Tag Archives: The Economy

More Proof That The Gray Lady Is Hurting !

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Street level view of the new New York Times building (photo credit: pentagram.com)

Five months ago, we wrote about job cuts at the New York Times (a.k.a. “The Gray Lady“). This week, the New York Times announced their latest price increase. Once again, Times readers will pay more, but get less (that is, those readers who remain readers despite the price increase). And New York Times readers don’t even get their favorite comics. To our knowledge, the New York Times has never had a comics section.

The weekday editions will go from $1.25 to $1.50, a 20% increase. This increase comes just twelve months since the Times raised their cover price 25% for weekday editions, and about 15% for the Sunday edition. Prior to the last price increase, the Times was able to do without a price increase for eight years. Viewed another way, these two price increases in one year’s time equal a 50% increase in the cover price of the New York Times weekday editions. Our salary hasn’t increased 50% in the past year …has yours? Sadly, the New York Times print editions may just be a luxury we can no longer afford.

More frequent price increases for many consumer products is the norm these days, We believe it is further evidence of an economy in deep trouble. Newspapers are getting it from all sides… Advertising revenue is drying up, readership is down, and production costs are way up, particularly paper, electricity and fuel. As if that wasn’t bad enough, the Internet and “new media” have turned out to be the newspaper industry’s worst nightmare. Newspapers are trying to embrace the brave new digital world, but it looks like they may be waging a loosing battle.

The squeeze has been evident to readers of the Times for quite a while now. The paper is shrinking. Their flagship product, the Sunday New York Times, is a shadow of it’s former self. Help wanted display advertising in the Sunday business section, once perhaps 75 or 100 pages every Sunday, has completely disappeared. Complete Sunday sections have disappeared. What’s left is an anemic Sunday edition that sells for an incredible $4.00 !

The voracious technology hounds at Routing By Rumor like to read the New York Times on Tuesdays, for the Science section, which has been contracting as well. We used to enjoy the Circuits section on Thursdays, but that section has disappeared, replaced by one to two pages of articles buried towards the back of the Thursday Business section. We suspect the Science section will go A.W.O.L shortly, as well.

All this bad news at the New York Times just happens to come at a time when people seeking their 15 minutes of fame have been flocking to the new building the Times has built, one block from New York City’s Times Square (named for the site of a previous building the New York Times’ occupied at One Times Square,  during the early 1900’s). It seems people have an irresistible urge to climb up the outside of the their brand spanking new skyscraper, like so many spidermen.  The fact that their new building sports what amounts to ladders on it’s exterior walls is too much for some adventure or publicity seekers to ignore.

Hu Totya/Wikipedia)

The New York Times building under construction, 9/16/2006 (credit: Hu Totya/Wikipedia)

We propose a solution that could only happen in New York City, home to Coney Island’s famed Parachute Jump, the Empire State Building, Yankee Stadium, and the site of the deadliest attack in our nation’s history.

Why not sell permits to climbers who want to scale the New York Times building, sell tickets to the spectators, sell the television rights to one of the networks, and use all the money they earn to subsidize the print editions of the New York Times. They could even place corporate logos on each floor, similar to how ball parks plaster sponsor’s ads on every nook and cranny at the ball parks. This plan may be so successful, they will be able to give away the Times for free. Remember, you heard it hear first.

Of course, safety will be an important part of this plan. Climbers will need to have the proper climbing equipment, safety nets will need to be installed, and spotters will have to supervise the climbing. Perhaps some bleachers can be built along Eighth Avenue. A giant LCD screen in Times Square (like there aren’t enough of those already) could let people follow the climbers.

David Scull/New York Times)

Alain Robert climbs the New York Times building on June 5, 2008 (photo credit: David Scull/New York Times)

Think this plan is crazy? Then you probably won’t think much of the latest attraction a few blocks away in New York’s Central Park. For the incredible price of $25, you can ride a helium balloon 300 feet above Central Park. Really! …And you thought the helium balloons in the Macy’s Thanksgiving Day Parade were cool.

Only in New York.

