Explaining recession

Generali

fc123 wrote: »

A. Hilton wrote a good piece last night in The Standard...and I understood it. He dismissed a lot of Sorus' opinions....comforting.

I love journalists. Generally a bunch of also rans writing a load of cojones about people that have acheived more than they ever will.

George Soros is a billionaire financier and philantrophist who has acheived more in one lifetime than most families do in generations.

Hilton is that bloke what writes a column for the Evening Standard. His Mum calls him Thingumy. He spends his weekend in the pub reading his articles from the Evening Standard with the photo on show in the hope that someone will realise he's the same person.

Hilton on Soros:

George Soros is a bit like those actors you see every night on UKTV Gold. The face or name is so familiar you tend to forget that his best days were 20 years ago and he has not done a lot since. Soros remains a legend because he made more than £1 billion betting that sterling would be forced out of the exchange rate mechanism. But that was back in 1992. Since then he has made so many bad bets he gave up running money, closed his hedge fund business and has devoted himself to good causes.

Soros on Hilton:

Huh? Am I meant to know him? Was he my driver in the 1970s? Or maybe that decorator that we used to use, the one that burned down the dining room. Nope, you've got me there.

epz_2

fc123 wrote: »

The best advice (now I look back with hindsight) was from our employment solicitor who advised me to make redundant most of our 9 staff, shut the least profitable part of the business and take over (on a day to day level) the
most profitable part.

In the end, that is what happened. But....... what did Mrs good person do? Couldn't face doing that (as when one employs, one has responsibilities....esp if one has a good socialist heart) so I borrowed.

When we look back, we cannot believe the ammount of debt that we were able to build up....and in a short space of time too...the computer kept saying "yes" so it didn't feel that we were doing the wrong thing.....but deep down I knew it wasn't right.


So, the point of this post is that the credit boom was NOT a good thing for my business at all and has made it more vulnerable than it should be.

However, the core of the business is sound plus the downsizing of our lfestyle has been a very "character building" experience...it feels rubbish at the time......but it is like editing who you REALLY are.

OT warning

the best thing for workers an employer can do is ruthelessly sack employees that are costing the business money.

it sounds harsh but if its a choice between a months notice period, severence pay, possibly reduced hours etc and turning up one day to find the gates locked and your pay gone to the bank after business goes bust then i know what i would prefer.

fc123

Generali wrote: »

I love journalists. Generally a bunch of also rans writing a load of cojones about people that have acheived more than they ever will.

George Soros is a billionaire financier and philantrophist who has acheived more in one lifetime than most families do in generations.

Hilton is that bloke what writes a column for the Evening Standard. His Mum calls him Thingumy. He spends his weekend in the pub reading his articles from the Evening Standard with the photo on show in the hope that someone will realise he's the same person.

Hilton on Soros:



Soros on Hilton:

Yeah, but I understood it......oh dear, I like reading his columns and I, mrs layperson, was happy to read that Mr Soros could be wrong.............ooops. Is Mr Soros correct??

I feel he could be as I read his statement on a link (here somewhere) and it felt that there was a logic in it...it did make sense.................be gentle...........i can cane anyone in a debate on next seasons winning colours.

fc123

epz wrote: »

OT warning

the best thing for workers an employer can do is ruthelessly sack employees that are costing the business money.

it sounds harsh but if its a choice between a months notice period, severence pay, possibly reduced hours etc and turning up one day to find the gates locked and your pay gone to the bank after business goes bust then i know what i would prefer.

Thats me.;)
I downsized the business but most of the staff went onto pastures new........now I have to manage it well so it keeps providing for the last 2 employees and I.
However, writing about it and doing it.....now they are 2 diff things.
One of the most difficult things I have ever had to face.
The economic theory and the the reality are a world apart in real life.



OH..I got a bonus too...I left S London and my offspring no longer end sentences in innit :T .

Generali

fc123 wrote: »

Yeah, but I understood it......oh dear, I like reading his columns and I, mrs layperson, was happy to read that Mr Soros could be wrong.............ooops. Is Mr Soros correct??

I feel he could be as I read his statement on a link (here somewhere) and it felt that there was a logic in it...it did make sense.................be gentle...........i can cane anyone in a debate on next seasons winning colours.

Mr Hilton engaged in an 'ad hominem' argument. That is he attacks the man not the statement.

So rather than say "Mr Soros is wrong because he claims that x will lead to y when instead it will actually lead to z for the following reasons....", he instead tries to say, "Mr Soros is a failure and so anything he says is rubbish...". Then puts forward his own argument.

It's like me saying, "How can you believe fc123 when she says that teal and scarlet will be the colours of next season when we all saw her get drunk and fall out of her dress on her birthday last year? As a result it's obvious that navy is going to be the dominant colour of spring".

One thing has nothing to do with the other. Scarlet may be the hot colour or not but it has no connection with your sobriety or lack thereof on any given day!

I don't know what's going to happen in 2008, nor do Messers Soros and Hilton. We take our education, experience and prejudice and take a guess. I tend to prefer my predictions from people that have been shown to have good judgement down the years (Mr Soros being one by making a lot of money for his clients) than a journalist that is paid for his ability to gain readers to look at adverts.

