Really? It seems to me that the next couple of years will be great real-estate buying opportunities. Prices are down and falling and credit is still relatively cheap.

[tabs]

Originally Posted by tiwebber

Really? It seems to me that the next couple of years will be great real-estate buying opportunities. Prices are down and falling and credit is still relatively cheap.

Hey Timmy I think the state of Alaska has a bridge they would be willing to sell cheap.