– Routing By Rumor

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March 17, 2008 – A Gathering Storm On Wall Street

The stunning collapse of investment banking firm Bear Stearns over the weekend, and it’s fire-sale purchase for pennies on the dollar by JP Morgan Chase has is just the latest bad news rattling investors’ nerves.

Oil, which crossed the $100 / barrel mark less than a month ago, hit another record high of almost $112 / barrel on world markets today. Gasoline prices have followed suit, hitting new highs on a daily basis, with no end in sight. Rising fuel prices prompted United Airlines to raise round trip fares as much as $50 last week.

The Federal Reserve enacted another emergency rate cut over the weekend, with yet another cut of up to 100 basis points expected later this week.

The U.S. dollar continues to weaken, making foreign goods more and more expensive for Americans.

Almost every day, you hear of another major retailer reporting dismal sales figures.

Saying that the U.S. real estate market is in a slump is like saying that the Titanic sprung a minor leak.

The Dow finished last week below 12,000. Overseas markets have dropped sharply today, down between 4% and 5%. Fasten your seat belt when the U.S. markets open today.

Will today come to be known as the St. Patrick’s Day Massacre on Wall Street, or will it simply be another roller coaster ride for investors?

More and more lately, it seems that “no news is good news”.

And yet the Bush administration still can’t bring itself to  accept the fact that the U.S. economy is in a recession.

– RoutingByRumor

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Late Breaking News From The White House: “The Economy Has Slowed”

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Mr. Magoo

Well, duh !

President Bush just might be the last person on the planet to have figured out that the U.S. economy is in trouble. He really needs to get out more often. Looking at the nation through rose-colored glasses while sitting in the Rose Garden, it’s hard to see what has been happening to the economy.

Last Friday, Mr. Bush announced with a straight face “it’s clear our economy has slowed”. That’s sort of like a physician standing over a corpse and announcing “it’s clear the patient’s condition is deteriorating”.

What’s next, a news flash from the Oval Office announcing that the Titanic has hit an iceberg? …or news of the Hindenburg disaster?

Not only is the President’s news flash embarrasingly late, but it also reeks of an administration in denial. We’re not in a depression. Not even in a recession. It’s just a wee bit of a slowdown. Nothing to worry yourself about, laddie.

Unless, of course, you home is being foreclosed, (foreclosures up 57% in the first month of this year) your job has been shipped to China, you can’t afford groceries or gasoline, you have no health insurance, your investments and retirement accounts have evaporated into thin air, and you won’t be able to retire until you’re 175 years old.

Mr. Bush’s also mentioned last Friday that “the long-term outlook is good”. That reminds us of nothing as much as it does “Mr. Magoo“.

By the way… You know all those shipping containers flooding our ports, laden with stuff made in China? Bet you thought all those containers are empty on their return trip to Asia. Wrong!!! We pack those containers with millions of high-paying American jobs before they are loaded onto ships for their journey home.

– RoutingByRumor

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Oil Closes Above $100.00/Barrel, Toilet Paper Closes Above $1.00/Roll, Wal-Mart’s Quarterly Sales Surpass $100 Billion and Postage Rates Are Going Up Again !

All of these increases are related, and they all spell serious trouble for the U.S. economy.

Energy costs are driving up the price of all consumer goods and services. Raw materials, production and transportation costs are all being pushed higher because of the price of oil.

U.S. crude for March delivery jumped $4.51, closing yesterday at $100.01 a barrel on the New York Mercantile Exchange. The previous record close was $99.62 on January 2, 2008. It has never closed above the century mark until now.

In a recent shopping trip, we found single rolls of Scott toilet tissue selling at a national drugstore chain for $1.15 a roll. I’ve never seen single rolls of toilet paper priced at or above $1.00 a roll. The cost of paper products seems to have increased 25-30% within the space of a few weeks.

And with Americans hard pressed to stretch every dollar, Wal-Mart continues to post record sales figures despite the widespread belief that retailers such as Wal-Mart are major contributors to the nation’s economic problems. The United Food and Commercial Workers (UFCW) union says Wal-Mart employs more than one million U.S. workers, earning an average of $8.00/hour.

