Nation's Unemployment Update

September Jobs Loss 263,000 jobs (up 62,000 from August)
National Unemployment Rate - 9.8% (26 year high)
Unemployment plus undermeployment 17%
15.1 million unemployed Americans
9.2 million Part Time workers who were Full Time
65% of involuntary part time workers are aged 15-24

The data above speaks for itself. Companies are getting more work out of fewer employees. Unemployment should peak at 10.5% and start going down next summer from there. State data isn't out yet for last month but wast 12.2% in August for CA nd MD was a mere 7.2%. The most telling stat not mentioned is the 6 unemployed Americans for every job in America. This will get worse before it gets any better. Next year most of the stimulus money goes out and we'll see the effects then. Keep an eye on the health care and greentech for growth sectors in the new economy.

Facebook is Cash-Flow Positive

It's been a big week for Palo Alto based Facebook. For those you in the 25-27 age range a little company we once used as thefacebook is doing quite well for itself. They announced they have 300 million users worldwide which is 50 million more than they had in July. In pure sense 1 out ever 22 people in the world have Facebook. I can't think many of other products or services that penetrated the market so fast. Facebook launched in February 2004 and in a mere 5 years has 300 million users. This also represents about 30% of all Internet users. The company has been valued at $5-15 billion dollars over the past few years depending upon how you value companies.

One year ahead of schedule, Facebook is cash-flow positive. In a basic sense Facebook brought in more cash last quarter than it spent for the first time ever. Ironically, even though the mainstream would think the company is banking is has yet to turn a profit. They are a privately held company so they could be hiding it by making huge capital expenditures at the end of the quarter ala Amazon in its early days. Facebook is supposedly bringing in $500 million this year and might even turn a profit after burning through $350 million in cash just last year.

Facebook's future depends on the question that has plagued them for years: How do we monetize our users base? If they can master targeted ads on their site they will be just fine. With their large user base and tons of data pieces going threw their server monetiziing it now should be a problem. Facebook added search into their features over a year ago and has become a destination website. I look forward to the day they IPO so I can see what their books really look like. I'm truly interested into how much money is going in and out of there. How are they not making money or what I think is that they are and just hiding it. Time will only tell.

Life Settlements To Help Jumpstart Economy

I was reading the NY Times on Sunday and stumbled across an article about Wall Street's new plan to sell life settlements as a bond. At first, I was mortified. Insurance long has been an alogrithm for years in all, but to be betting (I mean investing) on somebody's life or really against it. The best bonds to own will be those of the elderly and ill with the worst being the young and the healthy. This idea is from the same people who brought you the Gaussian Copula function (Google it) which ruined our bond markets and our economy, credit derivative swaps, "structured" investment vehicles, subprime mortgage loans, recently starting doing re-remics (bundling dirty assets into a new higher rated one) and now these "life settlements bonds".

After my sticker shock was over, I thought about it a little more. These "life settlements" will not only work they really help everybody as horrible as it is to be investing for/against somebody's life. These "life settlements" will create cash for those whose retirements got killed and are underneath their loan on their house . I know it sounds just like refinancing your home loan. Plus these new securities will be a boon for Wall Street and in some weird way will help do what Wall Street does best "create something out of nothing".

I expect it will take a few months or even years to work out the details but get ready to for every American to be traded on Wall Street just like a stock. As long as these practices are regulated I have no problem with these hitting the marketplace. We don't need another marker like what happened in the un-regulated CDS world last year. I don't know if I'd feel this way if I were in my 60's because it's their life settlements that will really be in play here. Best of luck to Wall Street and Barack in figuring this out. I think we as people deserve some details first and then some cash later too if we like what we see.

A Look At August Retail Sales Figures

As a retail veteran of 7 years (Nordstrom+Dodgers) , I've always liked taking a peek at same-store figures once in awhile. I find them even more interesting during the recession to see who is doing well. A recession usually helps companies that sell everyday items such as groceries, gas, and fast-food. Meanwhile it kills the high-end goods and think you'd like to buy but don't need like a mattress company. Let's run through a few companies with their sales figures and comments.

Abercrombie (-29%) - getting crushed by the economy, always thought they had a problem in attracting management talent because their pipeline of people who want to work their our high school and college kids, now my thoughts are proving to be right
Aeropostale (9%) - good work, nice that their medium exposure to the economy to due to low numbers of stores and price-point is paying off
Gap (-3%) - Wow!, I'm very impressed with this company, they always ace the marketing aspect of their product and know who their customer and what they want to buy
Hot Topic (-8.1%) - a LA based company that stock I still up a ton this year, should continue to do well to low pricepoints as parents continue to cut kids off or just say no to high-end

JC Penney (-7.9%)
Macy (-8.1%)
Nieman's (-16.6%)
Nordstrom (-7.6%)
Sak's (-19.6%)
The more luxury you are of a brand the more you are getting crushed by the economy, it's no suprise to me that Nordstrom is "beating" everybody because in times like these you are looking for value added and their service is better than any store which continues to make it "the most valuable name in retail" additionally I know their margins do well because of the increasing number of in-house and off-brands carried in every department which lower they're overhead and get their sell-thru up during these tough times

