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General News    H3'ed 2/25/09

Fashion Emergency!

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In his masterful lesson in basic Economics, President Obama spelled out how an economy is supposed to work (which, by the way, is not the model the United States has depended upon for the past 28 years), to paraphrase: give a mortgage to a worthy homebuyer, someone builds the house, the builder employs workers, who then can maybe buy a car, and the car is built and sold by workers who then buy new clothes, and so on…


Also insisting on a drastic overhaul of our atrophied regulatory system, it was a clear outline of the next era of the American economic system.  And virtually no one could effectively criticize a thing he said or how he said it - certainly not Louisiana Governor Bobby Jindal, who seems to think there’s something funny about a potential (though not presently projected) high speed mag-lev train from Orange County, CA to Las Vegas, two important population centers, with vital tourism sectors suffering, and there’s really nothing further to say about him that every comedian won’t tackle tonight.


The daily laundry-listed headlines at Bloomberg.com, expectedly, continue the gloom-and-doom of the bleeding wound.  Massive layoffs, foreclosures, insolvent banks and state governments, and consumer credit stopped in its tracks have become the everyday ever-worsening tales of the New Depression. But for those who believe that the rich are immune from the pain, (and some of them most certainly always are), today’s grim headline laundry-list comes from their world, courtesy of WWD, the bible of the fashion industry:


-Factors drop Barney’s over sale uncertainty

-Coach cutting staff by 10%

-Nordstrom net down 67.9%

-Neiman Marcus cutting 450 jobs

-Colton Bernard Partners in double suicide[/url] (this sad story should be read, but is a sign of the times not specific to the P&L bottom line)


Those are just today’s “most viewed”!  There’s also Macy’s and Target facing plummeting earnings, Saks posting downright losses, and (heavens!) LVMH scrapping plans for a proposed “Louis Vuitton Foundation for Creation” museum designed by Frank Gehry, to have been built in the Bois de Boulogne. 


Many of these companies had broadened their marketing during the reckless credit days of the past decade.  Why on Earth, for example, is there a Louis Vuitton boutique in every other mall?  Such luxury goods were very rare (and that is precisely what made them luxury items), until middle class consumers suddenly had access to second-mortgage money and sky-high credit card limits that enabled them to buy the overpriced “aspirational niche” items such as $1,500 vinyl handbags and $700 sunglasses (non prescription, no less!).  That game is up, and the companies that cheapened their own brands by focusing on the licensed crap rather than their real high-end goods may not make it through the end-result of their own irrational expansion. 


So even Barney’s can’t get credit for the Fall collections now.  Saks sales are so slow, evidently no one’s buying those collections anyway.  Neiman’s surely won’t be providing their storied solicitous service after dropping hundreds of employees, and Nordstrom, normally the cautious one in the whole group, has itself seen its fortunes drop.


This is all part of a massive deflation, and the message – so perfectly articulated by the president and so starkly evident from these fashion industry statistics – is that, in the new economy, it is time to shift our priorities away from such nonsense as paying $250+ for jeans because of a particular name on the ass, and back to rational approaches (like, buy what you can afford and get your ass to a tailor).   



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Michael Fox is a writer and economist based in Los Angeles. He has been a corporate controller, professor, and small business entrepreneur. After a life-altering accident, he spent five years learning more about medicine and the healthcare (more...)
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