If you need a better feel for what $100 billion actually means, it’s the same as saying “one hundred thousand million dollars”. It’s $100,000,000,000.00 …and that’s just for the fourth quarter of 2007. That works out to more than $1 billion a day, or put another way, more than a thousand million dollars every day. That translates to $400 billion a year if they continue those figures for four quarters. At this rate, Wal-mart, the world’s largest retailer and the largest private employer in the U.S. (see this UFCW fact sheet), will have a trillion dollars in annual sales before long.

The prices mentioned above are significant milestones, even if the specific numbers are not economically significant. It’s similar to when U.S. gasoline prices went above $1.00/gallon for the first time, back in the Summer of 1979. We feel that they portend even higher prices in the near future. Expect sharp increases to continue in the cost of living and inflation. Expect the size of those rolls of toilet paper to continue shrinking, while the price continues heading North. If you have any letters to mail, better do it soon. On second thought, use e-mail.

Trips to the supermarket are getting more painful every week. All of the basic grocery items, bread, milk, eggs, cereal, etc. are rising sharply. For instance, we’ve seen the price of a dozen eggs almost double in the last few months. Too bad gasoline doesn’t taste better, because milk is now almost double the price of gasoline, per gallon. It makes you wonder if the cows are the ones who are getting milked. We’ve seen some bakeries raising prices so often that they don’t even wait until their old packaging is used up before they raise the price. They are covering the printed prices on their plastic bags with stickers showing the new price. I’ve seen that some boxes of cereal have shrunk to less than 9 ounces. For instance, I spotted a 8.9 ounce box of General Mills Cheerios.

Who decides on these strange product sizes? Did a committee of pricing experts say that 9 ounces was way too big, but 8.75 ounces looked too small ? It’s voodoo marketing. It’s deception engineering. What’s next? The 8.1275 ounce box of Kellogg’s Frosted Flakes?

We can’t remember any time in the past 30 years that the cost of living has risen so sharply and for so long a period of time.

Just nine months ago, the Postal Service raised the first class postage rate (up to one ounce) by two cents, to 41 cents. They have just announced another increase to take effect this Spring. No wonder they introduced their “Forever” stamp. They saw these frequent rate increases coming, and probably wanted to limit the public outcry. Unless you have lots of money to tie up in “Forever” stamps, the idea of locking in your postage rate is pretty meaningless. You’d be much better off investing your money anyway. What we need is the “Forever” gallon of gasoline and the “Forever” quart of milk. Shoppers going to the supermarket are behaving more and more like stock market speculators every day. Should I buy that loaf of bread today? I really don’t need bread yet, but it might be 30 cents more tomorrow. Better fill up the car today, because the radio just said the price of a barrel of oil hit a record high yesterday, and that means the price at the pump will be going up in the next couple of days.

With these almost daily price increases and product downsizings, what we need is a new way of tracking the true cost of living. Forget about the U.S. government’s inflation index. Forget about the “market basket” price surveys. Forget about The Lundberg survey of gasoline prices. What this country needs is “The RoutingByRumor National Toilet Paper Price Survey”, adjusted of course, for the shrinking size of toilet paper rolls. Laugh all you want. We think it will be a very accurate gauge of inflation.

– RoutingByRumor

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Bad Day At Black Rock – The Axe Falls At CBS Flagship Radio Station WCBS 880 AM In New York City

…And we’re not referring to the 1955 John Sturges movie by the same name, starring Spencer Tracy.

We’ve written here recently that it seems to us that the vast majority of the advertising on radio stations lately is for products best described as snake oil, and services of questionable efficacy, almost always targeted at individuals in some sort of trouble. Advertising for legitimate, mainstream products and services seems to have all but disappeared. In our mind, this is direct evidence of the faltering economy in the United States, as well as a result of the impact the Internet has had on manufacturer’s and retailer’s advertising habits. We doubt that a radio station enjoys the same type of advertising revenue from a commercial for some brand of snake oil, as it would for an ad from an automobile manufacturer, airline, bank or any other “real” advertiser. And when you hear the same snake oil spot being broadcast every few minutes, day-in and day-out, we think it’s a good bet that they are buying the airtime dirt-cheap. Tough economic times always breed a bumper crop of hucksters, snake oil salesmen and get-rich-quick schemes. We guess P.T. Barnum was right.

