Friday, October 03, 2008

It’s as Bad on Main Street as on Wall Street

A long-standing observation of ours is this: the further you get away from Wall Street, the more optimistic you get.

On Wall Street, stocks go up and down—sometimes violently—every hour, minute and second of the trading day. Wall Street’s Finest slash ratings on stocks, worry about quarterly earnings and panic at the slightest headline.

Yet head out to La Guardia, and the airplanes are full of business travelers; travel to Silicon Valley and Route 101 is packed with traffic; visit Chicago and Michigan Avenue stores are full of shoppers. Life—and commerce—carries on.

The same holds true when we attend conferences and visit companies.

Managements seem always to be holding Wall Street’s hand at these gatherings, reassuring us that whatever Mr. Market is panicking about at that particular moment, business in the real world doesn't care: people still need to eat, buy clothes, travel, live.

And so it was striking to listen to a handful of companies at an investment conference in New York City yesterday, and hear the uncertainty in their voices and see the concern in their eyes as they grappled with what seems to be happening in their businesses right now.

For as all of Wall Street seems to be holding its breath for The Vote That Will Save the World, Main Street is suffering in ways nobody on Wall Street comprehends, or, perhaps more accurately, can bother to notice given the state of affairs here.

Credit-dependent businesses have collapsed. Order books are slim. And that's only the half of it. Inside companies, morale has also collapsed. Employees can’t buy houses, cars or even get credit cards. They’re watching their IRA accounts fall. They want their cash now, not sometime in the distant future.

For the first time in our experience, bad as things are on Wall Street, they’re just as bad on Main Street.

We have no doubt The Vote will pass. We wonder if it will matter.

Jeff Matthews
I Am Not Making This Up

© 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.


Brandon said...

The government intervenes on everything its ridiculous. They have really made a mess of the last few years. I read an article yesterday that suggested the GOV is going to freeze all banking activity in the next few weeks depending on the crisis. Is this possible?

I read the article here

American Bandersnatch said...

They could but they won't. Freezing bank accounts would mean that nobody could be paid for anything and therefore business would virtually cease.

The credit market being almost frozen is bad enough without worrying about these kind of scenarios.

Anonymous said...

Jeff, you've just articulated reason #4587 for why Main Street hates Wall Street:

Sure, it can get as BAD on Main Street as it does on Wall Street, but it somehow never gets as GOOD on Main Street as it does on Wall Street.

Anonymous said...

Why can't they buy houses or cars? I see an abundance of both.

Oh, that's right, you need money for that.

Well, people who have money have no problem buying things. If anything, things are getting cheaper.

And those who don't have money should get used to the idea of living with one's means. Lending craze is over and won't be back for at least a decade (judging from a typical historical experience).

Don't buy stuff you can't afford.

michael said...

They will if we have widespread bank runs. These could happen in silence, just electronically.

What would be unsettling enough to start these bank runs is everybody's guess.

Barry said...

Jeff, Double or nothing on the 6 pack of Meisterbrau you have owed me for at least 10 years that we have at least 1 unscheduled "bank holiday"

Anonymous said...

Jeff, things have been bad on 'Main St' for quite awhile now. It's just that no one starting noticing until now.