Professor Elam

Despite what you hear from all politicians, the world is undergoing a BEAR market. 

Bull markets are all about expansion. Since 1982 or the longer view, 1932, we have been accumulating, as George Carlin would say, STUFF. We now have so much stuff that we created another entire industry, the mini warehouse, to store out stuff.  Occasionally we got to the mini warehouse. But it is usually to store more stuff than to examine or discard the stuff we have. I wonder how many people move to a larger mini warehouse?  As the theme song to The Jeffersons put it, Movin' on Up!

Bear markets are all about removing excess capacity and getting back to the basics. Just ask Lehman, Bear Stearns or what is left of Merril Lynch. 

There were lots of clear clues that we had too much stuff. City Center in Las Vegas is a late to the party testament to that.  There are now blogs complaining about falling condo prices; these are maintained by condo buyers of course. When Vegas casinos sported three figure stock prices, well, that was an early clue. 

The Wall Street Journal is traditionally a newspaper about financial markets. However, responding to the STUFF craze, it added a new advertising section entitled Distinctive Properties. This featured mostly seven figure properties, the upper crust of flip this house. We all played this parlor game as children except then it was called Musical Chairs. Players circled the room as the music played, when the music stopped, one had to sit in a chair, but the room was always one chair short, so a player still standing was eliminated. Musical condos anyone?  Now as grown ups we are playing for real money. The lead ads in the Distinctive Property section are now all auctions…..

Just this morning I read that an organization entitled the Retail Federation of America figures American families have only completed 41% of their shopping, and egads, school has begun!  I suspect such a figure is a result of too many stores, rather than not enough shopping.  Today's fad is torn clothing, the knees are carefully torn on the horizontal. Once upon a time, Moms mended such tears rather than buy a new pair of pants.  Perhaps fashion has trumped necessity!  No need to mend, tear a bit more and hit the fashion curve!

A recent Barrons article wonders whether whiz kid Eddie Lampert will success with K Mart Sears now Sears Holding SHLD. He is after all standing in line with, let's count

WMT, Belk, Bealls, JCP, Target, Macy, Kohls, GAP, Old Navy, and so it goes, Mervyns has already gone

But our point, bear markets clean out excess. Everyone is not going to make it. Chrysler sales fell even with Cash for Clunkers, I doubt Chrysler will survive the next election. 

This fall I added the chapter on cash flow to the cost classes. And for good reason. Expect cash flow to move front and center to everyone's attention, after all that music keeps stopping again and again……