Da' Buy World: Considering "Blue Saturday"
Looking for bargain prices on items you know you don't need is kind of like building man-made islands in the Persian Gulf and Indian Oceans in the shape of the world, hoping that people will buy them for millions of dollars and live on them, despite rising sea levels.
Let me say that with the exception of a pancake breakfast for my son, I boycotted Black Friday.
For this post, I had planned to bang out a cautionary tale about Black Friday. I was going to talk about the potential bait and switches — at least those that are on the surface.
You know buy one TV, get one free and it turns out that they give away your grandma’s wood TV to set the new TV on top of.
Or the suits, buy one get one free. Only they don’t tell you what you’re getting is a suit with a lapel so low Matlock could wear it and a style so played out that Sonny Crockett and Rico Tubbs would meet you in Miami with matching Ray-Bans with a string attached to them to put around your neck.
That’s all well and good — personal finance news you can use with some nods to 1980s crime and punishment dramas — quirky stuff.
But that’s not what I’m going to do now because not only has it passed by already but I’m sure you’ve read a thousand Black Friday “beat-the-house” stories.
Consider this a post mortem.
What I saw out of my two pundit eyes and my third analytical winker was a potential metaphorical Blue Saturday. Blue for an economy still under water worldwide, and blue for the genre of music you play when you're sad because you've spent or borrowed too much and can't pay your bills.
I look and I foresee many hangovers from the continual devil-may-care, spend-until-you-feel-better mentality that helped cause “The Great Recession.”
There were two Black Fridays, just in case you didn’t know.
Even as shoppers — many of whom are probably behind on their bills, jobless, nearly jobless or underemployed — crowded the malls, rich sheiks a world away scratched their heads and wrung their hands because they can’t pay their bills either.
Dubai World, the sovereign wealth fund, of one of the Middle East’s richest governments, is as much as $80 billion in debt and has asked its banks for a six-month stay of execution — so to speak — on about $59 billion in debt repayments.
Basically they’re saying they can’t pay for six months and they are “restructuring.” This news sent the stock of every major bank and real estate company in the world down last week and many of these banks, we will soon find out, are more exposed to a Dubai collapse than they care to admit.
Back to the mall.
Am I trying to hate on your new cashmere sweater or clearance sale pumps or new television you got to put on top of your old one? Am I hating on your new fancy phone?
Certainly not, I told you in my last post to suit up so I'm not railing against capitalism and I'm definitely not saying what to do. It’s your money and life; plus we all live with the wicked paradox of an economy predicated on its citizens buying things they don’t need to keep a consumer-based economy on life support.
Back to Dubai.
Dubai World’s restructuring will affect Japan’s real estate companies adversely. Japan has price deflation problems already and is the world’s second largest economy, and the Yen is creaming the dollar right now.
Are you seeing the outside correlation yet?
Financial patterns, we have found, as well as weather patterns, travel east and then around the world. This cold front is already spreading west. Closer to home, British banks could be exposed to Dubai to the tune of $50 billion or more and those banks are already in trouble to begin with.
And over the Thanksgiving Holiday, American banks with potential exposure in Dubai were eerily quiet — perhaps PR folks and executives were out on Michigan or Fifth Avenues.
Right now you’re saying to yourself: "Dubai World? Are you kidding me J, this doesn’t affect me one bit and why am I reading this?"
Fair enough, but let me close with a little more info on Dubai World.
Dubai World is famous for the ostentatious man-made island plots of land in the nearby bay and Indian Ocean that they made for no reason, thinking they would sell like man-made islands shaped like a map of the world or hotcakes.
Dubai World and the government that funded it, didn’t anticipate gluts in demand and didn’t anticipate this big of a margin call either. British banks weren’t thinking about it, neither were Japanese or Australian real estate companies, so why would you be?
And that’s the problem right there. It takes more downturns for people to look again and see that this is not a game and that if the decisions of a few are affecting the masses, the masses, who set the agenda as consumers and the labor force need to change spending habits and approaches to consumption.
But is that in the cards?
Like Dubai World, with its own form of hyper-flashy uber capitalism, American retailers are famous for the ostentatious man-made phenomenon known as “Black Friday” where retailers try to break even for the whole year in what is the start of what they hope will be a 45-day buying spree to push full-year earnings numbers up.
The retailers, like the shoppers they serve, are reacting, reaching for short-term gratification, trying to right the ship with the ring of a cash register. Meanwhile not many are anticipating ancillary forces which can’t be accounted for when everyone’s busy buying things that in many cases, they didn’t or don’t need just to feel better.
All this instead of improving our station, mentally. Setting financial goals or “Wise Breading,” as a verb, is about making the choice not only to be thrifty, but to use wisdom through experience and apply it in financial planning.
Yet a large part of the populous still remains visibly and invisibly chained to repeating self-destructive patterns, even amid the worst downturn in almost a century.
Ask yourself this: what do you think you’ll be pondering six months from now, when you look back on Black Friday of 2009?
Do you think it will matter a little, or a lot?