I didn't mean to be rude to you. I can see how my post could read like that. It was meant to be rude to lazy writers that insult their readers.

You're right, economic theory and business are worlds apart. Economic theory can help inform business decisions I believe; business can help economic theory become more refined.

Well done for no longer saying innit. N'est ce pas.

Guy_Montag

I must say G, I'm greatly enjoying your input to this column. I always enjoy your posts, but these are particularly good. Anyway enough brown-nosing.

How will your hedge fund cope with the credit crunch & recession. Are you (as a business) preparing for recession? Does the credit crunch affect your business much?

Phirefly

fc123 wrote: »

Phirefly...you should come and visit the area for a weekend!

Maybe I will. I never need too much persuasion to head to the south coast

I work for a uk clothing manufacturer so none of this 'downturn' is new to me. Cheap imports and fast fashion has been squeezing the once thriving Leicester rag trade for years. The company I work for is somewhat of a relic, we have in-house production for short runs but also source offshore for larger orders.

Our directors will not however go to the far east, and stick to the increasingly expensive Turkey, Dubai and Pakistan. As a result, We cannot compete on price with other suppliers and are hanging on by the skin of our teeth pedalling on our superior design and fast response (yours truly). Thats a hugely precarious state to be in though, especially when your USP is business savvy and has her own best interests at heart. Put it this way, I don't plan to be clinging to the tiller when the ship sinks.

It could go several ways. As we've touched on before, there is a wind of change in consumerism thats also blowing though other retail sectors. Social and ethical responsibity may be another fad, or it could be here to stay. Bad timing though, just when people were starting to seriously consider spending a few more pennies on sustainable cotton or locally produced milk, along comes the recession and priorities have to switch again. As others have suggested, perhaps people will once more favour quality and longevity in their products and understand 'value' not as just the cheapest, but the best price for the best quality. The cynic in me fears that we've gone too far down the something for nothing route for that to really prevail.

From my personal point of view, I subscribe to G's tiger analogy. I saw this situation coming a long time ago (albeit due to the nature of the industry I work in rather than any economic savvy on my part) and have been doing the necessary ground work for years. Adapt or die really. I'm just seeing it as an opportunity to blow out the cobwebs and lose the dead wood. I'll cling on for dear life and hope I come out the other side on top. Which should be all the more viable seeing as my only real overhead is my broadband connection. Its easier to say though when my only dependent is of the canine variety and could live off shin bones from the farm shop if needs be. Perhaps I might not be feeling so gung-ho were kids in the equation....

Generali

Guy_Montag wrote: »

I must say G, I'm greatly enjoying your input to this column. I always enjoy your posts, but these are particularly good. Anyway enough brown-nosing.

Brown nosing positively encouraged Guy_Montag. All contributions of beer and cash (no cheques thanks) gratefully accepted too.

Guy_Montag wrote: »

How will your hedge fund cope with the credit crunch & recession. Are you (as a business) preparing for recession? Does the credit crunch affect your business much?

The sector that we're investing in tends to be largely recession-proof so on that basis things should be ok. Also, we're a long/short fund so the Portfolio Manager can take a view that if the risk premium that investors are going to want to hold shares is going to rise (ie the price of all shares is going to drop rather than just the ones that are likely to do badly in a credit-contraction led recession like banks) he can short the market and go long shares that he thinks will do well and so can make money short-term by the fall in the market and longer term by having been able to buy shares cheaply.

The thing is, hedge fund investing is high-risk and only open to 'sophisticated investors' for a reason. Basically the PM is taking a bet on a particular economic outcome (I'd rather not say what his bet is) and if it comes off our investors should do very nicely and by extension us as we take a proportion of their profits as is normal in the industry. Hopefully the hedging side of the hedge fund should mean that they don't suffer if it doesn't come off.

fc123

Generali wrote: »

Brown nosing positively encouraged Guy_Montag. All contributions of beer and cash (no cheques thanks) gratefully accepted too.



The sector that we're investing in tends to be largely recession-proof so on that basis things should be ok. Also, we're a long/short fund so the Portfolio Manager can take a view that if the risk premium that investors are going to want to hold shares is going to rise (ie the price of all shares is going to drop rather than just the ones that are likely to do badly in a credit-contraction led recession like banks) he can short the market and go long shares that he thinks will do well and so can make money short-term by the fall in the market and longer term by having been able to buy shares cheaply.

The thing is, hedge fund investing is high-risk and only open to 'sophisticated investors' for a reason. Basically the PM is taking a bet on a particular economic outcome (I'd rather not say what his bet is) and if it comes off our investors should do very nicely and by extension us as we take a proportion of their profits as is normal in the industry. Hopefully the hedging side of the hedge fund should mean that they don't suffer if it doesn't come off.

Just read it for the 4th time and it's still not making sense to me

Jonbvn

Generali wrote: »

So I agree with this idea that we're nearing the end of a 60 year boom (and have since the early-90s when The Economist started writing about the 'demographic timebomb') although for different reasons than most investors as most of them seem to believe in a 'super business cycle'. I don't believe in the 7 year business cycle let alone the 60 year super one! I think that could be a post for another thread/site though as it's quite esoteric.

G,

I think Soros is just saying anything that may get Billary or Obama elected. Don't read too much into his words/ideas..