Costco (0%)
Target (-2.9%)
Back to school is always a boon to these stores and this year it no different as school is back in session this week in most parts of the country, if you are looking for Walmart sales figures they've decided earlier this year to not release month figures but thanks to their amazing control over their distributors even in a bad economy their cash flows will be more than fine

Ross (6%)
Kohl's (0.2%)
TJ Maxx (5%)
More discounts and more sales increases coming from 3 of America's lower-end stores, I'd expect this trend to continue in the fourth quarter

Consumer Confidence - My LA Recessional Barometer

Contrary to reports coming from Washington, the recession is not over. Yes, the stimulus spending money is slowly trickling out. Most companies are reporting earnings greater than expected. The economy is in better shape now than a year ago and two years ago when this recession began but we aren't back yet.

The recession is not over until you can't get a reservation at Koi or a tee time at Hillcrest. The recession is not over until people start sending their children to LA for a year with a blank check. The recession is not over until the beach is packed only on the weekends. The recession is not over until the empty windows on Wilshire disappear. The recession is not over until people are investing in startups again. The recession is not over until actors can find solid work. The recession is not over until the big premieres and parties are back. The recession is not over until there isn't a sale at every store. The recession is not over until people find their confidence.

People in this town have money but are not spending it. When the money starts flowing again the economy will really be back. LA is fortunate to house Hollywood and a ton of tourists that will keep it going. Hollywood and software are truly the only American made goods anymore. Until LA's swagger comes back we will be in a recession in this town. Keep an eye on the little things and little people in this town and you'll know when you see it. The confidence and swagger that define this town are coming, but they aren't here yet.

Unemployment Stats

Currently unemployment rate is 9.7% in this country which represents 14.5 million people. California is at 11.6%. This and many other stats come out once a month from the BLS. (Bureau of Labor Statistics) I recommend taking a peek at their site at www.bls.gov/ They have some crazy data there. The unemployment rate is based on 60,000 Americans from 2200 census workers phone calls. Many people lie and say they are employed and can't be reached because they are out looking for a job. The other flaw with the data is that if you have been out of work for more than 1 months you are no longer considered a worker. Plus, if there are people in college in need of jobs or older people who want to go back to work they aren't counted as unemployed.
I think that some hybrid of unemployment and payroll should be developed. Paging Nate silver, paging Nate Silver. The numbers above are only a sliver. Somebody from MIT should be able to figure out the true information because the data above isn't correct. Hopefully in the next week I can track it down, but for now only a post about my dissatisfaction with the data out there.

Cash For Clunkers: Good For The Economy?

Much has been talk about this new goverment program to hlep our slumping auto business. Suffice to say the program is working as the first billion is gone and 2 more billion are on the way. The program is a great band-aid for our slumping carmakers in this county. The program guarantees you $3000-4500 for your old car in trade in value for a greener car. This is a cash infusion for a dying industry. Although, are the people taking advantage of this program buying greener cars or is something they do would have done it anyway?

The other question becomes how GM and Ford spend the funds raised by this program in the long-run to see if the program has any true effect. Most people are simply trading in their 2nd and 3rd old cars for newer ones so I really question how "green" the program really is. My only hope is that money is not taken away from research programs that could have long-term effects to help our environment and automobile industry. The additional $2.4 billion in electric vehicle grants will sure go a long away in greening our country and stimulating our economy announced today will help the auto industry in the long-term. I think $5.4 billion there would have been a better solution, but desperate times call for desperate measures.

Thanks to Barack for doing something to help the auto industry. Outside of software and movies, what other products are actually made here anymore. Here's to hoping this is the beginning of the renewal of a few iconic American car companies.

The Recession

We are living through the worst recession since the great one in the 1930’s and hopefully the last one I ever see. It’s really sad and at the same time an uplifting reality check. It’s definitely horrible to hear of everyday people, families, and companies getting laid off or fired to no fault of their own. Foreclosures are now commonplace. It’s sad to say that I have friends graduating college who can’t get jobs. I got let go last week. This is why we go to college to get a job (the other stuff is good too). On the far end you have people with graying hair who now have to work another 5 or 10 or 20 years.

I think we all want a fix. Something we can just plug in, download, or buy to make it all go away. Unfortunately, it’s not going to just go away for the next decade. Our new President is being proactive in the matter and that is good thing. In business you should always do something to stop a down cycle rather than companies that sit there and act like we are living in 1999. Those companies are the ones going bankrupt. They overbudgetted their sales, let their overhead go overboard, but most importantly companies lacked vision to see this coming or how to react.

View this recession as an opportunity. An opportunity to be better at what you do and what you want to do. I agree, what’s done is done. Stop dwelling on your dwindling 401K. Take a class at the gym, learn a new language, attend networking events, make new friends, move to a new place, go back to school, or live abroad because it’s cheaper than LA. Keep learning and at some point, we’ll again party like it’s 1999. For me I've started blogging, heading for a Mexican Spanish immersion classes, and I'll finally start putting on some pounds at the gym hopefully.

Until next time,

DES