Black Friday, Blue Monday
This year I shared Thanksgiving with a far-from-home group of twenty-something actor/filmmakers. All of them recent graduates of some of this country’s most elite universities, they were expected to go into medicine, or business, or cutting edge research. But when the going gets tough, creative types tend to get creative, and lacking job opportunities as the art curators and classics professors they trained for, this bunch has turned to Hollywood for their graduate studies. “Might as well be unemployed along with everyone else in the Industry,” seems to be the consensus.
As might be imagined, some of these expensively-educated kids’ parental units are not as supportive of their children’s aspirations as their kids might wish, so to make ends meet in between acting gigs, the group has adopted a variety of survival strategies. Two have pooled the rapidly-dwindling distributions from their once-expansive trust funds to lease a four-bedroom condo/hangout for the gang. Another relies on Granny’s largesse in lending out her conveniently-located house and an unused vehicle near the university where several are in graduate school. A recent University of Chicago microbiology graduate contributes the funds she earns braving the LA traffic as a bike messenger. And one has carved out a financial niche for himself as a “civilian” extra in porn productions—one of those rare characters who not only remains clothed, but actually serves to advance the minimalist plot lines. His straight-to-DVD film debut made for some hilarious post-prandial commentary as we all suffered through the money shots to get to his 15 seconds of AFTRA-eligible screen time.
One of our weekend guests, Jon, had to leave early to get to work on Friday. In order to make a few extra bucks, he’d just signed on as holiday sales clerk for a regional clothing franchise and “had to go buy some clothes” before the shop opened for the day’s business. Apparently, he was expected to outfit himself in the store’s line of clothing as a prerequisite to selling it to others. After all, it wouldn’t do to have the sales staff wearing some rival’s merchandise, so new employees were “highly encouraged” to buy the store’s offerings off the rack—at their own expense.
Though appalled, I was hugely impressed with what appears to be a new trend in mall-shop marketing strategy. First you hire hungry kids for the six-week holiday season and put them on part time at minimum wage, then you require them to shell out a couple of week’s wages to buy your cruddy $40 tee shirts and $90 blue jeans.
Moreover, to ensure that they hustle, you give them a sales quota, which if not fulfilled, results in their dismissal. Since none of these seasonal workers has a job contract, you can fire them essentially at will, and replace them with one of the dozens of other hungry kids cooling their heels on your wait list.
Granted, you have to give them a 30% discount on the clothing you’ve already marked up 200% over wholesale, but that’s a deductible expense. And since these kids are in a welfare-to-work zone, their wages are likely subsidized by government monies anyway. What’s to lose?
Jon told me that the store normally employs four full-time and one part-time worker, but that for the holiday season they had hired on seven new employees—all of whom had to shell out a couple of hundred dollars for the “uniform.” The store expected them to ring up $54,000 in sales on Black Friday, and the new hires’ jobs were explicitly dependant upon hitting the numbers. I asked him to let me know how they made out. Dutiful child that he is, he called me on Sunday to let me know. They pulled in $22K.
He’s out pounding pavement as of today.
It occurs to me that Main Street is beginning to recapitulate the example set by its Wall Street administrators. While the Fed is busy buying up T-bills to finance the US government’s rapidly-escalating spending, small-time retailers are compensating for lack of demand by creating it from labor. Why not simply forego taxes altogether and just have the Fed print money for a few years? Wouldn’t the results be the same?
After all, look what’s happening on the other side of the planet. Despite the 8B+ USD it got in TARP funds, all is not well in Cheney World.
The pending default of the world’s first Commercial Real Estate State may be a harbinger of the coming meltdown in commercial real estate investment worldwide. It certainly shook the financial markets over the weekend.
Straight out of Washington’s “leak it on a holiday” playbook, Dubai’s clumsy announcement just before the Muslim world closed for the four-day Eid, and the US markets closed for Thanksgiving, caused a major kerfuffle amid concerns about the very solvency of the Emerate. Given the recent propensity for timing dire financial announcements to coincide with the start of national holidays, it’s hard not to wonder why people would even want to take three-day weekends off anymore.
During the building boom of the last decade, Dubai World’s investment arm, the city-state’s sovereign wealth fund, incurred at least $80B worth of debt obligations. For a country with only 1.5 million people, the majority of whom are not even citizens, that’s a fair amount of coinage. Only 6% of Dubai’s income comes from oil; the rest is mainly dependent on tourism, real estate, and foreign investment. To woo that investment, Dubai turned itself into a veritable Disneyland for adults, with excesses that put Las Vegas to shame.
An environmental disaster without so much as an aquifer to call its own, the city-state is built entirely on debt, and Dubai now owes its creditors over 107% of its Gross Domestic Product. But that didn’t stop Sheikh Mohammed’s good friends at Halliburton, for example, from relocating their international headquarters there from Houston in March of 2007. Dubai’s free-form tax policies, plentiful slave labor, and reluctance to adhere to extradition treaties have made it a haven for corporations and individuals who might find Singapore a bit too stodgy, and SwitzerCaymans’ newly-cooperative financial authorities troubling.
The possible default on Dubai’s state obligations has caused a great deal of concern about the solvency of other countries’ sovereign debt, and markets are reflecting the worry that funds may begin to pull out of countries which have incurred major CRE-backed loan obligations—countries like Greece and Ireland. And California. The bankruptcy of Iceland can no longer be considered an isolated aberration.
Although the brunt of the potential default will apparently be born by European and Indonesian banks, recall that Las Vegas properties share numerous principal investors with many of these failed Dubai projects. At this point, who knows how much private US-based wealth has been laundered through this latest meltdown? One suspects that the State of Nevada is about to find out.
What is fairly certain, however, is that this time there will be no AIG bailout for Halliburton. With the House Oversight Committee breathing down the neck of the Fed, not even Helicopter Ben will risk the wrath of a chastised Barney Frank and an enraged American public. And this reluctance may portend the end of any governmental ability to create more debt to fight the economic “recession.”
As for Dubai, most likely Big Daddy Abu Dhabi will let the profligate Emirate sweat for an appropriate period of time, then publicly guarantee the debt. But in the meantime, Dubai—and it’s free-wheeling, debt-based economy—is effectively “grounded” while its bratty little sister, Sharjah—home turf of the Russian-based mafia and its war-profiteers—snickers in the corner. How cynically ironic that America is apparently now shifting the bulk of its defense tribute to Afghani$tan— from whence these Russian oligarchs made their fortunes in the first place.
by ahansen