It came as no surprise then, when we learned that there was a round of layoffs this week at CBS radio stations, including at WCBS-AM (880 kHz) in New York City. There are reports that nearly 200 CBS radio employees lost their jobs this week. According to this posting, it’s Crystal clear that the bloodletting included WCBS jettisoning their Program Director, Crys Quimby. You can still (at least at this writing) read about Crys on her page at WCBS880.com. She had been with CBS for more than 20 years! You know things are bad when people with that much service are shown the door. We guess that means there will be no gold watch.

The day after I blogged this story, this article appeared in the Newark Star-Ledger. A statement released by CBS Radio included the following explanation…

“With these actions, we continue to build on our strategy of deploying our assets to best grow our ratings and monetize the results”

Now, if that isn’t a piece of tortured doublespeak, penned by some corporate spinmaster, we don’t know what is. In fact, we’re not even sure it’s written in English. We parsed it using our Captain Midnight secret decoder ring. It translated into “The Internet has killed our audience. Between that and the failing economy, our advertising revenue has dried up like a lake bed in a drought. We’re running out of money”.

What’s next? Hooking WCBS 880’s traffic reporter Tom Kaminski up to a bunch of helium balloons instead of having him report from “Chopper 880”? Maybe they’ll have chopper pilot Christopher LaCasse manning the helium tank. We would love to have Tom take a few hits of helium just before he goes on the air. His traffic reports would sound like this (please don’t try this, since it could be dangerous, and there’s always the chance you could sound like one of the Munchkins permanently). The Wizard Of Oz has always been our favorite movie. As a child, we would cry every time we watched it, afraid that Dorothy and Toto wouldn’t get back to Kansas. By the way, here’s why helium does funny things to your voice.

…But we digress.

About the only advice we can offer to the employees at WCBS-AM and other CBS stations who are now unemployed, is to not bother applying for jobs at Macy’s. But WCBS could enter Tom Kaminski as the newest float in the Macy’s Thanksgiving Day Parade. Macy’s, one of America’s oldest and best known retailers, just announced they are cutting 2,300 jobs (read about it here). No big surprise here either, since retailers are really hurting in this economy. But hey, Wal-Mart is still hiring. As we have previously written, don’t expect the $600 income tax rebate checks Americans will be getting thanks to the U.S. Economic Stimulus Plan to be much help. In fact, we wouldn’t be surprised if Macy’s ends their more than 80 year sponsorship of the annual Thanksgiving day parade in New York City. In that case, you could say that the axe fell on the turkey, too. The Macy’s Fourth of July Fireworks show, which has dazzled New York City for over 30 years might also fizzle.

Of course, it’s not just CBS Radio or radio and TV broadcasters in general who are feeling the pinch. Newspapers are folding (pun intended) under the weight of a failing economy, coupled with the exodus of advertising dollars to the Internet, cellphones, and other electronic venues. Take The New York Times, one of America’s most venerable and respected newspapers, for example. The print edition of The New York Times is a shadow of it’s former self. Over the last year or so, entire sections of the Sunday New York Times have disappeared, while the newsstand price has climbed to $4.00. That alone, I am sure has contributed to much of the decrease in circulation that they have seen. For a long time, they didn’t even bother to renumber the remaining sections. For instance, when they killed section 10 (Help Wanted) and section 13 (Television), they simply sold the Sunday newspaper with those section numbers missing for about a year. I would imagine that prompted a lot of complaints from readers that their copy was missing some sections. Then recently, they decided to drop the section numbers altogether, simply using the remaining sections’ names only (Sports, Real Estate, etc.). I took this as an omnious sign that they expect to discontinue even more sections of their Sunday edition. We were particularly upset when the Technology section (formerly the Computers section) that appeared one (weekday) per week, shrunk and shrunk until all that remains today is one or two pages a week inside the Times’ Business section. Even the physical size of their pages has been reduced. We guess that means the Times is shrinking literally AND figuratively.

