Explaining recession

Jonbvn

fc123 wrote: »

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

Good article in the Torygraph.
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=ZIUY51WKGNGJFQFIQMGSFF4AVCBQWIV0?xml=/money/2008/01/27/cnpeston127.xml

G, keep the underwear inside your trousers!

fc123

Phirefly wrote: »

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....

I buy bits and bobs from the East End wholesalers so understand, totally, where you are coming from...they are so frustrating though as some of them just can't move with the times.
We have been cleaning up on handbags from the new Chinese suppiers who have based themselves there....still feels reasonably fair trade in that they are selling from their own family factory and are too small to supply chains. I buydirectly from them.

However, some of my clothing suppliers really resent their presence...though they themselves came in 3 decades back and undercut the existing wholesalers back then.

My own label is made in Leicester by a tiny (though once big, a chain took him to the floor some yrs back) family run outfit but he is counting down to retirement now.
One of my total disasters 4 yrs back was to launch a wholesale range. It sold really well through some really good UK indie retailers. I ended up with 80 stockists in just 6 months.
The masterplan was to up the units and go to the magical place "Offshore", so increase margin and make a load of £££££ to make up for the rent increase.
Except it just turned into a money eating nightmare.
At the same time my OH got shafted for £50k on a contract (they liquidated) and he then was diagnosed with a disease that required quite dangerous surgery.


When I type it out, I can't believe we actually solved each problem (there were staff ones too that I can't really elaborate on in a forum) and have come out the other side ...well nearly!

I was running this thread through my mind at work today and am now feeling more positive.

I am the proof of that theory (it could be McKinsey?) that all managers are not good enough as they do a task well and move up the ladder and so on until they end up in a situation where it is too much for them to cope with.

I live the self employed version (in a S London, superwoman / yummy mummy kind of way) and I think I made errors in handling the rent review situation because my "brain power " was spread too thinly; trying to be good wife, mum, boss, designer, retailer, lecturer (free at that) and all round business owner.

Our downsize (well sideways really) is the best thing we've ever done and there is little that we regret now at all....actually, I wish we'd done it sooner as then we wouldn't have built up a debt.



But then I had a cunning plan We re-located and rent here whilst renting out family home which, with hindsight, was the correct thing to do at the time. Thank god we didn't do a MEW thing and buy 2nd house.

I found this board and read about HPC, and how the savvy are selling and renting etc (so I was pleased as we were being savvy by renting too...though by accident) so I figured we could sell the house this year, put the equity in the bank, add to it when the debt was cleared and VOILA! Wait for economic meltdown and HPC and buy new house twice as good for the same ££££ perhaps with no mortgage.
Of course I forgot that I depend on consumer spending and things like HPC don't happen in isolation but are part of a bigger situation.

We still have slack to MSE on and the gym membership (my last luxury) just got culled and only 7 and half terms of school fees left.

With the last bit of debt gone, the business can survive a 35% drop in T/O but still pay me a salary....so I just need to concentrate / focus now.

Thanks all for the economics lesson and advice.:cool:

fc123

Generali wrote: »

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". Wrong colours!! I win the colour debate!

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 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. I wasn't offended at all.....I tried to understand a David Smith one(immigration and recession) in the Times today but got waylaid by a more interesting one on cellulite.

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. I am the living version of the theory but without knowing it

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

Best thing we ever did, my daughters teenage life is charmed down here. Son only just survived S London as, though he went to the nice school etc, all teenagers want to be Mr Coool.
He's at UNI now, funding himself and I feel that one job on my tick list had a good outcome

Guy_Montag

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.

So can I invest in THF? If so how? It'd only be money I can afford to lose, so not that much (in your terms).

ManAtHome

fc123 wrote: »

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

Bit like what that French geezer (guizour?) was up to, but he guessed wrong...

fc123

Jonbvn wrote: »

Good article in the Torygraph.
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=ZIUY51WKGNGJFQFIQMGSFF4AVCBQWIV0?xml=/money/2008/01/27/cnpeston127.xml

That was fascinating...I think I saw some of them queueing in Abercrombie and Fitch when I visited on a reccy.

QUOTE
"One consequence of the hedge fund (and private equity) boom is that the riches they offer act as an irresistible magnet to the brightest and best. This is not to argue that what they do is intrinsically heinous: every time they make a profit or a deal, they should be correcting a market failure, or improving its efficiency by helping to ensure that capital is allocated to the right projects and places at the right price.

But if someone has a facility for complex analysis, wouldn't the world be a better place if they deployed their talents on solving climate change or using the new science of genomics to find cures for fatal illnesses?

"I am an engineer by training," one hedge fund manager told me. "I moved out of engineering into the City in the mid-1990s. I couldn't believe people would want to pay you that much money for creating nothing"

fc123

ManAtHome wrote: »

Bit like what that French geezer (guizour?) was up to, but he guessed wrong...

Don't take the mick! The more I ask, the more knowledge I get.........all good!
And back to the French bloke..........wot a mess :rotfl:

ManAtHome

fc123 wrote: »

I am the proof of that theory (it could be McKinsey?) that all managers are not good enough as they do a task well and move up the ladder and so on until they end up in a situation where it is too much for them to cope with.

The Peter Principle - people rise to their level of incompetence... http://www.envisionsoftware.com/Management/Peter_Principle.html

Not unreasonable when you think about it - if you're good at your job you (should) get promoted until become bad at your (new) job, then you stay where you are.

fc123

Generali wrote: »

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.

Not even a little clue?

fc123

ManAtHome wrote: »

The Peter Principle - people rise to their level of incompetence... http://www.envisionsoftware.com/Management/Peter_Principle.html

Not unreasonable when you think about it - if you're good at your job you (should) get promoted until become bad at your (new) job, then you stay where you are.

That is so true.
I edited my business back down to a level that I can control myself, without having to employ anymore. It's heaven.

I am no longer running around after employees. I was great at delegating if the employee was fantastic (some were) but if they weren't so good, then one had to put all this effort in to get them up to standard.
During that process, my time was not being used doing my job.....the creative part; and without that, there is no business.

I am fortunate in that I earn OK and love 90% of what I do...it's not a drag to go to work......that is why I am determined to be prepared for a recession and want to be set up to survive for a further 5 years.............

I have a change of life plan for 5 years time. .....and I will be really cross if the world goes into economic meltdown, spoiling everything.:rolleyes: