 Starbucks
Doesn't Buck Trend:
GM Sinks to Lowest
Levels Since 1954
A recession is
brewing.
Coffee at more than
600 Starbucks stores
will stop being
brewed as a result.
That and rapid fire
expansion is being
blamed for Starbucks
decision to shut
down these
low-performing
stores and, in the
process, eliminate
thousands of jobs.
“We are in a world
where, anything
discretionary, price
becomes an issue,”
said Howard
Davidowitz, chairman
of the national
retail consulting
firm Davidowitz &
Associates Inc.
“Starbucks sells a
totally
discretionary item.”
Translation:
Individuals will
begin "value
shopping".
The normal price for
a short brewed
coffee at Starbucks
is about $1.50, when
Dunkin' Donuts 10
ounce coffee runs
for $1.39 and
McDonalds' 12 ounce
premium coffee is
$1.07. Why pay
more at Starbucks
during rough times
when coffee tastes
just as good
elsewhere?
And why buy
fuel-guzzling
automobiles when you
can walk, ride a
moped or purchase a
more fuel-efficient
car? That's
the problem facing
one of the largest
automobile
companies, General
Motors. Like
Starbucks, GM's once
high flying business
is now taking a nose
dive as a result of
economic variables.
Shares of General
Motors have closed
below $10 for the
first time since
Dwight Eisenhower
was president of the
United States.
The shares have
ended the day
Wednesday at $9.98,
down 15.1 percent,
their lowest since
Sept. 13, 1954.
On Tuesday, GM
shares surged as
much as 12 percent.
The automaker
reported an 18.2
percent drop in
sales from a year
ago, but it retained
its traditional U.S.
sales lead over
Toyota Motor Corp.,
which posted a 21.4
percent decline.
GM filing for
bankruptcy is “not
impossible” if the
U.S. auto market
continues to slump,
Merrill Lynch said
on Wednesday.
Merrill Lynch
analyst John Murphy
said in a research
note he cut GM to
“underperform” from
“buy” and lowered
his price target for
the largest U.S.
automaker to $7.
June was a dismal
month for the
industry overall,
which posted a 18.3
percent sales drop,
according to
Autodata Corp. Only
Honda, whose lineup
is tilted toward
smaller and more
fuel-efficient cars,
managed to report a
sales increase for
June — slightly over
1 percent.
The automakers’
shares have taken a
beating in recent
weeks, hurt by
rising oil prices
and a weak U.S.
economy, along with
a shift in consumer
demand away from gas
guzzling light
trucks and toward
smaller, more
fuel-efficient cars
and crossovers.
The US Economy will
go into Recession
during 2008.
The odds of this
happening have been
set at 34 percent
according to the
betting trends at
Intrade.com
"Now I know we're in
a recession!"
Christopher Dawson
posted on the
ZDNet.com
blog. "When
the economy starts
to hurt Starbucks, I
know we’re in
trouble.
Fortunately, Dean’s
Beans is still going
strong, so there is
some hope."
So when Dean's Beans
starts closing
stores, does this
mean we are
officially in a
recession?
The odds of a
recession happening
by year's end are
relatively low based
on betting trends,
but not so through
2009, though a
recession could
still be avoided.
Lehman Brothers
chief U.S. economist
Ethan Harris
described next
year's scenario as a
slow-motion
recession. As
differentiated from
a normal recession
in which the
financial systems
collapse resulting
to a slump of the
economy, the slow
motion recession
would not yield two
or three negative
quarters. Rather,
there will likely be
two years of below
par growth not
strong enough to
create jobs. "It's
kind of chronic
rather than an acute
pain," Harris said.
According to the
Labor Department the
unemployment rate
went up to 5.5
percent in May,
which Goldman Sachs
predicts will rise
further to 6.4
percent by late
2009.
Andrew Tilton,
economist at Goldman
Sachs explained to
the New York Times,
"The labor market is
clearly
deteriorating and
it's highly likely
to keep
deteriorating...
Clearly, there are
more jobs to be lost
in housing, finance
and construction -
hundreds of
thousands of more
jobs to be lost
collectively."
----
Jagajeet Chiba,
Gambling911.com
Originally published
July 2, 2008 5:45 pm
EST
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