We’re not the only ones thinking that The New York Times is in big trouble. Internet pioneer Marc Andreessen, the co-founder of Netscape, has begun his “New York Times deathwatch” (see this CNN article).

So I guess we will be getting most of our news off of the Internet from now on. Too bad, because we were starting to find all those radio commercials for snake oil to be quite entertaining.

– RoutingByRumor

P.S. – Ever wonder why WCBS-AM, which used to go by the moniker “Newsradio 88” adopted the “880” identity? They’re still at the same spot on the AM dial, 880 kHz (or 0.880 mHz). When radios, especially car radios, had analog tuning dials, it was the norm to drop the last digit of frequencies below 1 megahertz. Hence, 530 kHz was shown as “53” or “53“, and 880 kHz was shown as “88” or “88” (to avoid clutter, only a few frequencies would usually be shown on the tuning dial. You would have to guesstimate the position of the other stations). Some listeners would scratch a mark into the face of the radio to mark the position of their favorite stations. We would put little dots of “white-out” on the face of the dial. With the move to digital displays on modern radios, 880 kHz is usually shown as “880”. WCBS, as well as other AM stations, simply wanted to keep things in sync, and have what you see displayed match their announced frequency.

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Bloomingdale’s Warehouse Fur Sale – Proof That Even Luxury Goods Retailers Are Hurting ?

You are more likely to find us at a PETA meeting than in the fur salon at Bloomingdale’s, and we usually don’t pay much attention to advertising for fur coats. Besides, who needs fur, when you already have, well… fur! (see our picktur). But with everyone’s preoccupation these days with the economy, and the fears of a prolonged economic recession, I guess we have fine tuned our radar to keep an eye on advertising and retail trends.

We just heard a radio commercial advertising Bloomingdale’s warehouse fur sale. Now perhaps they have this sale every year, but I can’t recall hearing or seeing this in the past. If this is a new marketing gimmick by retailers of high-end products, we think it is confirmation that the economic slump has finally reached the luxury goods market.

RoutingByRumor’s economic rule of thumb # 1: You know it’s really a recession when the luxury goods market is hurting, or when you can’t unload your mansion at any price. What’s next? Buy-one-get-one-free deals from Rolls Royce? A De Beers warehouse sale? Buy one Learjet, get the second one for half-price?

Now don’t go running out to your nearest Bloomingdale’s store. The advertisement indicated that the sale is taking place at their fur warehouse, which is actually the Danish furrier Birger Christensen’s warehouse. Birger Christensen / BC International Group (BCIG) appears to be the largest fur retailer in the United States. (As an aside, I stumbled across some interesting info about an action that BCIG brought against another retailer to gain control of the Internet domain “maximilian.com”.)

We’ve read that Bloomingdales is not Birger’s customer, but rather it’s landlord. Birger Christensen leases space in Bloomingdale’s stores and operates the fur departments with their own employees. This, coupled with the fact that the “warehouse sale” is taking place at BC’s warehouse, tells us that it is not Bloomingdale’s holding the warehouse sale, but Birger. It would be our guess that the inventory is owned by Birger, and not by Bloomingdales (or by any of the other retailers where they operate their fur salons).

With BC’s purchase of Evan’s, Inc. almost ten years ago (see this article about Evans’ history), they operate the fur salons in Bloomingdale’s, Carson Pirie Scott, Dayton’s, Filene’s Basement, Goldsmith’s, Hudson’s, Lazarus, Macy’s, Marshall Field’s, Rich’s, and Saks Fifth Avenue stores (see related article, circa 1999, so this list may have changed somewhat). We don’t know if any other retailers use warehouse sales to move luxury product inventory. Our guess is that even if they haven’t in the past, you might start seeing them doing so now, as the economy continues it’s downward spiral. See this New York Times article about a disappointing holiday season for the nation’s retailers.

