February 2009 Archives

           By now, everyone undoubtedly knows that the economy is in shambles, but I will give you yet another sign that things aren't going well: the economics of professional sports. While many people may not look at sports as a big business, that's exactly what it is, only it's within the realm of entertainment. And many of these leagues generate billions of dollars. Well, during this past week, even the sporting world asked for money, just like everyone else. The NBA is set to borrow $175 million to bail out 15 teams by giving them each approximately $11.6 million to cover operating costs. This certainly is not good, especially when several of the country's millionaires are the ones asking for the money.

 

            Besides the NBA, the NFL has recently announced many layoffs ranging from the league's office to staff members on the teams. The most recent example comes from the Carolina Panthers which announced that they would be downsizing two weeks ago.

 

            I've experienced how the economy is affecting sports first hand. In December, I applied for an internship in the NFL office in New York. I was told that I would be hearing back from them some time in late January. Well, I did hear back from them in late January, but it was not the news I was expecting. They sent me an email saying that the 2009 internship program was suspended due to "budget restrictions." It was hard to wrap my mind around that concept - I'm a big time sports fan and, if even the NFL, the king of all sports, can be negatively impacted by the downturn in the economy, then that begs the question: who can't be hurt?

 

Here are links to stories related to the impact of the economy on sports:

http://nbcsports.msnbc.com/id/28141796/

http://blogs.charlotte.com/panthers/2009/02/panthers-announce-employee-layoffs.html

http://www.examiner.com/x-426-Sports-Examiner~y2009m2d26-NBA-borrows-175-million-to-bailout-15-teams

 

-Hank Nathan '10

I just returned home from Vegas - and I won $210 playing Blackjack!  But that's beside the point.  Just like other U.S. cities, Vegas is suffering.  Badly.  Our trip had been planned months beforehand, but many visitors have clearly decided to stop traveling, especially to "Sin City".

Las Vegas was once thought to be immune to recessions.  Not anymore.  I traveled to Vegas over last year's February break as well, and the difference in occupancy is remarkable.  Sure, there were plenty of high stake gamblers setting hundreds of dollars on the table for just one bet, but the casino, overall, looked emptier than I remembered a year before. 

Gambling tends to be a "recession proof" activity - often participators view gambling as a possible way to make money.  The stakes are high, but many choose to take the risk for the chance to win, even when they don't really have the money to lose.  Vegas depends on its gamblers, but in order to have gamblers, Vegas needs visitors.

According to MSNBC, Vegas is experiencing an identity crisis because the population has stopped growing, contractors are suspending casino construction, and less people are traveling to the city.  Gambling revenues have fallen tremendously, last year suffering from the highest revenue drop in Vegas history.  Fewer companies are sending employees to Vegas for business conventions, a huge contributor to Vegas income. 

President Obama's words during a town hall meeting in Elkhart, Ind. on Feb. 9 did not help Vegas attendance.  "You can't take a trip to Las Vegas or go down to the Super Bowl on the taxpayer's dime," said Obama.  He indicated that companies should not waste money on meetings in Vegas.  The Las Vegas mayor, Oscar Goodman, however, took offense to this comment and argued that his remark was harmful to the city's economy.

Wells Fargo and Goldman Sachs both recently cancelled scheduled business trips to Vegas, avoiding accusations of wasteful company vacations.  Vegas depends on business travelers as well as tourist visitors, and with higher airfare, rising unemployment, and pinched spending habits, the glamour of Las Vegas may be dwindling.

Vegas will probably bounce back eventually, but as for now, Sin City is looking unusually bleak.

-- Lauren Miller, '09

I recently read an article that listed the top 15 companies that may not survive the economic downturn of 2009. Many businesses that I had grown up with were on the top of the list. While household names like Circuit City and Linens N' Things have already perished, companies like Claire's, Sbarro's, Krispy Kreme, and Six Flags seem to be facing a similar future.

 

A few names on the list shocked me. Trump Entertainment Resorts Holdings, for example, has seen its stock drop 94% and is trying to sell many of its Atlantic City properties to pay down a stack of debt. The gambling industry has long been considered immune to the effects of recession - so what makes the recession of 2008 any different?

 

Other names were expected. Seeing Blockbuster on the list, for example, was not a surprise. It is hard to find a Blockbuster enthusiast in our technologically advanced world. My father has refused to shop there since he was charged $4.99 extra for dropping a movie off just twenty minutes past its due date. That was in 2004.

 

 

 

 

A lot has changed since the first Blockbuster opened in Brooklyn in 1985. People no longer use VCR's to watch movies. DVD players are replaced instead of repaired. Movies can be viewed On Demand through DVR recording systems or rented through Pay Per View channels by the click of a button. With the introduction of Netflix and $1 Red Box Rentals, it is no wonder why Blockbuster has seen its stock drop almost 60%.  Why deal with confusing late fee structures, rising rental prices, and complicated rewards programs when you can view a new release instantly from your computer?

 

But I have grown up with Blockbuster as a staple -- despite my father's aversion to it - and it is hard to imagine a world without one in every major shopping plaza. I know that I am young. I can imagine that dozens of firms will come and go within my lifetime. But the rising number of bankruptcies and the changing nature of America's industries is unnerving for a soon-to-be college graduate. With consumers guarding their wallets, corporate revenues are plunging. The business landscape is starting to resemble a graveyard.

 

And frankly, I am a bit afraid. 

