[May 14, 2008: Whole Foods Market CEO at a Loss of Why Sales are Slowing]
I've written as well, I believe discretionary entertainment will also take a hit (ex video games) - RVs, boats, even sporting events ALTHOUGH most sporting events are now populated by the upper 10% whom this slowdown will hit last, and corporations. But I just cannot imagine the average football game where parking is $30, concessions are $50 for a family of 4, and tickets are $150-$200 being at top of mind for the bottom 80% in this country. Things like NASCAR which caters more to middle America will take a hit.
[Jun 24, 2008: IBD - Heating, Electricity Rates Rising]
Without wages rising much, the pie of spending must draw down from one place (sporting events, camping trips, entertainment, non essential travel, Vegas, boating, eating out at restaurants, buying that extra pair of shoes) and go into essentials. This is pooring of America 101, and why sentiment gauges continue to fall to ungodly rates
[Oct 14, 2008: WSJ - As Economy Weakens, Sports Feels a Chill]
I've been watching intently for the first signs in the sporting world since this is (a) one of the last things Americans want to give up and (b) ticket prices have gotten to a point where many families of the lower 2/3rds to 1/2 in America were frozen out a long time ago - hence the slowdown means the upper 1/3rd (and corporations) are finally getting hit. Here we go. I do believe this will lead to the first deflation in ticket prices and concessions in many many years. What would be really shocking would be seeing athletes median salaries go DOWN year over year - when is the last time that ever happened? Never, in my memory. I think it's a distinct possibility if things drag out as long as I believe they will.
[Nov 14, 2008: November 2008 Thoughts/Roadmap]
#2 Sports - I predicted last year that sports will take their first hit in America - we discussed this in May , June, and October. By that I mean spending at stadiums, merchandise, and the like. I said it would start at the NASCAR crowd and move it's way up to other sports - remember much of middle class America has been priced out of many sporting events; it's now corporate driven. Based on the corporate retrenchment combined with economic stress moving up the food chain from poor to working poor to middle class to upper middle class to lower upper class... I see sports taking a real hit in 2009 and 2010. It would be a major outlier to call for salaries to ever take a hit but I will be interested to see if we ever reach a point like that (but not until 2010)
Here we go... the NBA's Commissioner David Stern warns of the first fall in salary cap (ever) in the league
- As commissioner David Stern warned at All-Star Weekend, the NBA is bracing to have the salary cap (and luxury-tax threshold) go down this summer for the first time ever. The picture might be even gloomier in 2010.
- With season-ticket renewals expected to plunge because of the weakness of the economy, some league executives expect the cap to fall significantly, which could have serious ramifications for a number of teams.
- .... one NBA executive told ESPN.com. "It's really ugly. Owners are scared to death right now."
- Finally, let me share a juicy tip from a league source on the state of the salary cap. Basically, the situation will be worse than many people expect, and the luxury-tax level next season will be set even lower than what several teams are currently planning for. The implications will be huge as we head into next season.
- Here's the more interesting part of what I was told: Next season's luxury tax might just be the tip of the iceberg. The salary cap (and thus the tax level) could drop massively in 2010; my source used the term "bloodbath."
- All this would be a prelude to the labor negotiations for a new collective bargaining agreement in 2011. If money gets as tight as some project, things could get ugly.
- Teams are already panicking about being over the luxury tax during this "bloodbath" season (in terms of the owners' extra-NBA holdings). If the luxury tax line shrinks substantially, everyone is going to be worried, and teams will be fighting with each other to lose contracts to below-cap teams.
- We're waiting for New Orleans to break up a team that came a game away from winning the No. 1 seed in the West last season because of the 2009-10 luxury tax, and that's incredibly sad. Multiple that by 10, and that's what we could very well get over the next season.
- Phoenix is trying desperately to exile a 26-year-old all-NBA first-teamer to get under the line. Think about that. This isn't solely a product of Robert Sarver's fidgety ways, or some sort of bad juju in the Valley of the Sun. Multiple teams might be doing this by next February. San Antonio cannot pay the tax -- let alone a few million in tax. Could Tony Parker or an expiring Manu Ginobili hit the fire sale trade market?
Not so much fellas - even a lowly blogger could see this coming.
8 comments:
I hope they know how to live in the real world. I have many Houston Texans as neighbors and am used to watch young players move into Houston in junk cars, then within a week, move up to the most expensive Mercedes, Lexus and BMW models.
I wouldn't get your hopes of of them living in the real world. Basically instead of making $22M on the high end, they'll make $20M (for the premium players) and then on the lower end instead of making $4M they'll make $2.5M. I'm sure they'll find a way to scrape by.
What I expect to see is something very similar to America - the loss of middle class. All the money will go to the top talent and then the middle (guys making $6-10M) disappear as the rest of the guys have to 'suffer' through making $2-$3M :)
It's a whole different world.
Hockey should be facing the exact same thing since their TV contract is almost non existent versus what the NBA has.
NFL should hold up best.