As the downturn of the U.S. economy continues, we think you’ll see indications that more and more retailers are in trouble, across the board. As we wrote yesterday, we doubt the U.S. economic stimulus plan that was announced yesterday will do much to stem the tide.

If the IRS hurries up with those tax rebate checks, perhaps you’ll get yours in time to run down to the “Bloomingdale’s” warehouse fur sale and do your part to stimulate the U.S. economy. You’ll look stunning in that new chinchilla.

– RoutingByRumor

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Chinchilla

Aw, he’s sooooooooooo cute. Maybe we’ll get a faux fur coat instead.

 

2/26/2008 Update – Here’s more proof that high-end retailers are feeling the squeeze… This article from CNN indicates that Nordstrom’s sales were down almost 9% in the last quarter.

 

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The Great Bernanke Pulls A Rabbit Out Of His Hat

What might have come to be known as Black Tuesday 2008 (yesterday) was averted at the last minute, when Ben Bernanke and Company delivered a 3/4% cut to the overnight bank rate. Tuesday’s rate cut was the largest one-day rate cut ever by the U.S. Federal Reserve Bank.

As any great magician will tell you, timing is everything. The Federal Reserve waited until just before the markets opened Tuesday to announce the latest rate cut. Here at Routing By Rumor, we were way too conservative in our predictions for yesterday. We forecast the Dow dropping 200 points within the first hour of trading. In fact, the Dow dropped 464 points within minutes of opening. We predicted a loss of over 700 points on the day, which did not happen, thanks to the intervention by the Federal Reserve yesterday morning. The Dow lost just over 1% on the day, closing down 128 points. Not a good day, but much better than everybody was expecting, for a trading day that resembled nothing as much as a wild roller coaster ride. We have little doubt that had it not been for the Fed’s action yesterday morning, there would have been a bloodbath on the floor of the New York Stock Exchange yesterday, just as there was on world markets earlier in the day. Instead, there was controlled bleeding, and a market that was touch-and-go all day.
That was a pretty big rabbit that Mr. Bernanke pulled out of his hat. He will only be able to pull that trick off a couple of more times before he is fresh out of rabbits. Then what? Mr. Bernanke’s rabbit arsenal reminds us of the bluff the United States pulled off in World War II. The dropping of atomic bombs on Hiroshima and Nagasaki prompted the surrender of Japan a few days later. Things might have turned out much differently, had the Japanese known that we used the only two atomic bombs we had. We were fresh out.

This is economic policy driven by crisis, rather than by plan. The Fed is putting out fires, rather than addressing the reasons why the U.S. economy is faltering. But the policies that are responsible for America’s economic problems are not controlled by Mr. Bernanke and his friends. There is little more he can do than loosen and tighten the tourniquet now and then.

Hear that giant sucking sound? We do. Ross Perot did, way back in the 1990’s when he was warning us about NAFTA. That’s the sound of jobs leaving the United States. I’ve written about the problem in this blog recently. As long as we are importing most of the goods we consume in America, our economy will continue to disintegrate right before our eyes, no magician necessary. Quick fixes and slight-of-hand will only work for so long.

So what’s ahead? Look for another wild ride when the markets open later this morning. The stock market futures are pointing to a 250 point drop on the Dow and a 35 point drop on the S&P this morning, Wednesday, 1/23/2008. Don’t look for any more rabbits, at least not for a while, despite hints by the Fed that another rate cut might come at their scheduled meeting next week. We view that as an attempt to maximize the mileage they get out of Tuesday’s rate cut. And even if we’re wrong about another rate cut, don’t expect another whopper. If there are any more rabbits in Mr. Bernanke’s hat, they’re likely to be a lot of smaller rabbits, rather than another 2 or 3 bunker busters.

….And the bad news keeps rolling in. Iraq, layoffs, foreclosures, energy prices, bankruptcies, inflation, unemployment, just to name a few. As the Bernanke effect starts to wear off, we believe the markets will trend lower in the days and months ahead. Expect to see a lot of volatility in the markets, similar to what occured yesterday.

– RoutingByRumor

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