 

Leann Gerlach

February 20, 2009

When Lehman brothers declared bankruptcy on Sept. 15, that move shook the financial markets to the core. The Dow nosedived, losing 25 percent of its value in the next three weeks as it fell below 10,000 for the first time in years. Credit markets froze, as major banks became unwilling to lend to each other -- or to average consumers. And the government launched it's massive $700 billion bailout, called the Troubled Assets Relief Program (TARP).
Now, many of the bankers who lost jobs at Lehman and other Wall Street titans are filing applications at a surprising place: Lehman.
That's because Alvarez & Marsal, the firm hired to unwind the billions of dollars in company positions and start paying back creditors, has a massive job ahead of it.
Bryan Marsal, who's now Lehman's CEO, told the Wall Street Journal he hopes to take apart the company in the next 18 to 24 months, though other experts interviewed by Journal say it may take longer than that.
Marsal has 150 employees from his own company working on the project, as well as nearly 330 former Lehman employees. Many of them are managing the same investments they handled before Lehman's collapse.
Some things have changed, however. The private chef, fresh muffins and expensive flowers that used to grace the executive offices are all gone. In fact, the executive offices and Lehman's entire Times Square building now belong to Barclays Bank, while the Lehman team works out of an office in theTime-Life building and eats lunch at Time's cafeteria.
Anotehr thing that's on the way out: Lehman's $30 million art collection and their fleet of corporate jets. The company has sold $53 million worth of jets, but a 767 and a helicopter are among the six vehicles still on the market.
While Lehman's employees may not be living the high life on the corporate jets, many of them are happy just to have a job that is almost guaranteed to be around for the next two years.

-- Jacob Geiger

Until around eleven o'clock on Sunday morning, I was unaware that the Cardinals were not only a baseball team, but a professional football team as well.

For the kids: It's a race to witch mountain. 

For the teenagers: The Rock--a highly recognizable professional wrestler/eyebrow raiser/"actor" --is one of the main character. 

For the parents: Multiple references to the 1977 cultural phenomenon "Star Wars," including a storyline with a bounty hunter and actual Stormtroopers climbing into the back of a taxi.

Rather than taking a risk by funding a movie with an uncertain box office outcome (a la 2003's "Pirates of the Caribbean")  Disney relied on tried-and-true moneymaking methods, signaling that even the creative giants are playing it safe.  

Okay. Things are looking grim, I know. But I think there's plenty of good coming out of this recession.

For one thing, it's given fashion magazines all kinds of great fodder.  A recent "Go Ask Alice" column on style.com was titled, "Recession 101." In the article, a fashion columnist points to designer Alice Temperley as a guide to learn how to 'navigate the recession with a wink and smile.' From the title, you're sure the article will give you great tips on how to look like you're wearing a $3,000 dress when really it's from the clearance rack at Banana Republic. But, no, the article is actually about really wearing a $3,000 dress. Apparently Temperley hasn't felt the recession the way readers have -- she is still planning to open a 2,500-square-foot shop in Dubai. Where, presumably, she can sell $3,000 dresses to tycoons who would look at me in my DVF knockoff dress and say, "Recession? Shesmession."

Luckily for those of us actually dealing with the recession in our J.Crew chinos and Target flats, TIME Magazine offered a spread on "Recession Chic" in March of last year. "March of last year?" you ask! Yes.  Apparently Time magazine and fashion designers alike acknowledged what the Fed so hesitantly finally admitted in Dec. 2008.

In the spread, Times columnist Kate Betts predicted the downturn of color and prints on the runways to coincide with the downturn in the economcy.  Betts quotes Amy Winehouse and says it's "Back to Black" for the fashion world as stocks stay in the red.  Betts warns that the dour black of this recession won't be nearly as heroin-grunge chic as the early 1990's, but rather a much more sophisticated black.  Sharp lines and classic cuts will showcase the newly-discovered practical side of fashionistas.

The recession isn't just giving great fodder to heady institutions like Vogue and Time though.  Chick-lit age bloggers are getting great stuff out of the dour times, too.  It seems that most blogspots have blogs titled "The Recessionista," or some similar witty take on the phrase. What do these blogs have to offer? A variety of things ranging from five-star-restaurant-quality recipes you can make at home to listings of stores with great deals.  Some of them are no-nonsenes guides to more-frugal living, and other are wildly humorous tales of the horrors of shopping during a recession: everything's black! everything's last season! everything is too expensive for me now that my I-Banker boyfriend is jobless!

So, alright, if the economy picks up around the second quarter of this year, I guess I'll go with it. But until then, or if then, I'll keep frequenting my new favorite blogs. I'll proudly don my sophisticated black dress for lower-key cocktail parties, and I'll wear my off-the-rack washable knit pants to class with my head held high. For I can feel confident, with the support of bloggers worldwide, that I'm not deigning to wear off-the-rack clothes, but rather I'm just letting out my inner recessionista.  

 

-Alicia Budich, '11

Last week we told you to "Get excited!" for the weekly update of the top and bottom five performing stocks.  The debate is still out whether any of these figures are worthy of "getting excited" over, but nonetheless, here they are.

 

TOP PERFORMING STOCKS:

COP

AFL

TS

MO

PM

 

BOTTOM PERFORMING STOCKS:

SBUX

STRA

PALG

POZN

PNC

 

It looks like Leann's on to something -- not only do people want their hamburgers cheaper, but it seems like they're realizing the absurdity of paying $4.60 for a "tall mocha cappucino, double whip, no fat, no water, blah blah blah..."  That, and maybe we're all just a little tired of practicing our orders before we tell them to our favorite Barrista?

-Alicia Budich, '11