TM: I am a season tix holder with the Indianapolis Pacers, and there are troubles brewing with this franchise. The long time owners, the Simons, are the Simons of the Simon Property Group. I would assume they are ok but having your company cut by 2/3 cannot be a good feeling especially when things remain so unsettled in the retail/ property markets. In any case, season tix for next year really have not dropped in price, and with the team playing poorly and unlikely to improve because they seem reluctant to spend the money, I have no hesitation of asking for some concession (may be better seats) to get my butt in the building. I am a big fan and even I am thinking, "hey, why plunk down all that money when I can easily get tix anytime I want for the best games I want to see." So if I am thinking like this, I can only imagine what the casual fan must think --"let's stay at home and watch it on the Dish package."
Putting fans in the stands is a real problem, and I am not even sure giving the tix away for nothing is helping and as a season ticket holder I have gotten such offers to get additional tix for a game for free. I didn't bother. Hopefully, the team can weather this financial storm; they seem pretty lean on talent and payroll coming in to this so maybe they can survive. Lastly, of note, there was a blurb on an NBA blog regarding the Pacers desire to have the city of Indianapolis pick up the tab for maintaining the arena; I think they have gone 15 years with the Pacers footing the bill and now they want the gov't to do it. Sounds familiar?
I think developments in sports are going to be interesting to watch. When I came t the US, I always had the impression it was the perfect Roman empire of bread (cheap stuff from China to throw away after 6 months) and games (football and the likes for gentlemen and [stupid] housewives for the ladies). If circumstances force peple to deal with real life without this buffer what is going to happen? Are Americans still capable of protesting?
One can agree or disagree with this view today - but I'd ask people to consider viewpoints that differ from theirs."
With all due respect, the same goes for your perspective. As you relentlessly bash anybody with a positive outlook, and post negative article after negative article, it seems your have been so caught up in your viewpoint that you are now unable to give legitimacy to any that differs from yours.
I don't know how long you have been investing--10 years or so? Let's revisit the bear markets of at least 20% declines over at least 6 months in the recent past, say 1960 on.
You have a 6 month bear in 1960: -26%; 8 month in 1966: -27%; 18 months in 1968: -37%; 24 months in 1974: -47%; 15 months in 1977: -26%; 32 months in 2000: -78%.
Without a doubt, in every one you could find a Davidowitz or anybody else you post predicting a permanent change and a poorer America. It would be fascinating to read the bad news pundits of those times, and compare their "forever doom and gloom" to those of today. I bet you would find articles that rival those you post.
Being a pessimist or bear is rewarding, as you stand out from the crowd because most people are bullish. It also appeals to the human side we all have that secretly worries the world will end badly.
So, take your own advice and listen to the rational arguments (not just the Cramer "rah rah" types) on the other side. Dont' get locked into your negative views.
Oh, and for fun---the 40 types of Bears:
http://www.wallstreetfollies.com/beartypes.htm
Oops, my post was a response to the "Davidowitz" post below....haven't been an NBA fan since the days of Wilt, Happy Hariston, Jerry West, Gail Goodrich et al.......
Doug:
Were those Bears you mention US-focused or world-wide?
Also: I agree with Mark on his views on Americans getting poorer. They have massive debts, both partners need to work, you are taxed, but do not receive much in return, etc. That's why you need NBA games a couple of times a week and reality shows. If ordinary people actually had time to educate themselves, they might have noticed that something is not right. Now they do, of course.
As always, we will get out of this, but it will take time, because there is nowhere to hide. I really admire true bulls. The analysts on Wallstreet do not count for me as they are plain b..
Doug, I respect that view and trust me I am trying to find rationale "bull" arguements that rely on something other than "the typical bear market last XX months, we are alraedy in month YY hence the bear market ends soon"
I also ask people to send me articles that are not so gloomy so I can throw some up every so often; hard to find anything of value. People cling to Baltic Dry Index rising - I went and did my own homework and found there is a reason behind it. People cling to China stock market rising - I went and did my own homework and found there is a reason behind it. When I find a bullish story that is valid I will be posting. In the end I am tasked to make money, whether up or down.
Last, I don't write what I write for "effect" - I truly believe we have many long term emergencies and our leadership (and people) are not pressing to address them now. If you notice, the past few decades we only address something when its a full blown emergency. And the cost is enormous versus if we addressed it earlier. We see that now... we will see it in even larger level when Medicare bill comes true.
At some point people will not lend us money as we go down this path. At that point we will just do what many 3rd world countries do - print money out the wazoo.
One more point - I think if you ask MANY in the middle class; not the upper middle but the true middle and working class if they believe their kids will have a better future than they; you would be surprised. I talk with these people all the time; maybe you do too. But I also have Michigan bias so we probably have a much darker perspective based on what has been happening locally.
But I am ok with opposite viewpoints and hope those people post on the blog. I am not going to post things that I don't believe in... if I thought things were headed in the right direction in the long run and this was just a temporary slip up of epic proportions I'd say so.
That also doesn't mean we cannot have a 30% rally in the stock market in 2 weeks, 2 months or 2 quarters. My worries are much longer term, and I hope I am wrong on them. Because what i see really worries me.
(I should also point out my "pooring of America" would apply to many of the 1st world Western countries who have borrowed over their head - i.e. UK)
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